Baker v Chief Executive, Department of Natural Resources [2000] QLC 39

LAND COURT BRISBANE 28 JUNE 2000 Re: Appeal against Annual Valuation Valuation of Land Act 1944 Valuation Roll No.: 2940 Local Government: Bowen (AV99-1232) Michael L and Valerie B Baker v. Chief Executive, Department of Natural Resources (Hearing at Bowen) D E C I S I O N Background: This matter relates to land at 8 Howard Street, Bowen, and described as Lot 7 on RP 709731, Parish of Pring. The subject land has an area of 2,307 m² and is located as beachfront land approximately 4 km north-east of the Bowen Post Office. Access to the subject land is good from Howard Street, which is a bitumen sealed single-lane carriageway. All normal utility services are available. The land is level and of regular shape, with uninterrupted sea views to the ocean, and direct access to the beach. The land is zoned "Residential" under the Town Plan of the Bowen Shire Council (the Council) of 28 May 1998, and current at the date of valuation of 1 October 1998. The key issues are changes in the market, the nature of the land and comparison of sales. On 29 March 1999 the Chief Executive issued a valuation of the subject land at $78,000. Following an objection, the Chief Executive confirmed that figure on 25 August 1999. The appellants have appealed that figure claiming the unimproved value should more properly be $55,000. Mr Michael L Baker appeared and gave evidence for the appellants. Mr Baker advised that following a family separation, Mr Baker is now the sole owner of the subject land. Mr Damien Grealy, Counsel of Crown Law, appeared for the respondent, calling evidence from Andrew Trevor Brown, the departmental registered valuer now accepting responsibility for the valuation. With the agreement of the parties, the Court inspected the subject land and the sales. [2000] QLC 39 -- 1 of 7 -- 2 The Evidence: (i) Changes in the Market - The major thrust of Mr Baker's concern is that the current rating system is increasingly placing an unrealistically burden upon the average citizen of Bowen. Mr Baker notes that Bowen is presently passing through a period of decline in property values, due mainly to a serious loss of employment opportunities in the city. Following the closure of the meatworks, it is Mr Baker's argument that home prices for improved properties in the city have declined to less than former values. A recent appraisal of the subject land provided by a real estate agent in 1998, as part of the family settlement arrangement, indicates a likely selling price of the house and land at only $100,000 to $110,000. The appellants purchased the property for $120,000 when they relocated to Bowen about 17 years ago. Mr Baker believes that current values attaching to beachfront lands in Bowen, with views of the ocean, tend to be unrealistic, and do not represent the extra value attaching to those views. He notes that while his beachfront land has increased from $60,000 (1 January 1996) to the current unimproved value of $78,000 (1 October 1998), an increase of 30%, much of the lands removed from the beachfront have remained steady in value. Mr Baker sees those increases as a blatant discrimination against owners of beachfront lands. In noting the changes of the unimproved value of the subject land, Mr Baker advises that the unimproved value had remained steady for five years, then increased annually by 10% for two years, then remained steady for three years, before jumping up 30% in the current valuation. He saw this as inconsistent analysis by the respondent, although he concedes that he was not fully aware of how the Chief Executive undertook the revaluation process. Mr Baker notes that over the last decade the views from the subject land had not changed, while the unimproved value had increased dramatically. Mr Baker further argues that if overall Council rates had to be maintained, in order to provide community services, then any reappraisal should be more fairly distributed amongst the ratepayers, and not just large increases for particular owners such as beachfront properties. (ii) The Nature of the Land - It is agreed by both parties that the views of the ocean from the subject land are unobstructed, and the land extends directly to the beach. That strategic location does also bring with it the potential threat of erosion by the sea, and it is agreed that -- 2 of 7 -- 3 the subject land has lost about 3 metres of land to erosion in recent times. There is evidence of undermining of a large coconut tree, and the exposed rocky shelf of the beach in front of the subject land demonstrates the heavy loss of sand in that locality. A property two parcels to the east of the subject land has imported a large rock fill along the esplanade in an attempt to delay erosion. It is therefore a fact that the subject land is being impacted by erosion from the sea. Mr Baker agrees, however, that there is a scarcity of available beachfront lands in that area. He concedes that any potential increase in the level of purchasers wishing to acquire such a site, would tend to increase the price that people have to pay to acquire a beachfront site. However, Mr Baker notes that comparable beachfront lands to the east in Soldiers Road have been on the market for some years, and cannot attract a buyer. However, it was not clear what asking price was being offered, and from the inspection it was noted that access to the beach from Soldiers Road had now been closed, presumably as a response to the beach erosion occurring. Mr Baker also concedes that the adjoining parcel (Lot 5) had been on the market for several years, and had only sold in 1999. That property has a derelict building, and sold to an overseas buyer for $235,000. It has the same views, and is the same size as the subject land. However, Mr Baker argues that sale should not be misconstrued to represent the market level for land in that locality, as the vendor was determined to get a very high price, and had sufficient independent means to wait until the market met his value. In Mr Baker's view the overseas buyer was not well informed about local market expectations. On the basis of that sale, Mr Baker would agree that an unimproved value of the subject land at $80,000 would not be too high. However, that does not solve his current problem with the high level of Council rates. In support of the valuation Mr Brown advises that the original valuer who undertook the valuation had made allowance for the risk of erosion. In Mr Brown's professional opinion he feels that too much had been allowed for that purpose, and Mr Brown feels that a figure of $90,000 would be an appropriate level for the subject land, even allowing for erosion. However, Mr Brown has not sought that level, and leaves the final level of value to the discretion of this Court. Mr Brown accepts the current level of erosion, and had spoken to the Council about it. However, as a site value for the land, Mr Brown believes that the loss of 3 metres of depth would not significantly affect its unimproved value, and $90,000 would reflect any possible reduction, in his opinion. -- 3 of 7 -- 4 (iii) Comparison of Sales - Mr Baker supplies no sales to support his conclusions, and is only generally aware of the locality of Mr Brown's sales. Mr Brown provides the following sales of lands zoned as "Residential", and all used as single residence sites, all of which were used for a range of other appeals in the Bowen locality:  Sale 1 - (24 Horseshoe Bay Road, Bowen - Lot 18 on Plan B6686). This is a 809 m² parcel with direct esplanade frontage and interrupted ocean views. The sale was vacant at the time of sale, and is a regular shaped inside parcel, slightly above street level, with similar views to the subject land. It is seen as slightly superior due to its location in Horseshoe Bay. The sale is only one-third the size of the subject land, and the views are slightly inferior as partly obscured by trees. The beach is 150 metres from the sale. The sale sold in March 1996 for $105,000 and was analysed, after allowing for minor clearing and fencing, at $103,800, and was applied at $100,000.  Sale 2 - (15 Thomas Street, Bowen - Lot 12 on RP 838634). This is a 1,277 m² near regular shaped corner lot with views of Port Denison and Bowen Harbour. It has a formed dirt road to its front, hindering direct access to the beach. However, there is little risk from erosion from the sea. Overall the sale is seen as inferior. The sale sold in August 1998 for $85,000 and was analysed, after allowing for improvements, at $83,200.  Sale 3 - (18 Wentworth Street, Bowen - Lot 254 on Plan B662). This is a 1,012 m² inside parcel, with limited views over Port Denison. It has gravel road access and no sewerage available. The sale was seen as inferior due to size, location and views, which are partly restricted by mangroves. The sale sold in July 1997 for $50,000, which was analysed at $48,200.  Sale 4 - (57 Golf Links Drive - Lot 22 on RP 706889). This is a 1,004 m² regular shaped corner parcel on the west of Golf Links Drive, with limited views to the ocean across the Bowen Golf Course. The sale was a late sale and is seen as inferior due to size, location and views to the water. The sale sold on 12 May 1999 for $72,500, which was analysed at $71,000, and applied at $66,000. In his assessment Mr Brown was aware of the sale of the adjoining Lot 5, and agrees that was a very high sale, and to an overseas purchaser. It therefore provides little use for the current valuation, and it was also a very late sale, well after the date of valuation. In determining the values of beachfront lands Mr Brown advises that the -- 4 of 7 -- 5 former relativities with inland parcels had been manually redetermined in order to reflect the level of sales in the market. Mr Brown further advises that the former unimproved value of his Sale 1 at 1 January 1996 was $76,000. Decision I turn first to the concerns of the appellant that the current rating system is at the core of his problems. However, that is not a matter for this Court, and is a matter for another place. The task for this Court is directed only to determining the unimproved value of the subject land. How that value is then applied by the Council, is a matter covered within the Local Government Act. In respect of the appraisal by the real estate agent, I find that to be prepared for another purpose, and not definitive in respect of the value of the land. In the matter of the percentage increase in the unimproved value of the subject land, I note that is likely to be of concern to the appellants. However, while I am aware that the percentage rise in valuation of a parcel is often of concern to appellants in seeking to have confidence that their personal property has been fairly treated in any valuation, they in fact do not prove conclusively that any error has been made in the valuation process. Such rises may, at best, be an indicator to owners that they should further investigate the valuation, but there may be many reasons why a valuation has changed at what would appear to be a rate out of line with some overall statistical percentage. This matter has been considered many times by the Courts, and I note from precedents that a large increase in itself is not evidence of some error in the valuation. I note, for example, in the decision of NR & PG Tow v. The Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at p.381: "It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation." (i) The Nature of the Land - A key issue in this matter, in my opinion, is the potential impact of erosion upon the subject land. While I accept Mr Brown's opinion that the loss of 3 metres of beach frontage would not seriously impact the site value of a 2,307 m² site, the presence of erosion threat is a matter for serious consideration in that locality. The closure of beach access from Soldiers Road, and the placement of a rock retaining wall to the east of the subject land, reinforces that concern. -- 5 of 7 -- 6 In respect of the recent sale of the adjoining Lot 5, I believe that may not represent a bona fide sale of a prudent purchaser, and for that reason I take no account of that sale. The definition of a fair market sale was perhaps best described by the High Court of Australia in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, where Griffith CJ said at p.432: " In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together." In the sale of Lot 5, the overseas purchaser would appear to have paid at a level well beyond the current market, and has perhaps paid a "special" value in order to obtain that particular property. That could only be fully appreciated after a careful and thorough analysis of that sale. For the purpose of this matter, I take no notice of that sale. (ii) Comparison of Sales - The sales provided by Mr Brown demonstrate the level of value paid in arm's length transactions for beachfront lands. In respect of Sales 2 and 4 I agree that they are different locations, and while they represent lands with views to the ocean, only Sale 2 has direct access to the beachfront, although it does not suffer from impacts of erosion. In comparing Sale 4 I note that it is further removed from the beachfront, while retaining views of the ocean across the fairways of the Bowen Golf Course. For that reason I agree that Sale 4 is inferior to the subject land. That then leaves the key comparison as Sale 1, which is in the same general locality, and also has direct access to the beachfront. While the subject land is larger than Sale 1, I agree that the better location of Sale 1 in Horseshoe Bay ensures that Sale 1 is slightly superior. On that basis I believe the value of the subject land is less than the applied value of $100,000 (Sale 1), and is more than Sale 4 ($66,000). -- 6 of 7 -- 7 If I then make allowance for any uncertainty as a consequence of the erosion problem, I could conclude either an unimproved value of $78,000 or $90,000. I note that while the respondent has led to a valuation of $78,000, Mr Brown has given an opinion that a figure of $90,000 could also be supported for the subject land. I am also aware that s.66 of the Act provides the power for this Court to either increase or reduce the unimproved value following hearing of the evidence. However, in view of any uncertainty, I note guidance to be found in the decision of the High Court in Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Company of South Australia Limited & Ors (1946-47) 74 CLR 358, where Dixon J said at p.373: " I have had the advantage of reading the judgment prepared by Williams J and agree in it. I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate." On that basis I will allow a figure of $78,000. In concluding my assessment, I am aware that under s.45(4) of the Act that the onus rests upon the appellant to prove his grounds of appeal in this matter. Unless it is demonstrated that the Chief Executive has used a wrong principle, or made a serious error, then s.33 of the Act dictates that the unimproved value as determined by the Chief Executive is deemed to be correct. (See Brisbane City Council v. The Valuer-General (1977-78) 140 CLR 40, at 56). On the evidence I believe that the appellant has failed to satisfy that responsibility, and the valuation of the Chief Executive should therefore not be disturbed. Conclusion Having considered the whole of the evidence I am not persuaded that the appellant has proved his case. The appeal is dismissed, and the unimproved value of Lot 7 on RP 709731, as determined by the Chief Executive at Seventy-eight Thousand Dollars ($78,000), is affirmed. (NG Divett) MEMBER OF THE LAND COURT -- 7 of 7 --