Dalzell v Chief Executive, Department of Natural Resources [1998] QLC 124

LAND COURT BRISBANE 13 OCTOBER 1998 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No.: 6828 Local Government: BCC-Balmoral (AV98-26) Donald and Elizabeth G Dalzell v. Chief Executive, Department of Natural Resources D E C I S I O N Background: This matter relates to land at 15 Hurd Terrace, Morningside, and described as Lot 4 on RP 43131, Parish of Bulimba. The subject land (the subject) has an area of 551 m, and is located approximately 4 km radially east of the Brisbane GPO, in a predominantly older timber style residential area, where some unit redevelopment is occurring. The key issues are changes in the unimproved value, the impact of noise and pollution, the method of valuation and the comparison of comparable sales. The subject is a regularly shaped inside parcel falling from rear to front about 7 metres, and is located above street level, with good access to Hurd Terrace, which is bitumen sealed with concrete kerbing and channelling. The subject is situated on the crest of a steep incline which may limit visibility, although this is not major due to the quiet nature of traffic in Hurd Terrace. The Morningside Railway Station is located approximately 250 metres to the north of the subject, and the Cleveland and Brisbane Port duplicated railway lines are approximately 130 metres to the west of the subject. Water, electricity, telephone, gas and sewerage are all available. The land is zoned "Residential BR3" under the Town Planning Scheme of the Brisbane City Council of 13 June 1987, and effective at the date of valuation of 1 October 1996. The subject is currently used as a single unit dwelling, and has been valued accordingly. The Chief Executive, Department of Natural Resources, on 17 March 1997 issued a valuation at $111,000. Following an objection, the Chief Executive confirmed that figure on 16 December 1997, and the appellants have now appealed, claiming the [1998] QLC 124 -- 1 of 12 -- 2 valuation should more properly be $75,000. Following a preliminary conference before this Court on 5 May 1998, the matter was heard on 10 July 1998. Mr D Dalzell appeared and gave evidence for the appellants. Ms C Watt, legal officer, appeared for the respondent, calling evidence from Miss JR Manners, the departmental registered valuer responsible for determining the valuation. The Evidence: (1) Changes in the Unimproved Value - Mr Dalzell argues that the recent increases in the unimproved value of the subject are inconsistent with trends in the property market in the locality, and make no allowance for the impact of two major public infrastructure developments. Following an objection from Ms Watt, Mr Dalzell amended his statement of appeal to remove any reference to prior "without prejudice" discussions between the parties. Mr Dalzell advised that he saw this matter as a test case of the current computerised process for determining the valuations, a matter of some concern and observation by many of his neighbours. There had been a group objection to the respondent against increases in the unimproved values in 1991, which had resulted in some minor reductions in the unimproved values at that time. Later objections in 1995-96 had not been so successful. Mr Dalzell saw his current appeal as symbolic of the current disquiet in the community with recent trends. Mr Dalzell also provides copies of average market sales of improved properties in the Morningside locality which were prepared by a real estate agent based upon records of sales recorded by the respondent. He notes the following house sales: Period Number of Sales Average Price Median Price 1.1.96 to 31.12 96 176 $96,616 $116,000 1.1.97 to 31.12.97 226 $106,157 $123,550 Mr Dalzell highlights the trend of increases in the unimproved value of the subject as follows: Date Unimproved Value Percentage Change March 1989 $40,000 - March 1990 $70,000 75% March 1992 $84,000 20% June 1993 $84,000 - January 1995 $88,000 5% January 1996 $101,000 15% October 1996 $111,000 10% -- 2 of 12 -- 3 Mr Dalzell argues that during this period, while the unimproved values have continued to rise, the quality of life in the locality as a consequence of other intrusions has declined considerably. He argues that, particularly in 1996 when the increased freight traffic on the Port of Brisbane railway line was severely impacting the local community, the unimproved value rose from $101,000 to $111,000 (9.9%). Mr Dalzell concedes that subsequent valuations in 1997 and 1998 have retained the same level as the 1 October 1996 value. He was uncertain whether this reflects the overall stable nature of the general property market, or whether the Chief Executive was recognising the increasing impact of the nearby railway line, in an otherwise rising property market. Miss Manners notes that the sales evidence in the locality supported an increase in the unimproved values, but the unimproved value of the subject had remained consistent since 1 October 1996 in recognition of the adverse impact of the rail traffic nearby. Miss Manners also notes that in some areas closer to the river, such as Norman Park, Hawthorne, Balmoral and Bulimba, there has been up to 40% increase in the unimproved values. The increase in the area surrounding the subject was of the order of 10%. She also advises that the Chief Executive does not merely average sales of properties to determine a broad assessment of any possible change in the market. In fact, her method of determining trends in the market is to analyse sales of vacant or near vacant lands on an individual basis, and then to compare those analysed sales with the subject lands. (2) The Impact of Noise and Pollution - It is agreed by both parties that there has been a significant increase in noise since the rail traffic has increased, particularly rail freight to the Brisbane Port. Mr Dalzell drew support from newspaper articles to support his own tape record of noise from a passing double-header diesel coal freight train. The newspaper articles quoted noise levels of intensity up to 110 decibels, a matter not contested by the respondent. The presence of a high pitched "squealing" of the steel wheels on the trains as the freight trains negotiated a series of inverse curves in the general locality, was also agreed as being very intrusive. The worst "squealing" occurs in the Norman Park area, but there is also a problem on a curve near the Morningside Railway Station. The rail traffic, also involving grain trains, was noted as occurring at all times of the day or night, and is expected to increase in activity as the Brisbane Port is developed to become perhaps the chief east coast port for Australian overseas traffic. The noise -- 3 of 12 -- 4 levels interfere with television and telephone, and casual conversations, all of which are conceded by Miss Manners. It was noted that there are no sound attenuation barriers along the railway line nearby to the subject, although in view of the elevated nature of the subject (about 15 to 20 metres above the railway line), the effectiveness of any such barriers may be debateable. Moves by Queensland Rail to reduce noise levels over the next seven or eight years on new diesel locomotives from 110 decibels to 97 decibels was seen as only a palliative solution. Mr Dalzell confirmed that there had been no actual decibel recording of the noise levels from the subject, and he relied on general noise records from the locality. In respect of air pollution, Mr Dalzell argues that his dwelling is constantly polluted by excessive grime and other substances, which result in the need for regular washing-down of the dwelling. He was of the view, but could not substantiate, that the grime captured from his dwelling (sample provided) contained coal dust and diesel and aircraft emissions. However, he concedes that similar grime could also emanate from passing traffic, a problem encountered in other parts of the city. However, he claims that the level of grime in his locality exceeds that normally experienced elsewhere, further from the railway line. It was also agreed that the subject lies in the general flight path for aircraft movements into and out of Brisbane International Airport. While the aircraft are well above the subject in their flight paths, the engine noises, particularly on take-off, add to the general disquiet of the area. Miss Manners argues that the subject is not directly under the flight path, an argument not agreed by Mr Dalzell who notes that aircraft regularly pass directly overhead. The proposal by the Commonwealth Government to consider further duplication of the runways at Brisbane Airport has clearly heightened public expectation in the locality. Mr Dalzell confirms that the electric suburban passenger services were not a problem, only the diesel freight trains. He notes that freight traffic had increased steadily through the area since the mid 1990s, and had been compounded by the shifting of the grain terminal from the north of the river to the south side. Miss Manners accepts the impact of the noise from the trains and the aircraft, but claims that those impacts have been allowed for in the valuation. Mr Dalzell argues that if allowance was made, then it was not allowed for to an appropriate extent. (3) The Method of Valuation - -- 4 of 12 -- 5 In seeking support for his valuation of the subject, Mr Dalzell provides evidence of improved property assessments of the subject by two real estate agents for $140,000 to $165,000, together with a copy of his household insurance policy on the existing dwelling, on the basis of replacement (new for old) at an insured value of $86,000. He argues that if the improved property is worth, say, $150,000 then, after allowing for a deduction for the improvements at $86,000, the remaining unimproved value of the land is $64,000. Mr Dalzell argues that to subtract the current unimproved value of $111,000 from the anticipated sale price of $150,000, would result, in his opinion, with the unacceptable conclusion that all of the improvements merely have a value of only $40,000. As he has had to terrace the site and provide three retaining walls to the subject in order to utilise the steeply sloping lot, he concludes such a low figure for the improvements must be inaccurate. In order to assess a reasonable figure, Mr Dalzell has concluded an unimproved value for the subject of $75,000. He further notes that, because of his regular maintenance of the dwelling, it has not, in his opinion, depreciated in value. To support his conclusion he notes that in "trendy places like Bulimba" old turn-of-the-century dwellings are now in fact selling at inflated prices mainly, in his opinion, because of the "fancy house on it". He does not accept that generally the older a structure such as a house, the more it depreciates in the quality of the structure. He argues that old houses may generate some "special value" associated with the building. He concedes that he has not sought a professional valuer's opinion of the unimproved value of the subject, although he would appear to not value highly any such opinions. Mr Dalzell concedes that comparisons with sales of vacant lots is a method of valuing the unimproved value of the subject, but it is not, in his opinion, the best method. He believes that where such sales of vacant lots are scarce in number, then those sales tend to reflect an inflated value based upon their scarcity. He argues that such sales represent the "exceptional circumstances" rather than the "normal circumstances". In arriving at her determination, Miss Manners has adopted the direct method of comparison of sales of vacant or lightly improved sale lands in the locality. Because the subject is used as a single unit house site, in spite of its higher zoning as "Residential BR3", the valuation has been undertaken for single unit purposes only under s.17 of the Act. The small size of the subject (551 m) may well be seen as too small for multi-unit -- 5 of 12 -- 6 development. Because of its elevation, with open views and glimpses of the city skyline, the subject is seen as an attractive building site, in spite of the impact of noises. Miss Manners discounts any reliance upon either improved sales or the estimate by the insurers, particularly in view of difficulties in establishing the added value of the improvements. She would adopt improved sales where the building is demolished to make way for redevelopments. (4) Comparison of Sales - Mr Dalzell provided a Blinmap showing some sales of surrounding properties (Attachment 1). However, the details of some of those sales, and any implications, were not subject to evidence under oath, and the weight applied to any conclusions was left to the discretion of the Court. It is noted that all sales, except one at the corner of Carntyne and Bundara Streets ($79,000) were for improved properties. One sale occurred each year in 1991, 1993, 1994; three sales in 1997; and a further current offer for sale was noted. Of the remaining four sales in 1995 and 1996 (the relevant period for the valuation), there was no detailed analysis of the sales for comparison purposes. The major conclusion sought from those sales by Mr Dalzell, particularly the two sales opposite the subject in Hurd Terrace, was that one of those properties sold for $76,000, and the Chief Executive currently has the unimproved value of the land at $85,000. Mr Dalzell notes that that property currently has an old house upon it which is leased at $100 per week. He argues that where there are no relevant sales of vacant land, the above sales support the use of sales of improved properties. To support her valuation, Miss Manners provided the following sales of the most relevant vacant lands:  Sale 1 - (83 Power Street, Norman Park - Lot 3 on RP 885546). This is a 405 m parcel, zoned "Residential A", and located approximately 0.7 km south- west of the subject, and about 150 metres west of the railway line. The sale is elevated, narrow, with good city views. There is an easy to moderate fall to the north-west to Power Street, with the rear half of the lot being level near the top of the ridge. There is some exposure to the rail noise, and "wheel screaming", as the land between the sale and the railway line falls away. There are some acoustic sound barriers at that location. The sale, while smaller, is overall superior due to its better locality, better views, and easier topography. The sale sold in November 1996 for $145,000 which, after allowing for improvements, was analysed at $144,000, and applied at $138,000.  Sale 2 - (59 Moreton Street, Norman Park - Lot 220 on RP 896390). This is a 404 m parcel, zoned "Residential BR3", and located about 1.2 km west of the subject, and is well removed (500 metres) from the railway line. The sale is -- 6 of 12 -- 7 level, narrow, in a good locality, with low elevation and no views. Overall the sale is inferior to the subject due to its smaller size, shape, lower elevation and lesser views. The sale sold in June 1996 for $75,000 which, after allowing for improvements, was analysed at $74,000, and applied at $70,000.  Sale 3 - (139 Richmond Road, Morningside - Lot 3 on RP 866826). This is a 664 m parcel, zoned "Residential A", and located about 0.7 km east of the subject, and 0.5 km away from the railway line. The sale is level, hatchet shaped, on a busy road, with no elevation or views. Access is difficult in heavy traffic. The sale is overall inferior to the subject. The sale sold in October 1996 for $80,000 which, after allowing for improvements, was analysed at $75,000, and applied at $67,000. Miss Manners concedes that noise or wheel screaming from the railway line, if any, would be considerably less at Sales 2 and 3 than at the subject. She also agrees that the impact of noise at the subject is greater than at Sale 1, and that Power Street is a very good locality. She agrees that the front part of Sale 1 would be protected from some noise by the top of the ridge at the rear half of Sale 1. She also agrees that it was more difficult to draw conclusions from sales at some distance from the subject, but she argues that with her experience as a valuer, she has no problem in comparing her Sales 1 to 3. She argues that sales of comparable amounts for similar properties in Morningside and Norman Park indicate that there is some relativity between the two localities. Decision: (i) Changes in the Valuation - I turn first to the changes that have occurred in the unimproved value, and note the appellants' reliance upon an averaging of sales of improved properties supplied by the real estate agent. In respect of those sales, I note that Miss Manners rejects the averaging of sales as a method of arriving at a comparison of the values. In that regard I note that the analysis seeks to provide a statistical mean price and median price of the total sales. As such, those calculations provide little incisive of understanding of the sales themselves, and give only a broad understanding of the range of sales which may extend from very low to very high prices. The matter of averaging of sales was addressed in Daandine Pastoral Co Pty Ltd v. Commissioner of Land Tax (1943) 7 The Valuer 299, at 305, where Williams J said in the High Court of Australia on 26 August 1943: -- 7 of 12 -- 8 "This method of averaging is to my mind unsound. The prices obtained at comparable sales should not be aggregated and averaged, especially when prices obtained on sales of small areas are dealt with in this way in order to obtain the value per acre of a large area. The only safe course is to compare each sale with the subject land separately. For instance, if three sales are considered to be comparable of three pound, two pound 10 shillings and two pound are averaged, the average value would be two pound 10 shillings per acre. But if the subject land was closer in value to the land sold at 2 pound per acre than to the other lands, the average value would cause the subject land to be seriously over valued." That principle has been upheld by lesser Courts on many occasions subsequently. In the matter of the percentage increase in the unimproved values, I note that Mr Dalzell argues that an increase of 277% from $40,000 (1989) to $111,000 (1996) bears no resemblance to general market trends in the property market over that period. While I can understand that such percentage changes in the values are often of concern to appellants in seeking to have confidence that their personal properties have 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 precedence that a large increase in itself is not evidence of some error in the valuation. I note, for example, in the decision of NR and 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 provide bona fide sales of comparable parcels support the new valuation." That matter was also considered in C and BD Henricks v. The Valuer-General (1983) 9 QLCR 59 where in the Full Court of Queensland, Macrossan J (CJ) said at p.63: " The appellants also relied upon a schedule, exhibit 4 in the Land Appeal Court, which showed percentage increases in the value applied by the Valuer-General to a number of selected parcels of land from the date of the preceding valuation up to the March 1979 valuation date. The percentage increase shown in the selected cases was in each instance considerably less than the increase applied to the subject land as between the two valuation dates. The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the same valuation area should increase at different rates over a period of five years." -- 8 of 12 -- 9 As the Full Court said, there could be many reasons why parcels of land can increase at different percentage rates over a period of time. The real test is not the percentage increase in the unimproved values, but a comparison of the subject with sales of comparable sites in the vicinity of the subject at the time of the valuation. (ii) The Impact of Noise and Air Pollution - This matter is just one of several recent appeals to this Court in respect of the adverse impact of noise from passing rail traffic along the railway line to the Port of Brisbane. In all of those matters the piercing nature of the "screaming" of the metal wheels was noted as the freight trains negotiated the apparent inferior alignment of the railway line between Norman Park to Morningside. As such, the Chief Executive has been aware for some time of the adverse nature of those noises, and their impact upon land in close proximity of the railway line. Therefore, any comparison of comparable properties should be restricted to lots along the same railway line where the idiosyncracies of that alignment can be compared. On the basis of the evidence before me, I accept that Miss Manners has in fact made allowance for that noise and vibrations in her determination. However, as Mr Dalzell noted, the question is has she made sufficient allowance for the impact? In considering that matter, I note that the respondent's Sale 1 has proximity to the railway line somewhat comparable to the subject, but both Sales 2 and 3 are only slightly impacted by noise, if at all. As the rail freight noise is the major disability of the subject, any allowance for that impact, based upon the sales evidence supplied, should lean heavily towards the subject. In the matter of aircraft noise, I find that the subject is so located in relation to the flight path for aircraft using Brisbane Airport, that for all practical purposes it could be said to lie directly beneath the approaching and departing aircraft. With the vagaries of any cross winds upon the aircraft, their flight paths are likely to vary in a horizontal location within a broad range of tolerances. For the purpose of this valuation, the subject may be seen to be directly impacted by overflying aircraft. However, as noted by Miss Manners, this applies to all surrounding properties in that locality, and it is the task of the appellant to prove that the subject has some special disability in that respect. When dealing with the impact of aircraft noise in DG & AK Wilson v. Chief Executive, Department of Lands [1994-95] 15 QLCR 63, the Land Appeal Court said at p.68: -- 9 of 12 -- 10 "It is submitted, and there is no dispute, that noise effects are greater directly under the aircraft and that a distinction may be drawn between lands of different elevation. In applying the test required under the Act, and as expanded upon in Stubberfield v. The Valuer-General supra, we are of the opinion that in the market place the subject lot in common with many others, would be identified by the potential prudent purchaser, to use a common expression, as being under a flight path. We find no reasons to depart from the finding of the learned Member below that the effects have been taken into account sufficiently by Mr Skinner in making the valuation." In seeking to determine whether Miss Manners has applied a fair and reasonable analysis of the sales, I note guidance in The Valuer-General v. KA & LF Knuth & Ors (1983) 9 QLCR 142, where the Land Appeal Court noted the importance of a "fair and reasonable" analysis of sales. I note also in H & E Grahn v. The Valuer-General (AV89- 246/7), 13 December 1990, unreported, where the Land Appeal Court said at p.5: "A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot." In exercising her discretion, Miss Manners has drawn upon her knowledge and experience in accordance with precedent established in Bingham v. Cumberland County Council (1954) 20 LGR 1, where in a minority decision Sugarman J said at pages 18 and 19: " In the absence of sufficient guidance to be had from sales, the valuer may find himself in a position resembling that to which Lord Romer referred in the Raja case (1939) AC at pages 312 and 313, in which he 'will have no market value to guide him and that he will have to ascertain as best he may from the material before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land.' The valuer in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant." In the context of those directions, I believe Miss Manners has applied a reasonable level of care in comparing the sales, in view of the availability of comparable sales in the area. The use of sales of improved properties by the appellants has the difficulty of determining the "added value" that the improvements bring to the land. In this respect, however, I note that difficulties have been previously found in similar circumstances where appellants have sought to conclude that most of the decline in value should relate -- 10 of 12 -- 11 to the land and not to the improvements. In this regard I note in O'Brien Nominees Pty Ltd v. The Valuer-General (1979) 6 QLCR 280, at p.284: " The basic properties have sold at prices considerably below the value of the improvements assessed on the traditional method of replacement cost less accrued depreciation. In such circumstances it is unreasonable to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements? It appears to us that the only tenable approach is to abandon the traditional method of replacement cost as at sale date less depreciation, and to adopt an 'added value' concept." The difficulty for Mr Dalzell in this matter is to determine the "added value" of the improvements. As Miss Manners suggested in evidence, where sales of vacant land exist, they are preferred in determining unimproved value. In his challenge of the current computer-assisted process of determining the annual valuations, Mr Dalzell argues "that the computer-based valuations can be in error" (transcript p.36). While he may have no confidence in the computer-assisted method, it is noted that the Land Appeal Court in Wilson v. The Valuer-General (supra), said at p.71: " In the context of an annual valuation, the process involves the activity described previously including the 'charts' and the collation of that material from the charts by the computer processes through to the public display of the print-outs containing the respective valuations and relevant dates. That process in our opinion does not offend the statute." The use of the computer-assisted valuation process was also considered in ML and ME Tighe v. Chief Executive, Department of Natural Resources (AV97-402), 2 October 1998, unreported at p.15. (iv) Comparison of Sales - The key therefore, is whether Miss Manners has applied a reasonable comparison with her three sales. I am also aware that those three sales are the most relevant of a range of other sales in the area. By her analysis I find the following comparison: Sale Analysed Value Comparison Sale 1 $144,000 Superior Sale 2 $74,000 Inferior Sale 3 $75,000 Inferior -- 11 of 12 -- 12 On that balance there is nothing to suggest that Miss Manners has acted on a wrong principle or method or made a serious error of fact (Brisbane City Council v. The Valuer- General (1977-78) 140 CLR 41, at p.56). However, within that range of comparisons I believe there is further scope for some additional allowance for the impact of the noise of the freight trains. (v) Summary - On balance I find that Miss Manners' method of valuation and comparison of sales are appropriate for the task of determining the unimproved value of the subject. I am aware that s.33 of the Valuation of Land Act places the onus upon the appellant to prove that the valuation is wrong; and that further, under s.45(4) of the Act, the burden of proving any and every ground of an appeal is also upon the appellant. However, I believe the appellants have demonstrated the severe impact upon the subject of the rail freight noise, which warrants some further consideration. Having considered that impact, I believe a reduction to the former valuation of $101,000 would be appropriate in those circumstances, and is supported by the sales. Conclusion: Having considered the whole of the evidence, I am persuaded that the appellants have partially proved their case. The appeal is upheld, the valuation of the Chief Executive is set aside, and the unimproved value of Lot 4 on RP 43131 is determined at One Hundred and One Thousand Dollars ($101,000). NG DIVETT MEMBER OF THE LAND COURT -- 12 of 12 --