Barney Point Industries Pty Ltd and Currumbin Minerals (Neumanns') v Chief Executive, Department of Natural Resources [1998] QLC 130

LAND COURT, BRISBANE 29 OCTOBER 1998 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No: 59058/50000 Local Government: GCCC-Albert. (AV97-345). Barney Point Industries Pty Ltd and Currumbin Minerals (Neumanns’) v. Chief Executive, Department of Natural Resources D E C I S I O N (Hearing at Coolangatta) Background: This matter relates to a parcel located at Stewart Road, Currumbin Waters, Gold Coast, and described as Lot 3 on RP 212384, Parish of Tallebudgera. The subject land (the subject) is located approximately 2 km south-west of the Currumbin Post Office, and about 1.3kms south of the Palm Beach-Currumbin State High School. The subject has an area of 3.37 hectares and is zoned “Commercial Industry” under the Gold Coast (Albert District) City Planning Scheme of 11 February 1994, and effective at the date of valuation of 1 October 1996. The subject is located within the industry preferred dominant land use of the Albert Shire Planning Scheme 1995, Strategic Map 5. The key issues are the nature of the land, access, the comparison of sales and relativity. The subject is irregularly-shaped, low-lying, and is subject to periodic inundation and drainage problems. There is a vegetated open drain just to the west of the western side of the subject, passing to the north through three concrete pipes below Stewart Road. Current vehicular access to the subject is from an industrial crossing to Stewart Road, which has partial restriction for access for part of its frontage to the subject. There is no vehicular access allowed to the Pacific Highway which is about 250 metres to the east of the subject. Stewart Road is a two-lane bitumen sealed State controlled main road, which carries moderate traffic. There is a deep earthen table drain along Stewart Road which passes through a concrete pipe [1998] QLC 130 -- 1 of 13 -- 2 culvert at the industrial crossing to the subject. Water, sewerage, power and telephone services are available, and the subject is currently used for the processing (separating and stockpiling) of mineral sands. On 10 March 1997, the Chief Executive, Department of Natural Resources, issued a valuation for the subject at $370,000. Following an objection the Chief Executive confirmed that figure on 1 September 1997. The appellant has now appealed that figure claiming that the correct unimproved value should be $320,000. Mr Bryan Kelaher, Registered Valuer, represented and gave evidence for the appellant, also calling evidence from Mr N Leigh, Manager for Neumann Developments. Mr J O’Rourke, Legal Officer, appeared for the respondent, calling evidence from Mr AJ Whitelegg, the Departmental Registered Valuer responsible for determining the valuation. The Evidence: Mr Kelaher argues that there is no evidence supplied by the respondent which justifies any increase in the unimproved value beyond the previous figure in 1995 of $320,000. He further argues that the method of sales analysis adopted by the respondent is flawed, and has not appropriately assessed the specific features and limitations of the subject. (1) The Nature of the Land - The subject is predominantly surrounded by industrial lands, with recent residential development about 250 metres to the south. The adjoining vacant lands to the south, south-east and west (Lot 4 on RP 196131 and Lot 2 on RP 196130), are also owned by the Neumann Group, and have been the subject of some planning for further development. However, there is only a preliminary re-zoning and subdivisional proposal before the Gold Coast City Council (the Council) at this time. The proposal is to develop the subject and the adjoining lands as one development. There is an existing easement registered over Lot 11 on RP 219844 on the north of Stewart Road which relates to providing easement access across Lot 11 to Judeller Road north of Lot 11. However, with the resumption of Stewart Road the easement provides no benefit to the subject, and has been ignored in determining the unimproved value of the land. Because of existing stockpiling of sands upon the subject, it is difficult to obtain a clear understanding of the natural surface level. However, it is agreed that the -- 2 of 13 -- 3 subject is generally below the level of Stewart Road by up to 1 metre. The land falls about 3-4 metres from the Pacific Highway to the east, and also slopes down to the surface of the subject from lands to the west. Surface waters from both directions are channelled to the open drain near the western boundary of the subject, and thence to the north under Stewart Road. Both parties agree that the subject will require filling of up to 1 metre in order to reach the Council-determined building level above flooding to RL 2.4 metres on Australian Height Datum. (2) Access to the Subject - A matter of dispute between the parties is the extent of legal vehicular access to the subject. It is agreed that there is no legal access to the Pacific Highway (Tugun bypass) or to Stewart Road within approximately 74 metres of the north-eastern corner of the subject. The current existing industrial crossing is located about 90 metres from the western end of the Stewart Road frontage, and within the approximate 150 metres of frontage available for access in Stewart Road. Evidence was provided of the Department of Main Roads in response (19 August 1997) to an application to Council to subdivide the subject, which showed that any access to Stewart Road would be subject to the approval of the Queensland Department of Main Roads under section 52 of the Transport Infrastructure Act 1994. Mr Kelaher argues that, in his opinion, the current vehicular access to the subject is of a temporary nature, and relates only to the current use of the subject for the temporary purposes associated with the stockpiling of sand. He provided evidence of the Albert Shire Council approval to rezone the land to "Commercial Industry" in 1982. I note also that in respect of an application to construct vehicular access to Stewart Road, formerly known as Currumbin Creek Connection Road, the Department of Main Roads advised the Council on 24 April 1985 that it had no objection to the proposal subject to its location and its construction in accordance with Main Roads standards. In respect of an application to subdivide the subject in 1990, the Department of Main Roads further advised (10 October 1990) that it would require estimations of traffic generated; the appropriate standard intersection designed to cater for this traffic; and that no direct access to Stewart Road is to be allowed from any of the proposed lots. -- 3 of 13 -- 4 While there was no evidence provided of the subdivisional design proposed at that time, it was indicated by Department of Main Roads that any access to Stewart Road from the subject would be preferred as an extension of Hayter Street, presumably in the interests of limiting or spacing access points to Stewart Road. At that time turning vehicles were controlled into Hayter Street by road surface markings, and there was no evidence that traffic light signalling systems were proposed. Lights will not be required at the Hayter Street intersection until it becomes a four-way intersection. Mr O'Rourke argues that the existing zoning does not preclude further developments permitted under that zoning, but concedes that in the event of an approval to subdivide the subject for other purposes, then Council would require an upgrading or alteration to the access to Stewart Road. Those conditions by Council would depend upon the proposal and the anticipated traffic generated. Mr Leigh advises that the preliminary design being negotiated with Council involves a change of use of the subject, which limits access to Stewart Road. However, he was unable to provide documents to support his conclusion that future access to Stewart Road would be denied. Mr Whitelegg agreed that access to Stewart Road from any new parcels would be denied, but argues that a collector road from the subject would at least retain its current lawful access to Stewart Road. (3) Comparison of Sales - Mr Kelaher argues that, because of the nature of the Currumbin area, its limited access and flood plain drainage problems, it is inappropriate to compare sales in other areas to that locality. He further argues that there have been no sales of similar sized lots in Currumbin since 1992/93. However, in seeking some comparison he examines two sales of improved properties (Sales A and B), and two sales of vacant lands (Sales 1 and 2) as follows:  Sale A - (2 Nuban Street, Currumbin - Lot 6 on RP 158052). This is an improved parcel of area 1.756 ha, located on the corner of Currumbin Creek Road and Nuban Street. The sale is level and has entrances to both streets, with outstanding exposure to passing traffic, and is zoned "Commercial/Industrial". The improved sale sold for $1,125,000 in June 1995, (gross $64 per m), which was analysed to contain improvements valued at $460,000, providing an unimproved value of $660,000 ($37.50 per m). The sale is superior to the subject. -- 4 of 13 -- 5  Sale B - (Currumbin Creek Road - Lot 7 on RP 110844). This is an improved parcel of area 6,394 m, which is hatchet shaped and involves an easement access to Currumbin Creek Road. The sale is very much smaller and superior to the subject. The sale sold in May 1996 for $500,000 ($49 per m) which, after allowing for improvements of $257,500, was analysed at an unimproved value of $242,500 ($38 per m). However Mr Whitelegg queried the relevance of allowing for headworks and development costs totalling $31,500. Mr Kelaher argues that approach was necessary to bring Sale B to a corresponding condition as the subject, where headworks charges have not yet been paid.  Sale 1 - (Queensbury Avenue, Currumbin - Lot 129 on RP 163190). This is a sale of vacant land of area 2,080 m. The sale is very much smaller and is superior to the subject. The sale sold in February 1996 for $170,000 ($82 per m) which, after allowing for improvements, was analysed at $109,000 ($52 per m), and applied at $98,000 ($47 per m).  Sale 2 - (Wheeler Crescent, Currumbin - Lot 114 on RP 178296). This is a vacant sale of area 1,539 m which sold in March 1996 for $110,000 ($71.50 per m). After allowing for improvements it was analysed at $60,000 ($39 per m), and was applied at an unimproved value of $76,000 ($49 per m). The sale is very much smaller and is superior. Mr Kelaher draws little support from the above Sales A and B, because of their improved nature, and the difficulties of determining the added value of the improvements. He provided Sales 1 and 2 to demonstrate the difference between improved and unimproved sales in the locality. However, he agrees that Sale A is the most relevant sale. To support his valuation Mr Whitelegg provided the following sales:  Sale 1 - (2 Nuban Street, Currumbin - Lot 6 on RP 158052). This is the same sale as Mr Kelaher's Sale A, and it is agreed is the key sale in this comparison. The sale is about 550 metres south-west of the subject. The sale has an area of 1.756 ha and is zoned "Commercial Industry". The sale fronts Currumbin Creek Road which is a divided four-lane dual bitumen sealed carriageway, with earth channelling. Nuban Street is a two-lane industrial width bitumen sealed carriageway, with concrete kerbing and channelling. Water, electricity, and telephone are available. The sale sold in June 1995 for $1,125,000 which, after allowing for improvements, was analysed as a filled clear site at $830,757 ($47.41 per m), and as an unimproved site at $633,736 ($36.09 per m). The sale is applied at $630,000 ($35.88 per m). Key differences between the parties are the added value of the improvements, and whether there has been any fill upon the sale. -- 5 of 13 -- 6  Sale 2 - (Staplyton/Jacobs Well Road, Staplyton - Lot 2 on RP 146418). This is a sale of a vacant parcel of area 4.041 ha, zoned "Future Urban" and located about 50 km north-west of the subject. Overall the sale is seen as far inferior to the subject. The sale sold in January 1997 for $180,000 which, after allowing for improvements, was analysed at $177,000 ($4.38 per m), and applied at $155,000 ($3.84 per m). Because of any lack of comparable nature of this sale to the subject I would agree with both valuers that Sale 2 provides no assistance in this matter and I will not consider it further. In comparing the common key Sale A the valuers have concluded unimproved rates for the subject at $9.50 per m (Mr Kelaher), and $10.98 per m (Mr Whitelegg). However, their methods of arriving at those figures are quite disparate. Mr Kelaher has adopted the following determination for the subject: 33,700 m @ $20/m $674,000 Less land fill of 1 metre depth 33,700 m @ $10/m $337,000 Fencing and levelling $12,500 Unimproved value $324,500 Adopt $320,000 ($9.50/m) Mr Whitelegg has drawn the following conclusions: 33,700 m @ $23/m $775,100 Less: Fill to bring to RL 2.4AHD (33,700 m @ $10/m) $337,000 Allowance for internal drains and stabilising fill $30,000 Plus interest @ 8% (1 year) $29,360 $396,360 Unimproved Value $378,740 Adopt $370,000 ($10.98/m) The reasons for the difference between the two analyses would appear to lie in the valuers' different understanding of the nature of the land in Sale A, whether interest should be allowed during the period of filling, and the value of improvements upon it. -- 6 of 13 -- 7 I take first their understanding of whether there has been fill upon Sale A. Mr Kelaher claims that from long personal experience in the area, and the existence of some trees upon Sale A, he believes that Sale A has not been subjected to major filling. Mr Whitelegg, by comparison, sought evidence from his departmental records of that site which showed that between half to three-quarters of a metre of fill had been applied to the site prior to the 1977 valuation, together with about a further 1 metre of fill in an old lagoon area on the site. The departmental record indicated the following fill had been allowed in the 1977 valuation of that site (Exhibit 9): half to three-quarters of a metre across the site plus 3,000 m to fill a lagoon, allow 20,560 m. In seeking to resolve any uncertainties in favour of that parcel Mr Whitelegg has allowed only 17,560 m at 1 metre deep @ $10 per m or $175,600. While Mr Leigh had no knowledge of that fill, he conceded that his experience of the site extended back only some 16 years. In the matter of the added value of the building improvements, which are 25 to 30 years of age, both valuers have relied upon industry journals depicting average values for that locality, together with their personal experience of such values in the area. Mr Kelaher has drawn guidance from Cordells Building Cost Guide (May 1996) p.244, which indicates an approximate rate of $390 per m for older industrial buildings at least 1,000 m in area, which are comparable to those upon Sale A. Mr Whitelegg has drawn guidance from Rawlinson Australian Construction Handbook Fifteenth Edition, p.45, determining a current rate of approximately $310 per m for comparable buildings. Because of the age and condition of the buildings, Mr Whitelegg has depreciated those costs by between 60% to 70% to obtain their added value, arriving at a depreciated rate of approximately $100 per m. Mr Kelaher has determined depreciated added values for the buildings upon Sale A at $200 per m, while Mr Whitelegg argues the depreciated value of the buildings are $90 per m and $105 per m. It is agreed that sewerage has not been connected to the improvements, and only basic electrical and plumbing services are connected. Mr Whitelegg advises that estimates have been given by agents who handled the sale of $300,000 to $350,000 to have sewerage connected. There is no evidence to suggest that either valuer has made an error in his estimate of the values of those buildings, and it is noted that the advantage of experience in assessing such values is heavily weighted in Mr Kelaher's favour. However to counter such advantage, Mr Whitelegg has been both enthusiastic and -- 7 of 13 -- 8 thorough in his approach. On balance I would concur with a rate per m somewhere between their two estimates for Sale A. While both industry guidelines would appear to have been appropriately applied, the disparity serves to highlight the difficulties of establishing the added value of the buildings, and also that the industry documents were in fact only average figure guidelines, and cannot be directly applied to any buildings without some adjustment. (4) Relativity - To support his analysis, Mr Kelaher has sought to compare relativity with the following parcel of industrially zoned land:  Parcel A - (Currumbin Creek Road, Currumbin - Lot 1 on RP 139003). This improved parcel has an area of 1.175 ha and has a narrow easement access to Currumbin Creek Road. There are three large factories aged about 10 years, occupying approximately 4,000 m, and the site has been heavily filled and pre-loaded. The parcel has a current unimproved value of $550,000 ($47 per m) which, after allowing for fill, improvements and fencing and services, would provide a suggested developed value of $1,571,250 ($133 per m gross). Mr Kelaher argues that site is very superior to the subject. While there was considerable discussion in respect of the number and location of the buildings upon Parcel A, that provided little insight into the real relevance of the check on relativity with the subject. There is no doubt that Parcel A has a superior unit rate per m, but that provides little assistance in determining the unimproved value of the subject. There was also some discussion about the possible capitalisation of net incomes from Sale A as a check upon the added value of the building improvements. It was concluded that the depreciated buildings were in fact showing a better rent return on investment than for new buildings, a not unexpected conclusion. That income was based upon a 60% depreciation rate, which also assisted in explaining why the current month-to-month tenancies were favoured by the tenants. In the end, the capitalisation discussion provided little assistance to the Court, although Mr Whitelegg claims that it supports his contention of depreciation rates at 60% to 70%. In response to Mr Kelaher's claim for relativity to be maintained, Mr Whitelegg provided a schedule of changes in relativity for industrial land in the locality (Exhibit 7) from 1.1.96 to 1.10.96. Overall there were 15 sites (including the -- 8 of 13 -- 9 subject) which demonstrated rates per m from $33 per m (3.567 ha) to $103 per m (5,333 per m). A 15% percentage increase during the period was consistent, and relativity had been maintained. Decision: I turn first to the nature of the land and note that both parties agree that the current surface of the subject will require about 1 metre of fill to bring to an acceptable level for future development. I also agree that the easement over Lot 11 on RP 219844 brings no added value to the subject. (i) Access - On the evidence before me I have nothing to suggest that the current access to the subject from Stewart Road is only of a temporary nature. While the actual use of the site was acknowledged as of a temporary nature for the storage of sand, the approval to rezone the land by the Council in 1982 to "Commercial Industry" required only that the industrial crossing to Stewart Road was to be "at locations approved by the Shire engineer". The locations required by the Council were to be within the western part of the frontage to Stewart Road as established by the Department of Main Roads. The current access satisfies those criteria. In respect of uses of the subject which can be undertaken under the current zoning, it is noted that Mr Whitelegg has assessed the valuation on the basis of development for commercial industry purposes, after allowing for filling to reduced level 2.4 metres AHD. In this regard the Table of Developments (column 2) provides for uses which do not require Council consent, but are subject to conditions. These uses include, amongst others, factory units, light and service industry, warehouses and showrooms. All of those purposes would be consistent with Mr Whitelegg's valuation. It is also noted that a collector road from Stewart Road into the subject area, thus providing access to any new industrial developments, was the most likely form of access. While Department of Main Roads indicated a preferred location nearer to Hayter Street, there is no apparent reason why the use of the existing location would not continue for any allowable uses under column 2 of the Town Plan. However, in the event of a higher value being placed upon the subject as a consequence of exercising any higher potential use following further subdivision, it is possible that some upgrading of the access to Stewart Road would be required. For the purposes of -- 9 of 13 -- 10 this valuation, I accept Mr Whitelegg's hypothesis in respect of the access to the subject. (ii) Comparison of Sales - As agreed by Mr Kelaher and Mr Whitelegg, the common sale (Sale A) is the key to any comparison. That sale is not of vacant lands, and has some inherent difficulties in assessing the added value of improvements (see PH Clough v. The Valuer-General (1981-82) 8 QLCR 70, at 76). However, there is general agreement in respect of some aspects of the comparison. I note the comparisons adopted are: Sale Area Rate per m Comparison Mr Kelaher (i) Common Sale 1.756 ha $37.50 Cleared unfilled site - superior (ii) Sale B 6,394 m $38.00 Smaller/superior (iii) Sale 1 2,080 m $52.00 Smaller/superior (iv) Subject 3.37 ha $20.00 Site Value (v) Subject 3.37 ha $ 9.50 Unimproved value Mr Whitelegg (i) Common Sale 1.756 ha $47.41 Cleared filled site - superior (ii) Common Sale 1.756 ha $36.09 Unimproved Value (iii) Subject 3.37 ha $23.00 Site Value (iv) Subject 3.37 ha $10.98 Unimproved Value In comparing Sale A, Mr Kelaher has concluded that sale to be free of any fill. However, based upon the departmental record of the 1977 valuation for Sale A, a total of 20,560 m of fill had in fact gone into Sale A more than 20 years ago, and prior to the erection of the existing buildings. On the basis of that evidence, I conclude that Sale A was in fact filled, and Mr Kelaher's assumption is inappropriate. (iii) Interest - In the matter of whether interest should be allowed as a deduction for the improvements on Sale A, I note that Mr Kelaher argues that such costs are normally only "allowed in such cases where the land has to be developed" (transcript p.2). By Mr Kelaher's conclusion, there was no further development costs required as at the date of sale, and the purchaser was able to receive a full benefit from the property as from that date. -- 10 of 13 -- 11 However, in arriving at the value of Sale A as a filled site, Mr Whitelegg has sought to allow for interest upon the development costs to bring the unimproved Sale A to a cleared flat site ready for development. Such a conclusion would facilitate a like-with-like comparison between Sale A and the subject after the subject has been filled. Any interest, in my opinion, would relate only to the site development costs, and not to any building improvements. However, such allowance would only be appropriate if we were seeking comparison with the subject on an unimproved basis. On the premise that a comparison is sought on a filled site basis, there would be no need to allow for any fill or for interest for the period to place that fill. In this matter the valuers have sought to draw an initial comparison between Sale A and the subject on a filled site basis, and then to allow for 1 metre of fill upon the subject. On that basis I agree with Mr Kelaher that allowing for interest would not be appropriate. (iv) Relativity - If I turn then to the added value of the building improvements upon Sale A, I find the following comparisons on a site basis: Mr Kelaher - Depreciated improvements (no fill allowed) $460,000 Mr Whitelegg - Depreciated improvements (fill allowed) $294,243 It is noted that there is some mathematical inconsistency in the analyses of Sale A. The unimproved value is shown on a copy of a map supplied, and adopted, by Mr Kelaher at $660,000, while Mr Whitelegg claims that the applied unimproved value of Sale A was $630,000 at 1 October 1996. It is possible that the figure adopted by Mr Kelaher was at some time other than 1 October 1996, but there is no evidence to confirm that assumption. Based upon uncertainties of the correct applied unimproved value of Sale A, and inconsistencies of the method of determining the depreciated improvements to that sale, I will focus upon the comparisons between Sale A and the subject as cleared sites ready for development. Mr Kelaher Mr Whitelegg Sale price of Sale A $1,125,000 $l,125,000 Improvements: $460,000 $294,243 -- 11 of 13 -- 12 Filled and Cleared Site $665,000 $830,757 The methods used by the two valuers for analysing Sale A involve a certain level of personal judgment and adjustment from the industry average guidelines. Mr Whitelegg has allowed for a lesser rate per m for the existing aged buildings, and has accordingly concluded an analysed rate of $47.31 per m for the cleared site value. That is compared to Mr Kelaher's cleared site value of $37.50 per m. If I then compare the rates per m for their anticipated site values for the subject, and Sale A, I find the following relativities: Mr Kelaher Mr Whitelegg Site Value of Sale A $665,000 $830,757 Site Value per m $37.50 $47.31 Site Value of the Subject $20 per m $23 per m Relativity 0.53 0.49 Mr Kelaher has sought support from relativity between his Parcel A (Lot 1 on RP 139003) and the subject in order to claim that the unimproved value should remain the same as for the former valuation. However, to counter that claim Mr Whitelegg has provided 15 parcels of similarly zoned land in the locality, which have all shown the same percentage increase of 15% from the former valuation. On the evidence supplied, I find no reason to challenge Mr Whitelegg's determination on a relativity basis. Summary: In summarising this matter I find that there has been inconsistencies in both methods adopted by the valuers, but in the end the final valuation rests upon the unimproved rates per m for the subject of $9.50 (Mr Kelaher) and $11 (Mr Whitelegg). There is no support for a change in the valuation as a consequence of any amendments to relativity in the locality. Any differences between the parties in respect of filling upon Sale A, or whether interest should be allowed for the filling of Sale A, have no impact upon the final valuation. -- 12 of 13 -- 13 The only variation of any consequence is really the added value allowed as a deduction for the aged industrial buildings upon Sale A. In the end, as noted, I feel an added value for the buildings between the values contended would seem appropriate. Based upon the variability likely following interpreting from the industry guidelines, I will allow a rate of $21.50 per m as site value for the subject. After allowing for filling, an unimproved value of the subject should be $10.50 per m or $353,850, say $355,000. Conclusion: Having considered the whole of the evidence, I am persuaded that the appellant has partly proved his case. The unimproved value as determined by the Chief Executive is set aside, and the unimproved value of Lot 3 on RP 212384 is determined at Three Hundred and Fifty-five Thousand Dollars ($355,000). NG DIVETT MEMBER OF THE LAND COURT -- 13 of 13 --