Andrews and Exley v Chief Executive, Department of Natural Resources [1997] QLC 143

LAND COURT BRISBANE 12 SEPTEMBER 1997 Re: AV96-328 An appeal against an unimproved valuation - Valuation of Land Act 1944 - Local Authority: Whitsunday Shire Council J.A., G.E. Andrews and V.K. Exley v. Chief Executive, Department of Natural Resources (Hearing at Proserpine) D E C I S I O N This appeal is against a decision on an objection against the unimproved value of land situated at Shutehaven. The land is situated at 3 Shutehaven Close and Warrain Street, contains an area of 483 m² and is described as Lot 34 on Plan S9464, Parish of Conway, County of Herbert. Shutehaven Close is a narrow single-lane carriageway. Town water, electricity and telephone services are available and connected. The land is zoned “Residential A” and accommodates a single unit two-storeyed dwelling. As at 1 January 1996, the unimproved value of the land was assessed by the Department to be $166,000. An objection against that valuation was disallowed. The owners contend for a valuation of $105,000 on the grounds that “The valuation given to the property is too high as well as being inconsistent with other properties in the locality”. Mr J.A. Andrews conducted the appellants’ case and gave evidence in support of his assessment. His research into matters which he considered to be relevant to a correct assessment of unimproved value had been painstaking. The Shutehaven residential area is located on an isolated peninsula of land at Shute Harbour and Mr Andrews recognised that property values there “bear no relationship to values in any other parts of the Whitsunday Shire”. Of the 87 surveyed lots, Mr Andrews held the opinion that most have similar topographic features, access and panoramic views, all with similar services and none with sewerage reticulation or postal delivery services. Apart from the expected “minor differences” the one major difference between the various lots was the variance in size. This [1997] QLC 143 -- 1 of 7 -- affected “the ultimate usability” and in his opinion, the consequent unimproved value of each lot. Mr Andrews had established, by search, the valuations applied by the Department to each lot in Shutehaven. As the size factor was, in his opinion, the primary variant affecting value, he sought to support his perception of inconsistency between some valuations by focusing on the valuations on a unit of area basis. He found that in the eastern precinct of Shutehaven where the subject land was situated, there was, on analysis, a reasonable consistency with the applied values per m² being “generally in the range of $200 to $260 per m²”. (He suggested 83% of the 35 lots in that precinct were within that range although, on his tendered evidence, only 60% of the applied valuations were. 83% were in the range of $174 to $286 per m²). The average value per m² was $248. Lot sizes as surveyed ranged from 483 m² (the subject lot) to 885 m², the average being 617 m². The subject lot although the smallest of all in the eastern precinct carried the highest pro-rata value equating $344 per m². Mr Andrews held the opinion that as all lots in Shutehaven in unimproved condition would have been rainforest vegetated, the “field of view” from each lot was limited to that capable of being controlled from within that lot and provided by its clearing. He submitted that, on this basis, the field of view was capable of being measured for individual comparison. The “building envelope” available on each lot after setbacks imposed by Council regulations, was also capable of calculation. For example, Mr Andrews had calculated that the subject lot had a “usability factor” (building envelope) of 48.6% which was 86.5% of the average lot in East Shutehaven and a view factor of 95% of the average lot. These relative factors suggested to him that the correct valuation would be represented by $204 per m² in comparison with the average $248 per m². On that basis, the unimproved value of the subject land would be $98,532. Furthermore, when he applied those factors to a comparison with the one vacant sale, in the period relevant to the valuation, (which showed a value of $216 per m²) he concluded that a correct valuation of the subject land could not be more than $216 per m² or $104,328. Finally, he carried out an exercise in valuing the subject land as improved, then deducted his depreciated valuation of the improvements, based on a current building cost demonstrated by a dwelling built in the immediate locality. By that method, Mr Andrews arrived at an unimproved value of $106,710. He was convinced from his analysis of the various methodologies capable of consideration that his adoption of an unimproved value rounded to $105,000 was totally supported. -- 2 of 7 -- 3 Mr Andrews also drew attention to specific examples of what he believed to be inconsistencies in the applied valuations, including the lower valuation on the higher elevated, larger lot adjoining to the west and an apparent single unit residential valuation base for a double lot in the immediate vicinity used for a motel. The chief executive’s valuation had been carried out by Mr T.C. Mullins, registered valuer. It was his evidence that there was indeed only one vacant land sale in Shutehaven in the relevant period and after investigation that evidence had been adopted as a basis for the relevant date valuation. The sale had indicated a decrease in the level of value which had been previously applied at an earlier date. Brief details of the sale are as follows: Lot 1 on Plan S9464, 570 m², sold 1 August 1995 for $122,500 unimproved, applied valuation $120,000, land situated in Harbour Avenue, steeply sloping, regular shaped, partially obstructed high level south-western views of Shute Harbour. In comparison, the subject land although smaller in area, was seen by Mr Mullins to be significantly more valuable with superior views, aspect and physical qualities. Being aware of the opinions of Mr Andrews and faced with the limitation of evidence, Mr Mullins had also carried out some painstaking research. It was a theory of Mr Andrews that, because of greater density of dwellings constructed with aspect over the harbour, the south-westerly through to south-easterly aspect was at least equal to if not more attractive than northerly aspect and views through the Passage to the ocean. However, historical sales evidence in Shutehaven over a 10-year period and then the recent asking prices for vacant lots in this exclusive pocket, indicated to Mr Mullins that there was a distinct market orientated preference for those lots with the north-westerly through to north-easterly aspect together with the panoramic views available in that direction. This indicated preference supported his own interpretation of the market forces which might reasonably have been expected together with the opinions he had sought from persons operating in the local real estate sales and valuation industry. As far as Mr Mullins was concerned it seemed natural that the higher the elevation the wider the field of view if free of external obstruction. He was interested in the potential view available from the site to be valued in its notional unimproved state but in the environment which existed at the date of valuation. This was not the hypothetical environment where all surveyed sites were notionally unimproved being the test which Mr Andrews had applied. Mr Mullins did not agree with Mr Andrews’ opinion that the area of the site was the dominant criterion influencing the market value of land with highest and best use for single unit residential development. He did agree that the area of a site influenced the value along with other factors including, in this matter, topography, situation, aspect, view -- 3 of 7 -- 4 and access. He accepted that the available “building envelope” was a matter which could affect value but, in the subject matter, if the site was unimproved as he was required to value it, a dwelling of substantial dimensions even on one of the three levels which could be permitted, with appropriate boundary setback, was capable of construction. Even on Mr Andrews’ estimate of maximum coverage possible, that was approaching the maximum site coverage allowed by the Council’s planning policy, which was then capable of relaxation where circumstances warranted. It was Mr Mullins’ opinion that the major component of value of a single unit residential site was reflected in the potential for a dwelling to be constructed, subject to whatever disabilities affected that potential, while the balance usage potential for such purposes as amenity or recreation, carried lesser proportionate value. It was against valuation principle, in his opinion, to value single dwelling residential land on a unit of area basis or to compare applied values on a unit of area basis. The arguments put forward by Mr Andrews are not uncommon before both this Court and the Land Appeal Court. If, indeed, single dwelling residential estate was bought and sold on the major criterion of site area, with “minor adjustment” for other criteria, then it would be legitimate to argue that size of a site should be the dominant criterion in the valuation and comparison process. However it has not been shown at least to my satisfaction in this matter, that the size of the subject single dwelling residential lot is other than one of the components which go to make up its market value. For example, I am persuaded by Mr Mullins’ evidence that the sale land although larger in area, is significantly inferior in market value due to topography and potentially available views. I have not been persuaded that the degree of variance between the valuation of the sale land and that of the subject land has been proved wrong. Although Mr Andrews also saw inconsistency between the valuation of the subject land and the adjoining lot to the west, that is a matter of opinion and Mr Mullins’ professionally based opinion is preferred. Mr Mullins’ evidence was that he had considered not only size and elevation of that adjoining land but also the relative unimproved topography. With regard to the second allegation of inconsistency, even if the motel site had received a favourable valuation relative to its commercial type use (and that was not proved) the remedy would be to correct that valuation rather than to cause some uniform error. There are a number of similarities between the appellants’ arguments here and in a matter which was dealt with by the Land Appeal Court in Grahn v. The Valuer-General (1992-93) 14 QLCR 327. At 328, 329 the Land Appeal Court had this to say: -- 4 of 7 -- 5 “ The decision of the High Court of Australia in Brisbane City Council v The Valuer-General ((1978) 140 CLR 41, 5 QLCR 283) and the decisions of the Land Appeal Court in cases such as WM and TJ Fischer v The Valuer General ((1983) 9 QLCR 44) and R and MM Barnwell v The Valuer-General ((1989) 13 QLCR 13) are authority for the following propositions: (a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis. (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p.16 and cases cited in it). (b) The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p.46; R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p.17). (c) Section 13(7) of the Valuation of Land Act 1944 creates a presumption that the value in money terms shown by the Valuer-General in his notice of valuation is correct (Brisbane City Council v The Valuer-General (1978) 140 CLR 41, at p.56. (d) Once it is shown that: (1) in making the valuation of the Valuer-General acted upon a wrong principle, or made a serious error of fact; or (2) the valuation was made by a method fundamentally erroneous, The presumption created by section 13(7) is rebutted (Brisbane City Council v The Valuer-General (1978) 140 CLR 41, at pp.56-7). (e) Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p.46). (f) If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error (R and -- 5 of 7 -- 6 MM Barnwell v The Valuer-General (1983) 13 QLCR 13, at pp. 16-17 and cases cited in it).” Further the Land Appeal Court then said at 330: “ In the appellants submission there is no reason why two blocks with the same position and outlook should be valued at such apparently disparate rates. Blocks should be valued at the same rate per square metre. ... The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes. As the Land Appeal Court said in its decision on the appellants’ previous appeal (H and E Grahn v The Valuer-General), AV89-246, 13 December 1990): “for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots etc and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features.” As to the contention of Mr Andrews that each block, on a global basis, should be treated as unimproved, albeit with roads and services in place, the true test to be applied was as stated by Else-Mitchell J in Luton v. Valuer-General (1971) 23 LGRA 180 at 183: “The Court on appeal must assume that the land which is to be valued is in its virgin condition but that the adjoining land and the environs generally are in their existing condition. These hypothesis in a case like the present require that one must assume first the existence of all existing facilities and amenities external to the land, such as roads, power, access and the like, but, secondly, that the subject land is in its original natural condition without any improvements at all thereon. What is of critical importance, however, is that these assumptions must be made successively in the case of each valuation and with respect to the land comprised in each valuation.” In summary, while Mr Andrews has gone to a deal of trouble in an effort to support his interpretation of correct valuation methodology, his argument has no support in principle or practice of valuation, best identified, in my opinion, by his contention that the subject land should be regarded as having less value as a site than the sale property. -- 6 of 7 -- 7 The appeal is dismissed and the valuation of the chief executive affirmed. RE WENCK MEMBER OF THE LAND COURT -- 7 of 7 --