Brauer v Chief Executive, Department of Natural Resources [1997] QLC 170

LAND COURT BRISBANE 17 October 1997 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No: 11423 Local Government: GCCC-Albert. (AV97-103). Norman C Brauer v. Chief Executive, Department of Natural Resources (Hearing at Coolangatta) D E C I S I O N Background: This appeal relates to a property at 33 Yellowood Road, Stapylton, Parish of Albert, and described as Lot 2 on RP 149715. The subject is located about 4 kms south-east of the Beenleigh Post Office, also fronts the Stapylton-Jacobs Well Road, and has an area of 7.687 hectares. There is good access from the Stapylton-Jacobs Well Road and Yellowood Road, both of which are bitumen sealed with earth shoulders and table drains. Electricity and telephone are available. The property is currently vacant, is used for some grazing of cattle, and is zoned as "Rural" under the Town Planning Scheme of the Albert Shire Council of 24 February 1995, and effective at the date of valuation of 1 October 1996. The key issues relate to the comparison of sales, the impact of flooding, and the impact of the Council's Strategic Plan. The nature of the land is triangular in shape with large frontages to both Stapylton-Jacobs Well Road and Yellowood Road. The site is cleared and generally of low elevation, falling from south and east towards a low wet gully area near the northern boundary. This low area floods during periods of heavy rain, which occasionally tends to back up from flooding in the Albert River to the west of the subject. The subject is designated as "Frame Industrial Area" under the Strategic Plan Map 7 - Stapylton/Yatala Interim Industrial Structure Plan. The Chief Executive, Department of Natural Resources, on 10 March 1997, issued a valuation at $375,000. Following an objection, the Chief Executive on 26 May 1997, confirmed the valuation at $375,000. The appellant has appealed that decision, claiming the [1997] QLC 170 -- 1 of 10 -- 2 unimproved value should more properly be $100,000. Mr NC Brauer, the appellant, gave evidence; and Mr B O'Connor appeared for the respondent, calling evidence from Mr AJ Dalgarno, the Departmental Registered Valuer responsible for the determination of the valuation. Evidence: Mr Brauer's family has farmed the area since 1865, and Mr Brauer has a personal long involvement in the area. His knowledge of the extensive flooding of the subject was very detailed. He gave evidence that in major floods (1947 and 1974), almost the entire area has been inundated to the extent that overhead telephone wires were under water. He confirmed that his enquiries made to the Albert Shire Council could find no evidence held by Council in respect of the extent and height of the flooding. There have also been smaller floods during other periods. Mr Brauer argues that, while he does not reside on the subject, the land is used for the grazing of between 6 to 8 cattle, in conjunction with other land of his in the area. He acknowledges that he is aware that the Albert Shire Council has designated the subject in their Strategic Plan as "Frame Industrial" land but argues that the Council has inadequate records of flooding, which should have required the subject to be retained as "Future Open Space". Mr Dalgarno gave evidence that as the subject was designated as "Frame Industry" in the Strategic Plan, it had been valued accordingly for industrial subdivision purposes. The intention of a "Frame Industry" designation is to indicate the potential future development of the area as part of an extractive and core industrial area. Mr Dalgarno agrees that if it was to be developed as industrial land, because of the low-lying nature of the subject, it would be necessary for considerable filling of the area in places for buildings. However, he argues that it would not be necessary to fill the entire area as some storage and parking areas could be allowed in the more floodprone areas. He also noted that the "core industry" in the Strategic Plan are those where the land is immediately available for development. He agrees that the current zoning is as "Rural" but feels sure that the land will be rezoned in the future as "Industrial" land. In the matter of the extent of flooding upon the subject, Mr Dalgarno confirmed that he had sought no input to his determination from Council officers on that subject. He noted that flood levels were not generally available from Council records. He admits that part of the land is subject to flooding, and he could not comment on the extent of flooding as he had not seen the land in flood. However, he feels the subject's greatest asset is its excellent exposure from Yellowood Road, and in particularly also from the Stapylton-Jacobs Well Road. Mr Brauer argues that, while Council has designated some large areas near the subject as "Future Industrial Land", it is premature to adopt that classification at this time, as there is little demand at present for the land for industrial purposes. He acknowledges that the land to the -- 2 of 10 -- 3 south-east of Stapylton-Jacobs Well Road opposite to the subject, is now starting to develop as there is now some infrastructure in place, mainly privately developed. Some of that land is currently zoned as "Commercial Industry", "General Industry" or "Residential", and all of that area is designated as "Core Industrial Area" under the Strategic Plan. In respect of the zoning of the general area to the west of the subject, it is noted that all the land to the Albert River is currently zoned as "Rural", and in the Strategic Plan, part of it is designated as "Open Space Area". Clearly the impact of flooding from the Albert River has been a deciding factor in the Council's intention of preserving the low-lying land as "Open Space" in the Strategic Plan. Because the flooding has historically apparently occurred across the subject, Mr Brauer argues that the future "Open Space" classification should not stop at Yellowood Road. In support of his estimate of value, Mr Brauer provided no evidence of comparable sales, while Mr Dalgarno provided the following sales: •Sale 1 - (Old Pacific Highway, Yatala - Lot 19 on RP 815181, Lot 20 on RP 815182 and Lot 21 on RP 815183). This is a 12.1566 hectare property located about 1.5 kms south-west of the subject. The land is cleared and zoned "Commercial Industry and Public Open Space" and also designated as "Frame Industry" and "Public Open Space" in the Strategic Plan. Electricity and telephone are available, and water and sewerage is located just to the south of the sale. There is fair access to the sale from the Old Pacific Highway which is formed gravel. The sale fronts the Albert River. The sale is seen as overall superior to the subject due to its topography, size and elevation. The sale sold in December 1996 for $900,000 which after allowing for improvements provided an analysed value of $890,000 ($73,211 per hectare) and an applied value of $810,000. •Sale 2 - (Christensen Road, Stapylton - Lot 3 on RP 6928. This is a 10.4 hectare site located about 1.5 kms south of the subject. The sale comprises an irregular shaped lot bordered to the north and east by Sandy Creek. It was zoned at the date of sale as "Future Urban" and is generally low-lying requiring fill. Electricity and telephone are available, and water has subsequently been brought on site by the purchaser at a cost of $84,500. At the date of sale there was no physical access to the sale, and the purchaser has subsequently constructed an access road ($65,000) and a bridge ($130,000), plus headworks charges ($185,160) in order to gain rezoning of part of the land to "General Industry". The sale was compared to the subject with the headworks and external costs included in the analysis of the sale price. The sale is seen as far superior to the subject, although the subject is seen as having better exposure than the sale. -- 3 of 10 -- 4 The sale sold in February 1996, for $670,000 which was analysed at $670,000, and applied at 1 January 1996 valuation at $490,000. After adding the external costs of improving the services ($464,660), the analysed rate of $109,000 per hectare was compared to the subject. •Sale 3 - (Stapylton-Jacobs Well Road - Lot 2 on RP 146418). This is a 4.041 ha site located about 2.2 kms north-east of the subject. The sale is partly cleared, is zoned "Rural", and has good access from Stapylton-Jacobs Well Road, which is bitumen sealed with earth shoulders and channelling. Electricity and telephone are available. The sale is regularly shaped, generally level, but is low in elevation and is flood prone, comprising mostly ti-tree country. The sale is designated in the Strategic Plan as "Core Industrial Area". The sale has similar topography and elevation as the subject, but the sale is considered inferior due to its location and exposure. The sale sold in January 1997 for $180,000 which after allowing for clearing was analysed at $177,000 ($43,801 per ha) and applied at an unimproved value of $155,000 In comparing the sales, Mr Brauer argues that Sales 1 and 2 do not flood and, while Sale 3 is low-lying, it does not suffer as badly as the subject from backup flooding from the Albert River. In respect of the potential to fill the subject for the construction of buildings for any potential industrial purpose, Mr Brauer estimates that perhaps 25% of the area of the subject could be suitable for economic filling. He noted that the last occasion there was flooding on the subject was four years ago. Mr Dalgarno argues that the most comparable sale was Sale 3, which is designated on the flood maps of the Council as subject to flooding from the Logan River. At the request of the appellant, and with the agreement of the respondent, I inspected the subject area. Decision: In considering the matter of the impact of flooding upon the subject, I note that the respondent relies on the lack of any flood level evidence held by the Albert Shire Council. Mr O'Connor concludes that in preparing the Strategic Plan the Council must have had evidence of any flooding or lack of flooding when determining the future categories in the Plan. While Council has designated certain parcels between Yellowood Road and the Albert River as future "Open Space Areas" in the Strategic Plan, Mr O'Connor argues that the subject is seen as having potential for industrial development and has been accordingly designated as "Frame Industry Area". In considering a copy of the Strategic Plan Map 7 provided to the Court, I note that, with the exception of Lot 10 on RP 6820 (5.962 ha), all of the land west of the subject from -- 4 of 10 -- 5 Yellowood Road to the Albert River has been designated as future "Open Space Area". From the inspection of the property I note that those designated areas reflect the low-lying areas which extend across Yellowood Road and through the northern part of the subject. I note also that the land rises gradually to the north of the subject to Lot 2 on RP 6847 and Lot 4 on RP 202508, and then falls slightly to Quinn's Hill Road. From the above I conclude that Mr Brauer's evidence that flooding extends well into the subject, would appear to fit the strategy drawn in the Strategic Plan by the Council in respect of maintaining future open space where flooding occurs. As Mr Brauer has had a long association with the area, and in view of his detailed evidence of the extent of flooding of the subject, I see no reason not to accept that the subject is regularly, and reasonably often, subjected to flood inundation, which can occasionally be very significant. The lack of any documented evidence by Council to the contrary in my opinion, does not discredit Mr Brauer's memory of the history of floods on the subject. In seeking to ascertain the extent of actual flooding of the subject, I note that Mr Brauer feels that perhaps 25% of the area could be filled for future industrial purposes. Mr Dalgarno agrees that "part of the subject is liable to flooding, but could not estimate the extent of those floods. From my personal observations during the inspection, I could reasonably accept that perhaps half, the northern part of the subject, would be subject to regular inundation, and therefore not acceptable for industrial development without major filling. I turn now to the matter of the impact of the possible future land uses noted in the Strategic Plan. In seeking to understand the intentions of the Strategic Plan, I note that the conditions relating to the Stapylton/Yatala Industrial Structure Plan are depicted on Strategic Plan Map 7, and are further clarified in s.1.5.3 of the Albert Shire Planning Scheme. I note that as an interim measure, and until detailed Development Control Plans for specific areas can be prepared, the interim strategy is to prevail. I note also that s.1.5.3.2 says amongst other things: "Land designated in an industry area on Strategic Plan Map 7 is intended to be developed for industrial and, or business purposes and is not intended to be developed for any other purpose that would compromise the intent of the Strategic Plan. Council will assess all applications for town planning consent, rezoning and subdivision on this basis and will refuse those applications which are contrary to this intent." From a planning perspective the interim strategy is to be seen as a holding strategy to ensure that development incompatible with the future intent of the area does not compromise the intent of the Strategic Plan. In the absence of any detailed Development Control Plan, it would be reasonable to suggest that there is some degree of flexibility in defining the actual future uses of individual parcels in that area. -- 5 of 10 -- 6 In further seeking to understand the proposed future land use categories impacting the subject, I turn to s.1.5.3.3 of the Plan: "1.Core Industrial Area - These areas are intended to provide opportunities for a range of uses including general industry, food industry, special industries, distribution warehouses, corporate parks, landmark premises, major industries and limited amount of light industry and retail warehouses. The distribution of uses in this area will be subject to more detailed planning. 2.Frame Industrial Area - These areas are intended to provide opportunities for the development of a range of uses including light industries, distribution warehouses, corporate parks, retail warehouses. In the Burnside Road area and the Yatala township, some commercial shopping, residential and/or recreation uses may be appropriate. The distribution of uses in this area will be subject to more detailed planning. 4.Future Industrial Area - These are areas which are not expected to develop for industrial purposes during the life of this Plan but which should be protected for future industrial usage. Council will only approve land uses in this area which would not compromise its efficient, orderly and timely conversion to industrial purposes. 5.Open Space Area - This designation recognises areas which are subject to one or more of a number of factors. These factors include high landscape and environmental significance, steep topography and buffering from quarries. Any development permitted in these areas will need to be visually unobtrusive and should be limited to no more than 10% site cover. In general, it is intended that this area will be retained in a largely undeveloped state. " The above categories may be summarised as areas where Council requires land to remain undeveloped for a variety of reasons (Open Space Areas); where general industrial development should proceed (Core Industrial Areas); where a mix of light industry and some commercial and residential uses may be appropriate (Frame Industrial Areas); and areas where future development to industrial use should not be impeded (Future Industrial Use). The thrust of the strategy is to protect and promote the development of the industrial area as a major employment centre (s.1.3.5.2). The sequencing and rate of progress of the development of the area will depend upon the availability and cost of providing services (s.1.3.7.1). In considering the timing of the impact of those strategies, I note that the planning scheme has a time frame which is flexible, and will occur over varying time horizons. The plan is also to be reviewed by -- 6 of 10 -- 7 the year 2001, but will also change as circumstances impact upon the goals of the plan. In the context of the plan, the demand for development in the area of the subject will depend upon the nature of the property market in both Queensland and Australia. However, it would be reasonable to conclude that Council sees the potential for development of the "Frame Industrial Areas" and "Core Industrial Areas" to commence to occur by the year 2001. In considering the potential future use of the subject, I note that Mr Dalgarno has sought direction in the Strategic Plan which designated the subject as suitable for a mixture of Light Industrial and other compatible uses (Frame Industrial). While the current zoning under the Planning Scheme would preclude such purposes, the intentions of the Strategic Plan suggest that Council would look favourable upon an application for rezoning of the land. At its planned "highest and best use" in the future, the land could be seen as zoned for Light Industry, following completion of the appropriate development works, and payment of suitable headwork charges to contribute towards infrastructure costs. The matter of when, and at what rate, the "potential" future use of the subject should be considered in the annual valuation should be seen within the context of the Strategic Plan. At the relevant date of the current valuation, the land is zoned as "Rural" and development to industrial purposes would depend almost entirely on the decision of the Shire Council. While the existence of the Strategic Plan should influence its agreement to any rezoning, the Council could argue that development at this time did not meet the development sequencing criteria for the area. While the Strategic Plan forms part of the Albert Shire Planning Scheme, and therefore is enforceable under the Local Government (Planning and Environment) Act 1990 (s.2.1), the wording of s.1.3.7.1 of the Planning Scheme allows the Council discretion in approving any rezoning. (See s. 2.19/3 of the Local Government (Planning and Environment) Act supra.) These matters were discussed in Redland Shire Council v. Bushcliff Pty Ltd 2 Qd.R. 97. That matter dealt with a request for a statement of reasons for the decision why the Redland Shire Council had refused an application. While that case has no direct bearing upon any possible rezoning approval of the subject, it does demonstrate that it is unwise to assume that Albert Shire Council will automatically approve a re-zoning application from "Rural" to "Light Industrial" use. This then suggests that at the lower end of the "potential gradient" for added value to the subject, the actual quantum of the potential may be minimal. At the higher end of the "potential gradient", once the land has actually been rezoned to "Light Industry", the potential of the added value would have been realised. The task for the valuer is to determine when, and how much of that potential added value should apply at the relevant date of the valuation. I note that in the context of compensation determinations it was held by the Land Appeal -- 7 of 10 -- 8 Court in AK and SS Gallagher v. Brisbane City Council (1975) 2 QLCR 368, that what has to be determined is the value to the owner and not the value to the taker of the land. In that case the appellants argued that the resumed land had "potential for development for commercial purposes", while the respondent argued that obtaining consent was remote. The Land Appeal Court followed the findings in Cedar Rapids Manufacturing and Power Company v. Lacoste (1914) A.C. 569 per Lord Dunedin at page 576. The Land Appeal Court found at page 381: "We have substituted the words `highest and best use' because these words occur frequently in the valuation evidence. We could perhaps also use the words `potential of the land'. Now, while the zoning of the land pursuant to a Town Plan will always affect the highest and best use of the land at a particular date, and to that extent the value, it does not create that highest and best use. It may facilitate the immediate realisation of that highest and best use or, at the other end of the scale, it may totally prevent such realisation. In between these two, zoning may work to postpone, or defer, for any realisation of the value of the highest and best use, until some intermediate action is taken and completed. But, in our view, the highest and best use remains the same throughout, and on the basis that the highest and best use on resumption date is different from the permitted use as of right of the land under the zoning on that date, the dispossessed owner is entitled to receive the present value of that highest and best use of the land on resumption date, so long as such present value exceeds the permitted use as of right value on that date, where the zoning provisions prevent the immediate realisation of the highest and best use value. " From that conclusion the Land Appeal Court has directed in compensation matters that a "potential added value" should apply to the land as at the date of resumption. However that also needs to be seen in the perspective of Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358, where Dixon J. said at page 373: "There is some difference of purpose in valuing 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 the case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case of a more conservative estimate. " -- 8 of 10 -- 9 From the guidance supplied by Dixon J. it is clear that in determining a matter of compensation, where the claimant has now lost the benefits of ownership of the land, it is important to adopt a more liberal approach, and to allow for the immediate impact of the added value from the potential to be added to the land immediately upon the date of resumption. However, in the matter of Annual Valuations, where an unimproved value of a property is determined from year to year, the valuer should adopt a more conservative approach to the impact of "potential" upon the added value. In the context of the current matter I believe, while the subject should be seen as having acquired some statutory standing as future industrial land under the Strategic Plan, it would be prudent for the valuer to adopt a conservative approach to comparing the subject with other comparable industrial sales. This principle is sometimes referred to as the "bottom/up approach" to valuing the subject, and has been discussed in many cases. The principle was also referred to in Queensland Turf Club v. The Valuer-General 6 QLCR 180. In that matter, the President considered the findings of Royal Sydney Golf Club v. Federal Commissioner of Taxation (1957) 2 LGRA 203, where Kitto J. said at page 216: "How much should be allowed under that head is necessarily a matter of guesswork, for the hypothetical vendor and purchaser would have to engage in sheer speculation. They might perhaps consider what net profit might be realised in the event of subdivision becoming possible ---. But there would be so many incalculable factors in this method of approach that I think they would more probably agree on the addition to the amount otherwise arrived at of a percentage of that amount. " In the Queensland Turf Club case the President found that "the possibility of obtaining a rezoning of the subject was so remote as not to weigh with any hypothetical prudent purchaser". No percentage increase was therefore allowed. I turn now to the comparison of sales. Both parties agree that Sale 1 (Old Pacific Highway - $73,200 per hectare) is considerably superior to the subject in view of its location, nature and frontage to the Albert River. In respect of Sale 2, (Christensen Road - $109,000 per hectare), it is also considered superior to the subject, mainly as a consequence of the large costs of providing external services to the sale. That then leaves the comparison with Sale 3 (Stapylton-Jacobs Well Road - $43,800 per hectare) as the starting point for comparison. I note that Mr Dalgarno sees the zoning of the land (Frame Industry) as somewhat comparable to the zoning of Sale 3 (Core Industry), although it was agreed in evidence that the core industry areas tended to already have some private service infrastructure, and were therefore more ready for development purposes. While I accept that he believes the subject has a greater exposure and better location than Sale 3, I believe he has not fully considered the -- 9 of 10 -- 10 impact of the "potential gradient" as discussed previously. Bearing in mind the uncertainties of the impact of the timing of implementation of the Strategic Plan, and the added impact of flooding, I believe it would be more appropriate to adopt a similar per hectare rate for both Sale 3 and the subject at $43,800 per hectare. On this basis the unimproved value of the subject would be $336,670. I note that in applying an unimproved value to Sale 3, Mr Dalgarno has adopted a figure of 87.57% of the analysed figure for Sale 3 (i.e. $177,000 reduced to $155,000). If I apply that same proportion to my analysed figure for the subject of $336,670, it indicates that an applied figure of $294,788 would be appropriate for the subject. In the end I will adopt $300,000. In respect of the grazing of cattle upon the subject, I note that only six to eight head of cattle are currently grazed upon the land. However, I also note that those cattle are only part of about 60 head of cattle which are alternated between the subject and other lands owned by the appellant in the area. It became clear that the Chief Executive had not been made aware of that grazing arrangement, nor whether such uses of the lands may satisfy the requirements of s.17 of the Act for concessional valuation. In the event of the current valuation such a use of the land was not a matter for consideration by this Court. However in the broader context of future valuations of the subject, it would seem prudent for Mr Brauer to approach the Department with full details of his grazing operations, and to see if he could satisfy the requirements of s.17 and thus be eligible for a lower concessional value for the subject. Conclusion: After having considered the whole of the evidence, I am persuaded that the appellant has partly proved his case. The appeal is allowed, the Chief Executive's valuation is set aside, and the unimproved value of Lot 2 on RP 149715 is determined at $300,000. (NG Divett) Member of the Land Court -- 10 of 10 --