Copeland v Chief Executive, Department of Natural Resources [2000] QLAC 83

IN THE LAND APPEAL COURT HELD AT BRISBANE I LaBRARY COPY J In the matter of appeals from decisions of the Land Court - Unimproved Valuations Valuation of land Act 1944 Local Government - Maroochy Shire (A V98-907; AV98-908 and A V98-909) BET\VEEN Kevin J and Rosemarv A Copeland AND Chief Executive. Department of Natural Resources Appellants Respondent BEFORE THE HONOURABLE MR JUSTICE MUIR, MR RP SCOTT AND MR RE WENCK REASONS FOR JUDGMENT Delivered at Brisbane this Fifteenth day of December 2000 1. The appellants own land, on which they reside, at McKillop Road, Palmwoods, about 7.6 km south-west of the Palmwoods Post Office. The real property description of the land is Lot 1 on RP 218704, Parish ofMooloolah, containing an area of8,192 m2 • 2. The dwelling site has been developed in the western section, towards the northern boundary, on a sandstone spur ridge. It was the appellants' evidence in the Land Court, that the dwelling site "allows a north-eastern aspect and outlook across the Landershute valley floor, about 100 metres below, to the ridge lines which cross the valley due south of Palmwoods. A small window of about 5° (five degrees) of horizon allows a distant glimpse under favourable conditions of the coastline near Mudjimba." 3. The eastern 48% of the site is encumbered by an easement accommodating a 275 kV electricity transmission line. Three sets of conductor cables, strung in horizontal configuration, span the site. A supporting steel pylon structure is located immediately to the south of the frontage road reserve. The next pylon is some distance northerly of the site. The appellants described the cables as being "at eye level where they pass the dwelling ... and the closest wire is 27 metres from the dwelling." The conditions of the easement and the restrictions imposed on the use of the land are not an issue in this [2000] QLAC 83 -- 1 of 10 -- 2 matter, the parties being concerned with the impact of the easement encumbrance and visual impact of the electrical works on the unimproved value of the land. 4. As at 1 January 1996; 1 October 1996 and 1 October 1997, the Chief Executive's unimproved valuations of the land, subsequent to reductions following objection to the originally issued valuations, are $58,000; $60,000 and $60,000 respectively. The appellants appealed to the Land Court from those decisions on objection, contending for valuations of $42,000; $45,000 and $45,000. 5. The Land Court dismissed the appeals and affirmed the valuations of the chief executive. 6. Mr and Mrs Copeland have appealed to this Court from the decisions of the Land Court. The grounds of appeal are as follows: "The decisions of the Land Court are based on Crown analyses of sales and applied values which rely on descriptions and assumptions which are often incorrect; the decisions do not correctly consider and apply the principles of relativity as established in and between the subject and basic sale localities; the decisions reject local evidence presented in differential impact of easement powerlines and structures and apply data from a market area far removed and quite different from the subject area." 7. The learned Member of the Land Court had identified the key issues before him as being the nature of the land, the impact of the electricity easement, relativity of valuations and the comparison of sales. The facts are fully outlined in the reasons for his decisions. 8. In the Land Court, Mr RJ Rose, a registered valuer employed by the Chief Executive, tendered a formal report in which his valuations were written as follows: "Dates of valuation Rural Homesite (unaffected value) Less allowances for Power easement 32.5% Adopt 1/1/96 $86000 $27950 $58050 $58000 1/10/96 $90000 $29250 $60750 $60000 1/10/97 $90000 $29250 $60750 $60000" 9. Mr Rose's valuation was made having regard to five sales, one of which, the "Mossy Bank" sale, (his Sale 1), showed on his analysis, an unimproved value of $66,000 as at the date of sale, 30 July 1995. The sale land has an area of 7,293 m2 • As at 1 January 1996, an unimproved valuation of $60,000 had been applied to that land, -- 2 of 10 -- 3 then, $63,000 as at both 1 October 1996 and 1 October 1997. Of relevance was the fact that the sale land was encumbered by an electricity easement accommodating the overhead cables of a 110 kV transmission line, supported on steel pylons external to the site, and of somewhat different structural configuration to the 275 kV line pylons supporting the cables over the subject land. About 60% of the sale site was encumbered by the easement, with a sliver of unencumbered land adjacent to the easement and the rear boundary. Mr Rose's analysis adopted an added value of $2,000 for a "structure", $500 for a dam and $1,500 for clearing. The "structure" was located on the prime unencumbered building position available on the site. The building was apparently suited only for "weekender" type accommodation and had minimal fittings. The evidence was that some renovations and additions of a relatively minor nature had been made since the date of sale. Mr Rose had included the following remarks relative to this sale - "Sale is also included to demonstrate diminution in value attributable to the effect by a substantial power easement for high voltage power lines. Unaffected, the site is considered to be worth $100 000 at the sale date. This shows 32.5% reduction in value . . . ." In his oral evidence in the Land Court, he resiled somewhat from that assessment when, at transcript p.56, lines 39-44, after referring to the sales evidence "continuum", he said: "I think the $100,000 was a bit high actually. I think at the time I was thinking $95,000 to $100,000, but I was trying to be generous in the allowance. Now as it turns out I have been over-generous in this allowance. However it was struck by the Court and we settled on it and I've tried to maintain that integrity ... " (emphasis added). 10. The evidence was that the appellants had previously appealed against an earlier valuation (as at 1 January 1995). Mr Rose had made that valuation. His evidence as to the basis for the allowance of 32.5% for the easement, at that time, had in fact come from the then "after date" "Mossy Bank" sale. It was his basis for the allowance that had been accepted by the Land Court at that time. 11. The "as it turns out" emphasised above, was a reference to research Mr Rose had undertaken as to the effect of 275 kV electricity transmission lines and accommodating easements on lots within a "park residential" subdivisional estate at Cashmere, in Pine Rivers Shire, some considerable distance southerly of the subject land. He had been concerned that, apart from the "Mossy Bank" sale, there had been a dearth of sales evidence of smaller rural residential lots affected by electricity easements in the locality -- 3 of 10 -- 4 of the subject land. In his quest for the further evidence, after having conducted the fonnal valuation, but prior to the Land Court hearing, Mr Rose had been directed to the Cashmere estate by a departmental colleague. He thought the comparisons were "very relevant" pointing out to the learned Member "that while this area is far removed from the subject we are talking about the same quantum of money for land. We are talking in the $60,000 to $100,000 bracket. We are talking the san1e quantum for improved properties ... ", although the country comprised "a hard gravelly ridge" which he felt "was very unattractive." Tables of sales of land "unaffected" by electricity easement and "affected" lots within two locations of the Cashmere development, were tendered at the Land Court hearing. In the first location (Table 1) the data showed that four lots with easements encumbering about 50% of their areas, more or less, had sold in the period generally relevant to these appeals, in the range of 17% to 19.5% less than "unaffected" adjoining lots surveyed to the same street frontage. The easements on Mr Rose's evidence before us, had been designed to accommodate two parallel transmission lines only one of which had been constructed at the dates of sale. He had not identified any difference in diminution in value between lots affected in different ways by easement. Some had existing overhead cables, others had potential for the future works, whilst there was one lot where a tower was located within its boundary. 12. In the second Cashmere location (Table 2), four lots with varying easement encumbrance had sold in the same general period at prices less than for comparable adjoining or nearby lots, the differences ranging from 11.5% (about one-third of the lot encumbered) to 14.7% (slightly more than 50% encumbered) to 29.5% (majority of site affected) and to 44% ("about 80% of best land affected - two large steel pylons located on site to facilitate junction of two lines considered example of worst possible case - barely a building site left - consider much worse than subject easement effect"). 13. Mr Rose had formed the opinion, which he saw as supported by the Cashmere evidence, that the greater the area of easement encumbrance, the greater the deleterious effect on market value. 14 . Mr Copeland has long valuation experience. He had been caught by surprise in the Land Court when the Cashmere evidence had been introduced by Mr Rose. Furthermore, less than two weeks prior to the date of the Land Court hearing he had become aware of two sales additional to those which he understood had formed the basis of the chief executive's valuation. He had not been able to adequately inspect or analyse one of those sale properties. -- 4 of 10 -- 5 15. As a consequence, the appellants sought leave to adduce further evidence in the appeals to this Court. That application was successful, only in so far as it related to the Cashmere sales. Mr Copeland had formed the opinion that all market evidence from the Cashmere area should be considered "non-comparable and inadmissible". He described Cashmere as a "planned Park Residential area with an average lot size between 6,000 m2 and 8,000 m2, development standards which include wide bitumen roads, kerb and channelling, town water and ancillary services. It is a dormitory suburb close to the State Capital City, with all the attractions and benefits which flow from a resident population in excess of one million people. 11 In contrast he described the subject area west of Palmwoods as comprising "... a mix of residual commercial farms, hobby farms, cleared and forested lands, some steep (and unstable) lands and alluvial plains ... characterised by a mosaic of remnant vegetation . .. " and 11 •• • Development for urban purposes on rural residential land is not intended in this Planning Area" ("Maroochy Plan 2000, planning area No. 28 - Southern Hinterland, p.345"). The appellants submitted that, if it was necessary to consider the comparisons made between "affected" and "unaffected" lots at Cashmere then three (3) levels of blight to affected lots needed to be distinguished having regard to: • those lots which are within an easement area, but free of power lines across the land; • those within an easement area with power lines crossing the land; • those which also have a tower situated on the land. In Mr Copeland's opinion, Mr Rose's Cashmere comparisons had not been extended sufficiently to show the total picture, which indicated greater levels of delet.erious effect. 16. We do not intend to discuss at length the methodology of comparison adopted by Mr Copeland. Suffice to say that, in the circumstances as described, we do not think he took sufficiently into consideration the physical and locational differences between certain lots, before considering the effect of the easements and their associated electrical works. 17. While we do not criticise Mr Rose's attempt to establish an evidentiary relationship between electricity transmission lines, their accommodating easements and market value, we are unable to accept that the results of the Cashmere research, while helpful as a guide for that area, are sufficiently authoritative to allow rigid valuation application even in Cashmere, let alone on a wider geographical scale. Although Mr Rose was unable to personally confirm the development history of Cashmere, it seems -- 5 of 10 -- 6 clear that the subdivisional development was designed to accommodate the pre-existing transmission lines and easement. The lot layout would logically have been sought by design, to mitigate as much as was possible, the effect of the encumbrance. It is observed, for example, from the tendered mapping, that in many instances encumbered lots are larger in size than the standard lot. While we accept that, in the comparison process, differing proportion of site coverage could have differing deleterious effect, we are not persuaded that site coverage is the sole criterion. Indeed, it is envisaged that, as Mr Copeland suggested, there would be a number of criteria which could be expected to have deleterious effect of varying degree, depending on the particular circumstances. 18. . We accept that Mr Rose did not set out to use the Cashmere sales evidence as a basis for other than assessment of the deleterious effect of the easement on the subject land. However, we also accept the thrust of Mr Copeland's argument that factors which influence the market in an environment such as Cashmere may not, necessarily, have similar impact in an environment such as that of the subject land. Mr Rose's evidence before us was that he would not have gone to Cashmere, had the evidence he sought been readily available in the locality of the subject land. While additional local evidence would have been of assistance, it is our view that the evidence provided by the "Mossy Bank" sale casts real doubt as to the veracity of the direct application of the Cashmere evidence to an environment such as that in which the "Mossy Bank" land, or the subject land, is situated. 19. In the circumstances, it is necessary to consider the differing analyses of the "Mossy Bank" sale as a site encumbered by an electricity easement. The difference between Mr Rose and Mr Copeland relates principally to the added value of the structure. Mr Rose as discussed earlier, placed a value of $2,000 on the structure, for demolition salvage purposes. His reasoning was that the highest and best use of the land was for development as a rural residential site. The structure occupied the only position on the site which was suitable for construction of a dwelling of a quality in keeping with the site. The structure could not, in his opinion, be incorporated into a suitable redevelopment. The Member found that, for demolition purposes, Mr Rose's assessment was generous. Mr Copeland's evidence was that a purchaser would not be considered to be imprudent, in his opinion, if a decision was taken to do just as the purchaser had done, to make the structure "livable and perhaps take it much further than she has taken it". On that reasoning, he had applied a depreciated replacement value of $8,750 on the "cottage". He agreed that the structure occupied the only practical -- 6 of 10 -- 7 building site on the land. The Member found that the building, having been utilised for limited accommodation purposes for the four years subsequent to the sale, would have possessed some value to the purchaser, at the time of sale, and adopted an added value of $4,000 for the structure. 20. The monetary differences in the conflicting reasoning are not great, but have an effect of some significance on the analysis of the deleterious effect of the easement. The building, even on Mr Copeland's assessment, has relatively nominal value due to its physical condition and nature of constrnction, in comparison with the value of the land, if vacant. On the evidence, we are not persuaded that any significant expenditure on the strncture would have been economically justified, regardless of the intentions of the actual purchaser. In the particular circumstances of the sale land, we do not find that the structure added any value for the highest and best rural residential use of the land, other than its salvage value for demolition. We agree that Mr Rose's apportionment of value on that basis was generous. We therefore accept his analysis of the unimproved value of the "Mossy Bank" land in the amount of $66,000. 21. There was a difference of opinion between Mr Rose and Mr Copeland as to the relative effect of the easement encumbrances on the "Mossy Bank" land in comparison with the subject land. In his formal valuation, Mr Rose had accepted that the deleterious effect of the easements was, on balance, directly comparable. However, as we understood his verbal evidence, he had been persuaded by his Cashmere research that the greater proportional area of easement encumbrance on the "Mossy Bank" land, brought with it greater deleterious effect than on the subject land. Mr Copeland was of the opinion after analysis of the "Mossy Bank" sale, that the deleterious effect of the easement on that land equated about 30% of the unaffected value. In comparison, and for reasons associated with the substantial difference in voltage (110 kV to 275 kV), structural configuration of the pylons and conductors, varying visual impact including the height of conductors relative to the building sites and the location of the supporting pylons, Mr Copeland suggested that the deleterious effect of the easement on the subject land would be 40% of its unaffected value. The Member, assisted by an inspection of both the subject land and the "Mossy Bank" sale in the company of the parties, found that on balance, the deleterious effect in each case was similar. We find no evidence which would influence us to depart from his finding in that regard. 22. When considered as hypothetically unaffected sites, there seems to be consensus between Mr Copeland and Mr Rose that the "Mossy Bank" land is superior to the -- 7 of 10 -- 8 subject land. The degree of superiority is a matter of dispute. Mr Copeland, on his assessment of relativity with the sales evidence suggested unaffected values of $75,000 for the "Mossy Bank" land and $70,000 for the subject land. Mr Rose, in his formal assessment suaoested a market value of $100,000 for the "Mossy Bank" land,' ::::,::::, unaffected by the electricity easement. It had been his evidence that a market value of $100,0000 would have shown an unimproved value of $98,000 after deduction of $2,000 for the dam and clearing. It was from this assessment ($98,000) and his analysis of the sale as encumbered ($66,000) that the deleterious effect of the easement had been calculated as being 32.5%. His oral evidence had been that a market value in the range of $95,000 to $100,000 would have been more realistic. Of course, a lower unaffected unimproved market value would have the effect of lessening the calculated deleterious effect of the easement. An unaffected market value of $95,000, when reduced to $93,000 as unimproved, would indicate a deleterious effect of 29%. 23. We feel that Mr Rose's verbal evidence as to the unaffected unimproved market value of the "Mossy Bank" land should not be ignored. On the totality of the tendered sales evidence, we see Mr Copeland's unimproved estimate of $75,000 for the "Mossy Bank" land as being altogether too conservative. We adopt $93,000 as the amount for which the land could have been expected to have been sold in an unimproved state hypothetically unaffected by the easement encumbrance. However it is necessary to note that from an analysed unimproved value, as encumbered, of $66,000 a valuation of $60,000 had been applied to the "Mossy Bank" land as at I January 1996 (an application of 91 % of the analysed sale price). For consideration of relativity issues, it seems desirable to assume that an unimproved sale price of $93,000 would also have attracted a statutory valuation application of 91 %, or $84,630. Now, by coincidence, the Member's methodology adopted in his assessment of the unimproved value of the "Mossy Bank" land, resulted in an unaffected assessment of $84,666 which he rounded to $84,000. In comparison, the Member then adopted an unimproved unaffected value of $80,000 for the subject land. 24. Mr Rose said that he would have applied an unimproved value of $86,000 to the inferior subject land hypothetically unaffected by the easement. While we are able to accept on the evidence that $86,000 may have represented a hypothetical unaffected sale price for the subject land it seems to ignore the fact that the evidential unimproved analyses of sale prices of the various lots have not been applied in full in the statutory valuation process. It is observed that the methodology adopted by the Member in his -- 8 of 10 -- 9 assessment of unaffected value for the "Mossy Bank" land, and as a consequence, the subject land, did not appear to give consideration to the relationship between "sale" prices and "applied" values. Nevertheless, on our analysis, his adoption of $80,000 unaffected, for the subject land, seems to us to bear reasonable relativity with the value which, it is assumed, might have been applied to the "Mossy Bank" land as unaffected. 25. A difference we have with the Member's determinations is that a deleterious effect of 25% was adopted for the easement encumbrances on both the "Mossy Bank" and subject land. That effect was based on Mr Rose's interpretation of the Cashmere sales evidence. It is our view that the evidence from the "Mossy Bank" sale supports a rounded ~eleterious effect of 30%, as had been suggested by Mr Copeland. We would then however depart from Mr Copeland's opinion in that we accept the Member's decision that the easement encumbrance caused, on balance, equal effect on both the "Mossy Bank" land and the subject land. 26. An allowance of 30% of an unaffected unimproved value of $80,000 as at 1 January 1996 would result in an unimproved valuation of $56,000 for the subject land. While the sales evidence put before the Land Court was similar for each date of valuation, there seemed to be consensus between the parties that values had increased from 1 January 1996 to 1 October 1996 then remained static through to 1 October 1997. vVe adopt the applied increase of $2,000 above the 1 January 1996 valuation for the subsequent dates of valuation. 27. In summary, while it is clear that the sales evidence supported the valuations appealed against, we are satisfied that there is indication of some inconsistency, albeit of limited significance, in the relativity of valuations applied by the chief executive to the subject land, in comparison with, in particular, the valuation applied to the "Mossy Bank" land as at 1 January 1996. 28. In Grahn v. The Valuer-General (1992-93) 14 QLCR 327 the Land Appeal Court, after identification of certain principles relevant to sales evidence and relativity, said at p.329: "Bearing those propositions in mind, it is best to approach this case by considering first the position regarding sales evidence then considering the relativity of the valuations of the subject blocks with the valuations of comparable blocks of land." -- 9 of 10 -- 10 29. While we accept that valuation is not an exact science, our analysis suggests that the appellants before us have carried the burden of proving that relativity of valuations was an issue deserving of further consideration. Finding 30. The appeals are allowed. The decisions of the Land Court are set aside and the unimproved value of the land determined as follows: 1 January 1996 1 October 1996 1 October 1997 $56,000 $58,000 $58,000 (Muir J) JUSTICE OF THE SUPREME COURT (RP Scott) MEMBER OF THE LAND COURT (RE Wenck) MEMBEROF THE LAND COURT -- 10 of 10 --