Down v Chief Executive, Department of Natural Resources and Mines [2002] QLC 45

[2002] QLC 45 LAND COURT BRISBANE 30 MAY 2002 An Appeal against an Unimproved Valuation Valuation of Land Act 1944 Local Government: BCC-South Brisbane (V2001/0102) Edwin J Down v. Chief Executive, Department of Natural Resources and Mines J U D G M E N T [1] Pursuant to the provisions of the Valuation of Land Act 1944 the Chief Executive placed a value on the appellant's land in the amount of $150,000 as at a relevant valuation date of 1 October 1999. The landowner appealed against that valuation and in his Notice of Appeal contended for a figure of $130,000, though led evidence to a figure of $133,000. [2] Phillip Roy Peterson, a registered valuer, provided valuation evidence in support of the appeal, whilst Edwin James Down, the landowner, provided evidence concerning particular features of what I will call the subject land. The Chief Executive called Arend Boudewyn Van Hees, a registered valuer, who supplied valuation evidence in support of the Chief Executive's figure. [3] The grounds of appeal were sufficiently broadly drawn to encompass each of the issues raised by the appellant and considered by me in these reasons. It may be useful to note at this point that the matters raised in the Notice of Appeal were the same as those raised by the landowner in an objection to the respondent. Evidence was not, however, produced to me in respect of all of the matters raised in the Notice of Appeal. I confine these reasons to issues raised by the Notice of Appeal in respect of which evidence was given. [4] The subject land is located at 8 Stanley Terrace in the suburb of East Brisbane and is described as Lot 37 on Registered Plan 11469 and Lot 2 on Registered Plan 46134, having an area of 789 m². The property is located about 4.5 km south-east of the Brisbane CBD. Access is available from Stanley Terrace whilst the land is below the level of that street with a slight fall to the rear where it drains towards Norman -- 1 of 10 -- 2 Creek. Stanley Terrace is bitumen sealed with concrete kerbing and channelling and in the vicinity of the subject land is improved with "traffic calming" structures or obstacles designed to reduce the speed of traffic using the street. All of the usual utilities and services are available to the subject land. [5] The subject land is irregular in shape with straight-line boundaries, but with the rear boundary being narrower than the road frontage boundary. The property backs onto Norman Creek, which is both an attraction and a disability as the creek floods intermittently as a result of heavy rain and tidal influences, sometimes causing inundation to the lower rear area of the land. The land is improved with a medium set residential dwelling and a separate garage structure to its rear. The house was constructed in 1931 and Mr Down thinks that the garage was probably built around that time. Both parties valued the subject land pursuant to the provisions of the Valuation of Land Act on the basis of it having a highest and best use for single detached residential purposes. [6] In his valuation report Mr Van Hees referred to three sales upon which he had relied in concluding his value of the subject land at $150,000. Sale 1 at 15 Clarendon Street, East Brisbane, was analysed by Mr Van Hees to a vacant land value of $156,000, however the Chief Executive applied a value of $135,000 to that property. Sale 2 at 16 Gresham Street, East Brisbane, sold vacant at $184,500 and was applied by the Chief Executive at $165,000. Sale 3 at 62 Latrobe Street, East Brisbane, was also vacant land selling at $115,000 though applied by the Chief Executive at $105,000. [7] Mr Peterson did not include any sales evidence in his valuation report, however accepted the above three sales as being appropriate evidence of value to employ in the present case. I understand that the valuation originally struck by the Chief Executive was $195,000, but that following objection this was reduced to $150,000. I have no evidence that clearly points to whether this reduction in value was based on the proposition that none of the matters complained of by the landowner was taken into account in adopting the pre-objection value of $195,000; or whether the post-objection value of $150,000 resulted from further allowances being made for some or all of the matters pursued in the objection. [8] Mr Peterson's approach was to say that he accepted that the subject land would have been worth $195,000 apart from the disabilities he identified and which I will come to shortly. I have some difficulty with this approach in that it adopts a commencing point of $195,000 without either he or Mr Van Hees providing me with a -- 2 of 10 -- 3 comparison with any sales which might be said to support that conclusion. Valuation by use of comparison with sales is a well-recognised method of valuation described as "the conventional valuation technique" in Riverbank Pty Ltd v. Commonwealth (1974) 48 ALJR 483 at 484. [9] The technique involves a process of comparison between individual sales and the subject property in which factors which would, in the expert valuer's opinion, materially affect the value of the subject land. Some of those matters may be considered to be comparative advantages for the subject land, whilst some may be disadvantages. Adjustments are made to arrive at a value based on a consideration of these material differences – in some instances by making a particular monetary allowance for each material difference, but in most cases by deciding on an overall differential in value. By such a process of comparison a value figure for the subject land is settled upon, the degree of comfort that one might have in that figure being dependent largely on the degree of comparability between the sales properties and the subject land and the adjustments made in settling on the final figure. [10] What I have set out in the above paragraph is supported by different language which appears in Brewarrana Pty Ltd v. Commissioner of Highways (No 1) (1973) 32 LGRA 170 where at 179 to 180 Wells J said: "It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 and in later cases to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the -- 3 of 10 -- 4 contract of sale and transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive." [11] The difficulty I have with Mr Peterson's approach is that I have no understanding of the process of comparison that appeared to lead him to the view that the subject land had a higher value than each of the sales in the Van Hees valuation, if one considered all material matters apart from those for which he made particular monetary allowances. In short: what are the material allowances which he took into account in adopting the figure of $195,000? Notwithstanding this difficulty, there is benefit in my considering the particular adjustments made by Mr Peterson. These were summarised in a document tendered entitled "Valuation Workings" "Value unaffected $195,000 (vacant allowing for clearing) Allowance for school nuisance on long boundary To the property 15% (includes parking restrictions etc) $29,250 Allowance for retaining wall and drain - approximately 25 lineal metres $7,500 Account for easement affects 217 m² (8.6 perches) Approximately half of the rear yard 217 x $165,000 x ½ 789 $23,000 Filling 200 m³ at $12 $2,400 $62,150 Total $132,850 Say $133,000 " [12] I will commence my discussion of these workings by first considering the allowance of $2,400 for filling. The evidence showed that excavation has been carried out under the house on the subject land, with the yielded material being deposited towards the rear of the lot. The material improves the flood immunity of the land and facilitates access to the separate garage. I accept Mr Peterson's estimate of the volume of earthworks at 200 m³ and that at the relevant date the cost of that work would have been $12 per m³. [13] There was no evidence of a similar allowance being made by Mr Van Hees in his valuation. [14] Mr Peterson's approach to this issue was based on his understanding that to find unimproved value as is required by the Valuation of Land Act he should "deduct improvements to the land". He did not place a value on the residence on the land though it is clearly an improvement, but simply proceeded on the basis that the -- 4 of 10 -- 5 residence was notionally removed. This is the approach that is authorised by s.3(1)(b) of the Act which provides: "'unimproved value' of land means – (b) in relation to improved land - the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist." (the underlining is mine) [15] The manner in which improvements are to be treated on a piece of land to be valued for the purposes of the then New South Wales Legislation which included provisions similar to s.3(1)(b) mentioned above is expressed in Toohey’s Ltd v. Valuer-General (1925) AC 439. At page 443 of this case the Privy Council said: "Now, what he (that is, the valuer) has to consider is what the land would fetch as at the date of the 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 had never existed." [16] The correct approach to the excavation and filling on the subject land is therefore to assume that it had not taken place and to consider how the hypothetical prudent purchaser would deal with that feature of the property at the relevant date. Would such an abstract purchaser excavate and fill the land in the same manner and to the extent that Mr Peterson had described? Now in answering this question it would be reasonable to consider whether the hypothetical purchaser would be likely to construct a garage in the location of the existing garage therefore requiring fill, or whether a garage might be closely associated with a residence in the manner that is apparent in contemporary slab construction techniques. This was not addressed in the evidence. [17] The valuer would also consider whether a purchaser of the subject land at the relevant date would see an advantage in placing filling on the rear of the subject land. In that respect there are two matters to consider. First, is that the land is subject to inundation from Norman Creek, therefore the placement of fill would appear to be an advantage. Both valuers said that potential flooding of the subject land is a disadvantage. Second, there is an area of 217 m² of the subject land (an area which appears to encompass nearly all of the back yard) which is subject to an easement in gross in favour of the Brisbane City Council. That easement is for flood mitigation -- 5 of 10 -- 6 purposes and, amongst other things, was said by Mr Peterson to prohibit filling and retaining of the land. In his consideration of the easement he made an allowance for that factor as a disability along with other implications of the easement. There is an obvious risk of doubling-up and overlap between the allowance for the restriction imposed by the easement and an allowance in Mr Peterson's valuation for fill value of a particular sum. [18] The correct approach, in my view, is to view the subject land unimproved and to consider whether the restriction on placing fill is a material disadvantage to the property. Mr Peterson sought to answer that question by pointing to the neighbouring school where fill has been placed and retained. There is a playground at the school which benefited from filling of the land there. I cannot see how reference to the school, which would require a flat area for a playground, would assist Mr Peterson in demonstrating that for residential purposes a hypothetical prudent purchaser of the subject land would consider filling of the rear land to be a priority consideration. No evidence was provided of owners of other houses in the area filling their back yards. Nevertheless I can conclude that there would be some advantage if the rear of the subject property were able to be filled, therefore a purchaser of the subject land for residential purposes would see the restriction imposed by the easement as being a disadvantage. [19] Other disadvantages of the flood mitigation easement mentioned by Mr Peterson were:  the owner is prevented from construction of structures such as a boatshed, garden shed, fern-house, pergola, etc;  limited structures are allowed for the launching of boats;  the easement blights the title of the property. [20] Mr Down said, in addition to these matters, that he understood that the easement prevented an owner of the subject land from planting trees in the easement area. Since the residence on the subject land has been there since 1931 and since the easement was not taken until after the major flood in 1994 I find it difficult to accept, without further evidence, that an owner of the subject land on 1 October 1999 would see a limitation on tree planting to be a significant disadvantage. [21] Mr Down said that the salt content of the soil towards the rear of the subject land was such that structures would not practically be placed there, therefore the inhibition of the easement with respect to structures has no practical effect. He made -- 6 of 10 -- 7 the point that he enjoyed access to the easement area as the owner of the subject land and that he was required to maintain that area. [22] Mr Peterson's valuation approach involved discounting the value of the easement area on the basis of it having a dollar per m² value as part of the whole of the subject land, 50% lower than the value of the area of the subject land not affected by the easement. My criticisms of this approach are:  The method adopts a dollar per m² valuation approach whereas the approach to valuing the residential site overall is to value it as a single entity. Valuations per unit area are generally utilised, for example, in the case of commercial or industrial land where the size of the land is a primary consideration in arriving at a value. The same does not apply in the case of residential sites.  The adoption of a 50% discount in the value of the easement area does not accord with the limited evidence concerning the effect of the easement restrictions on the enjoyment of the subject land. I cannot accept that the restrictions, such as they are, amount to a figure as high as $23,000. [23] There was no evidence of the Chief Executive having considered the flood mitigation easement in valuing the subject land. In addition, Mr Van Hees was unable to assist me with an opinion as to how the flood mitigation easement should be taken into account in valuing the subject land. Section 33 of the Act provides: " 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." [24] The precursor to section 33 was considered by the High Court in the case of Brisbane City Council v. The Valuer-General (1978) 140 CLR 41 and the following quotation explains the nature of the obligation that an appellant has in a case such as this: "The question then is whether a court on appeal is bound to accept the Valuer-General‘s figure as correct unless it is positively established that the true value is lower, or whether it is enough to show that the value was reached as the result of an error in principle. 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 s.13 (7) is rebutted. It is true that the Valuer-General might by coincidence reach the right result by a wrong process of reasoning, but I cannot attribute to the legislature the capricious intention that a valuation shown to have been erroneously made should be presumed correct simply because by mere chance the Valuer-General may have hit on the right figure. If, for example, lands were valued as suitable for high rise city buildings although the law forbad them to be put to that use, or as rich agricultural land when in fact they had been rendered useless be excessive salinity, it would be absurd to hold that the valuation, although shown to be radically wrong, still must be deemed correct. In my -- 7 of 10 -- 8 opinion once it is shown that a valuation was made by a method fundamentally erroneous the presumption is rebutted." (at 56 and 57) [25] I am of the view that the failure by the Chief Executive to take into account the flood mitigation easement on the subject land is an error sufficient to rebut the presumption erected by s.33. I deal with the effect of that conclusion below. [26] In addition to the flood mitigation easement, there is an easement for sewerage purposes located towards the rear of the subject land. A sewer main has been constructed on that easement area. Mr Down understands that the main is to be found 4 feet or more underground and is located 12 to 15 feet from the rear of the garage structure. There was no evidence that this easement has any depreciating effect on the use or value of the subject land. [27] A timber retaining wall has been constructed along the northern boundary of the subject land by the proprietors of an adjoining school, that wall having the function of retaining fill placed on the school land. There is evidence of termite attack on that wall and Mr Down expressed concern that the wall may be a source of a termite attack he has identified on the garage building on his land. I understand that the garage construction pre-dates the retaining wall construction by many years. It may be that the garage is the source of attack on the wall. The evidence is inconclusive. This would generally be the case, I think, as I take judicial notice of the fact that locating termite infestations and nests, as well as the successful treating of termites, are notoriously difficult undertakings. [28] The other difficulty the wall presents is that no drain is constructed in association with it. Some unspecified drainage difficulties are therefore experienced on the subject land. [29] Mr Peterson's allowance of $7,500 for the suggested disadvantages of the retaining wall is inordinately high. He appears to disregard the fact that termites are endemic to the area and makes an allowance for the presence of the wall that I would think may even approach its replacement cost. The disadvantages of the wall, I conclude, are limited to its impact on drainage and to the fact that the wall comprises an item that demands an owner's attention from time to time. These disadvantages do not equate to an allowance of $7,500, in my view. [30] Mr Van Hees did not expressly mention the retaining wall in his valuation report, thought he said that he had made allowance for the disadvantage of the subject land adjoining the school playground. No mention of the school appears in his valuation report. In the comparison he made between the subject land and his sales -- 8 of 10 -- 9 there is mention of the "location" of the subject land and the sale properties but, as I understand his use of this term, it does not include any consideration of the proximity of the subject land to the school. Nevertheless I accept that a substantial allowance was made by Mr Van Hees for what he saw as being the disadvantages arising from the school being an adjoining neighbour. It would, however, have been clearly preferable for Mr Van Hees to have provided a "speaking valuation" in which all of the material points of comparison between his sales and the subject property appeared. A speaking valuation is, "one which, on its fact, discloses the method of valuation used" (Mayne Nickless Limited v. Solomon [1980] Qd R 171 at 178); or as "giving reasons or calculations´(Campbell v. Edwards [1976] 1 All ER 785 at 788) or as "explaining the basis upon which the valuation was made" (Arenson v. Arenson [1973] 1 Ch 346 at 363. [31] The disadvantages which the proximity of the school visits on the subject land seen by Mr Peterson as being relevant for valuation purposes included:  Students trespass on the subject land to retrieve footballs and suchlike, kicked or thrown there during sporting activities.  Students dispose of items of rubbish including potato chip bags, milk cartons and suchlike over the adjoining fence and onto the subject land.  The playground is a source of noise during sports and physical education activities and during maintenance of the playground area such as early morning mowing.  Students sometimes throw projectiles, including mud balls, towards the house on the subject land occasionally hitting the house.  Parents who bring their children to school by motor car and collect them to take them home frequently park across the driveway to the subject land. Headlights from such traffic visiting the school at night shine through the windows of the house on the subject land. Vehicles use the gutter crossing at the front of the subject property to manoeuvre three-point U-turns.  The fact that the school land has been filled means that that land does not accommodate floodwaters from Norman Creek. It was suggested by Mr Peterson that this would have increased the inundation of the subject land, though the extent to which this may have occurred is more a matter of estimation than of expert evidence.  On one occasion a tail light on Mr Down's motor car was damaged – he thinks by a stone either thrown by school children or the mower used on the playground. [32] Mr Peterson allowed a 15% discount of his start point figure of $195,000 as representing the discount that ought to apply to that start value for the disadvantages the subject land experiences owing to its proximity to the school. That level of -- 9 of 10 -- 10 allowance was, he said, based on his opinion and his understanding of the respondent's practice in respect of such matters. Mr Van Hees agreed that discounts ranging between 10% and 15% did apply in such situations, but made no reference to there being a standard practice. He acknowledged that the subject land ought to be valued on the basis that its proximity to the school had a depreciating effect. I do not know what allowance he made in his valuation but, given that there was no allowance for fill nor the flood mitigation easement nor the retaining wall mentioned in his valuation report or in examination-in-chief, it seems that his allowance for the school proximity factor may have even exceeded that allowed by Mr Peterson. That is indicated by the fact that the value placed on the subject land was $195,000 before objection and was reduced to $150,000 following objection. [33] In the circumstances I hold that the appellant has not demonstrated to me that the Chief Executive made any serious error of fact in that aspect of the valuation dealing with proximity to the school. Further allowance should, however, be made for those matters not included in Mr Van Hees' valuation report. I have already indicated that the allowances made by Mr Peterson are too high. Based on the evidence I heard as to the practical impact of these matters I conclude that a nominal allowance of $5,000 should be made. [34] There was evidence from the appellant's side concerning flying foxes which fly over the subject land and defecate on the property and on laundry hanging out to dry. There is a flying fox colony not far from the subject land. No allowance appears to have been made in Mr Peterson's valuation for this particular matter. Indeed, to the extent that any allowance should be considered, it ought to have arisen in the process of comparison with the sale properties. I have no evidence upon which I can usefully consider what, if any, allowance might be made. I make no allowance for this matter. [35] Accordingly, I allow the appeal and determine the value of the subject land at One Hundred and Forty-five Thousand Dollars ($145,000). RP SCOTT MEMBER OF THE LAND COURT -- 10 of 10 --