Baker v Minister for Natural Resources [1996] QLC 106

LAND COURT BRISBANE 16 AUGUST 1996 Re: SL 31/51072 - Maryborough District Conversion of Tenure Lessees: K.J. and A.M. Baker (Hearing at Maryborough) D E C I S I O N The lessees made application for conversion of tenure of the above Special Lease on 29 November 1994. It is at that date when the unimproved value of the land is to be determined, under the provisions of s.207 of the Land Act 1992. The Minister’s determination, in the amount of $52,000 was not accepted by the lessees and the matter has been referred to the Court for determination. The land is described as Lot 21 on Plan Mch 5434, Parish of Maryborough, County of March, containing an area of 5775 m². It is situated fronting Enterprise Street (a bitumen sealed service road parallel to the Bruce Highway) in the Moonaboola Industrial Estate about 8 km by road north of the Maryborough Post Office. The land, in common with surrounding properties within the estate is zoned “General Industry” under the Maryborough City Council Town Planning Scheme. Electricity, water, sewerage and telephone services are available. Mr N.L. Maddern, a registered valuer in private practice, appeared with Mr Baker and conducted the lessees’ case. Mr Maddern’s valuation at the relevant date is in the amount of $35,000. He described the land as an almost rectangular shaped inside lot, originally sloping moderately from front to rear, cut and levelled in its development as part of a saw-milling operation. Although Enterprise Street is in effect, a widened section of the Bruce Highway Reserve, Mr Maddern stressed that the subject land “has only limited visibility from traffic travelling along the Bruce Highway, due to road formation, the contour of the land and the large number of trees located between the highway and the service road ...”. His valuation reflected a level of value of approximately $6 per m² and was based on three sales within the Moonaboola Estate. I will return to the overall sales evidence later. The Minister’s determination was the valuation of Mr B.W. Gaskell, a registered valuer employed by the Department of Lands as it was at the relevant date (and now the Department of Natural Resources). While there was no real argument as to the physical nature of the land, Mr Gaskell saw [1996] QLC 106 -- 1 of 6 -- 2 it as enjoying a prominent position within the estate, in terms of elevation and superior in that sense to the lower elevation area. His written report contained the comment that “Enterprise Street runs parallel to the Bruce Highway and is separated by an unformed Road Reserve which gives good exposure from the Bruce Highway.” His verbal evidence was that the exposure of the frontage of the subject land was limited by the vegetation within the road reserve but more so to northbound traffic than to southbound traffic. Mr Gaskell, in his valuation basis, had relied on three sales, two of which were of land in Moonaboola Estate. As I understood his evidence, he saw his valuation then being supported by another six sales, together with four determinations of unimproved value made by the Minister and accepted by the lessees. The overall sales evidence from the Moonaboola Industrial Estate as provided by Mr Gaskell is condensed to the following: Ref Lot/Street Area Date Analysis (m²) 1. 23/Production 2.443 ha31. 8.83 $2.50 2. 1/Highway - Industrial Av 1.15 ha28. 9.94 $5.50 2(a) " " " 6.11.95 $7.13 2(b) " " " 28.11.95 $9.48 3. 4/Industrial Av 5306 m² 12. 1.95 $5.85 4. 5/Industrial Av 8218 m² 28. 6.95 $5.85 5. 9/Activity 1.668 ha 20. 9.95 $3.92 6. 20/Activity 9958 m² 10. 1.96 $3.91 Mr Gaskell’s primary basis of valuation was gained from sales Ref 1 and 2, with Ref 2(a), 2(b), 3, 4, 5 and 6 being listed in his report as “after date” sales. Mr Gaskell said that the Moonaboola Estate had been first established by the Government in 1970 with slow development until the last few years, when he saw it as becoming “the focus of industrial development in the city”. By 1995 he said, all available service lots had been sold by the Government. He held the opinion that the Department of Small Business and Industry had been able to “keep the purchase price of lots down due to the development costs being done many years ago.” He commented - “There have been a number of sales of Industrial land during late 1994 through to early 1996.” Referring to those listed as Ref 2(a) and 2(b) Mr Gaskell said “These sales show the market’s growing interest in well-located lots. There has been a marked increase in value of these sites at Moonaboola compared to the property market generally in Maryborough over the last 12 months.” The “Special Lease Acceptances” included as support to Mr Gaskell’s -- 2 of 6 -- 3 valuation were as follows: Lot 14 Enterprise Street - 2,657 m² - $11.30 m² as at 4.5.93 Lot 2 Enterprise Street - 1.489 ha - $5 m² as at 10.11.93 Lot 13 Enterprise Street - 3,683 m² - $12.20 m² as at 12.12.94 Lot 15 Activity Street - 2,654 m² - $12.80 m² as at 11.1.95 Included in Mr Gaskell’s primary valuation basis were the details of a sale of four surveyed “Light Industry” zoned lots, as an aggregated parcel, at Gayndah Road/Sunbury Street, West Maryborough, showing an analysed value of $13.75 per m². Mr Maddern’s sales evidence included those sales which I have set out as Ref 2 and 3. He had also included information regarding a purchase by his client, the lessee, of land in Activity/Quarry Streets which he said was as “generally similar”. As it happened, further evidence introduced during the hearing showed that the purchase was of a significantly larger area (for the same total price) - the vendor being the Minister for Industrial Development. While the resulting level of value on a unit of area basis reduced from about $5.88 per m², as three surveyed lots in aggregation, I do not accept that these sale lands could reasonably be described as “generally similar”. It seems that when the Estate was first constructed a natural watercourse was channelised as a drain external to the rear of the lots in Refs 2/6. Mr Gaskell’s inquiries had indicated that at least with regard to lots Ref 3 and Ref 4, unsuitable fill material had been placed on those lots during development. The asking price of lot Ref 3 had been reduced significantly he said due to the purchaser’s concerns as to earthwork requirements. Mr Maddern on the other hand described lot Ref 3 as land which fell gently from the road to the rear with a gentle cross-fall. He described the land as again “generally similar” to the subject land on a per m² basis. The other common sale between the valuers is that of a large site, Ref 2, at the entrance to the estate with far superior traffic exposure. The site had been offered for sale at public auction and there is no dispute that the price represented fair market value for the land at the date of sale, which was very close to the relevant date in this matter. The purchaser had been Mr Baker as trustee for Sunbury Woodmill Employees Superannuation Trust. The first resale had been to the purchaser of the land in Ref 4. Mr Maddern called Mr Baker to give evidence. Mr Baker over -- 3 of 6 -- 4 the years has been involved in a number of acquisitions and sales of land within the estate. He expressed the opinion that the land in Ref 2 was significantly superior in location to the subject land, not only because of the superior highway exposure, but also through being at the entrance to the Moonaboola Estate which in itself attracted a fair amount of local traffic. The development surrounding the subject land was such as to attract very little local traffic. It seems to be accepted that the resales (a) and (b) of Ref 2 are indicative of a market improved above that which existed at the relevant date. No reliance can be placed on those sales for this valuation exercise. There is also an obvious comparison difficulty in using the evidence from that basic sale of Mr Gaskell of “Light Industry” zoned land in the four surveyed parcels at what Mr Gaskell recognised as a superior west Maryborough location. Another question which arises is the weight which might be placed on the determinations of unimproved value of the nearby lands which have been accepted by lessees for conversion purposes. As the Land Appeal Court said in Re: Grazing Selections Nos. 6011 and 6012 - Blackall District - Applications for Conversion of Tenure - (1966) 33 CLLR 265 at p.266: “We are of the opinion that determinations of unimproved value made by the Minister for Lands, and accepted by the lessees, are admissible evidence in the same way as Land Court determinations in uncontested cases are admissible, but the weight to be given them will vary in different cases and obviously is not the same as the weight given to Land Court determinations in contested cases.” In the present case, the more relevant acceptances might have been the latter two as provided by Mr Gaskell, and closer to the relevant date, which, as I understood his evidence, were based on the same basic sales evidence as was the subject determination. Lot 13 is at the entrance to the estate, opposite Sale Ref 2 and has three street frontages, including exposure to the highway. It seems that at some time in the past, no doubt when different market conditions were relevant, three small lots were amalgamated by survey to create Lot 13. As unimproved land, there is now potential to again resurvey the three lots which previously existed. That land, on the evidence, would have been expected to have had superior potential as unimproved land to that of Lot 15 in Activity Street. However, it also seems that the smaller area of Lot 15 has resulted in a slightly higher unit of area value. If the larger area of Lot 13 causes that result, then there is even more difficulty comparing the significantly larger area of the subject land albeit in a more elevated yet less exposed location than -- 4 of 6 -- 5 Lot 13. The area difference between Lot 13 and Sale Ref 2 also makes comparison between those lands difficult. There is some conflicting factual evidence as to the effect of size on market value in this Estate. It could be expected that the historical valuation perception that, all other things being equal, increased lot size produces lower pro-rata value, is demonstrated in Sale Ref 1. It seems also to be demonstrated in the comparison between Ref 2 and Ref 3 - 2 being clearly a much superior but larger lot, selling at a slightly lesser value than the much smaller and inferior 3. But then the size difference would not seem to be reflected between Sales Ref 3 and 4, except that the evidence as to the rising market may also be demonstrated in those transactions. Certainly there seems no difference through size demonstrated between the evidence of Sales Ref 5 and 6. I am not convinced that the level of value indicated by the accepted determinations should be adopted as a valuation basis in preference to the actual sales evidence on which those determinations were said to be based. It seems to me that the better evidence of value is provided by Sales Ref 2 and 4, both having taken place at dates close in time to the relevant date in this matter. I accept Mr Gaskell’s analyses of unimproved value as shown by those sales, being $5.50 per m² and $5.85 per m² respectively. Had the lots been of similar size, the land in Sale Ref 2 has been demonstrated to be clearly superior to the subject land, primarily due to location and traffic exposure. The sale lot is however twice the size of the subject land. I am not convinced that Mr Gaskell’s valuation of $9 per m² for the subject land is supported purely because of the higher elevation or smaller size of the subject land. Mr Maddern’s comparison process is more convincing based on that sale alone. Sale Ref 4 is of similar area to the subject land but Mr Gaskell’s evidence regarding the inferior physical nature of the land in comparison with the subject, is the result of his particular investigations. Mr Maddern saw the two lots as “generally similar” in terms of overall value, but the evidence does not, in my opinion, support that conclusion. The location of the land in Ref 4 relative to the Estate might be superior in terms of the local traffic but the subject land does have some highway exposure. I am able to accept that the subject land is superior to that in Ref 4 but again not to the degree found by Mr Gaskell. There seems little doubt that Mr Gaskell’s valuation was an accurate prediction of the market which was about to emerge, but, in my opinion, his adopted level of value was not capable of being achieved under open market -- 5 of 6 -- 6 conditions at the specific date of valuation. I have decided to determine the unimproved value in the amount of Forty Thousand Dollars ($40,000) rounded to a practical real estate figure based on $7 per m² overall. RE WENCK MEMBER OF THE LAND COURT -- 6 of 6 --