Adams v Chief Executive, Department of Lands [1996] QLC 78

LAND COURT BRISBANE 31 MAY 1996 Re: V94-693 and AV95-360 - Appeals against unimproved valuations under the Valuation of Land Act 1944 Local Authority: Warwick Shire G.T. and K.R. Adams v. Chief Executive, Department of Lands (Hearing at Warwick) D E C I S I O N Mr and Mrs Adams own a residential property known as “Aberfoyle”, situated at No. 35 Wood Street at the corner of Albion Street, Warwick. The land is described as Lot 43 on Registered Plan 51030 and Lots 1 and 2 on Registered Plan 62321, Parish of Warwick, County of Merivale, containing an area of 1,884 m2. It is zoned “Residential R3" under the Town Planning Scheme for the City of Warwick. “As of right” uses in that zone include duplex dwelling-houses, dwelling-houses, home occupations and public utilities. Purposes for which development may be carried out only with consent of the Council are extensive, but, for example, include accommodation buildings, commercial premises, shops, showrooms, motels, multiple dwellings etc. Albion Street is a section of the main highway thoroughfare of Warwick. Albion Street traffic exposure has attracted development more intense than single unit residential. “Aberfoyle” was built in 1910. It has recently been included by the National Trust of Queensland in its Register of places worthy of preservation as part of our National Heritage. This is accepted as a preliminary step in a submission for consideration of the dwelling being included in the State Heritage Register. As I understand the situation, Mr and Mrs Adams purchased the property as one which had been previously used as a single dwelling-house and proceeded to renovate and restore the building. The land had been valued by the Department of Lands (now Natural Resources) on the basis that the previous use required s.17 of the Valuation of Land Act 1944 (the Act) to be applied, resulting in a concessional valuation. Otherwise, the zoning of the land provided potential for use and consequently market value, significantly higher than for strictly single unit residential purposes. Indeed, the traffic exposure which might be attractive for commercial orientated uses has a deleterious effect on residential use. As at 30 June 1993, the Department valued the land in the amount of $66,000. As at 1 January 1995 the valuation increased to $73,000. These valuations resulted from the removal of the concession which would have applied under s.17 of the Act had the Department [1996] QLC 78 -- 1 of 7 -- 2 considered the land still to be exclusively used for the purpose of a single dwelling as defined. The owners have appealed against both valuations seeking the concession to be reinstated and estimating in the Notice of Appeals valuations of $28,000 and $30,000 at the respective dates. There is however, no dispute between the parties that with potential use limited to single dwelling-house as defined, the valuation of the subject lands would be $28,000 and $32,500 at the respective dates. It should also be said that there is no evidentiary challenge to the valuations of $66,000 and $73,000 at the respective dates on the “as zoned, unimproved value basis” adopted by the Department, and as supported by sales evidence of similarly zoned land. This valuation basis was adopted when the owners were successful in an application to the Council for a permit to use four rooms within the dwelling to accommodate a maximum of eight guests. The need for town planning consent resulted from the use of “any land, building, or other structure or any part thereof which comprises or is intended to comprise two (2) or more rooming units” being termed an “accommodation building” under the definitions in the Town Planning Scheme. That term includes “a boarding house, guesthouse, hostel ... and attached accommodation for the family of the owner or the proprietor”. The term “does not include a dwelling-house, dwelling unit or multiple dwelling” as defined in the Scheme. It is observed that a “dwelling-house” comprises “a single dwelling unit” and a “dwelling unit” is defined in the Scheme as “any building or other structure which comprises or is intended to comprise a self-contained dwelling-place for the exclusive use of one (1) family”. After consent was obtained, use of the property commenced as the “Aberfoyle Bed and Breakfast”. That use was intended as primarily a “homestay” operation - the owners residing in the premises. “Homestay” is described by Mr Adams as “an emerging section of the tourism market, particularly in country towns and districts. It is part of the eco-tourism trend, which in the broadest sense, refers to visitors seeking a genuine cultural experience ... by staying on a rural property or with a family in a country town. Traditionally, homestay is a source of part-time income for salary earners or retirees.” Mr Adams provided the Court with information as to what was a nominal gross income, in comparison with expenses, attributed to “Aberfoyle” in the 1994-5 financial year, resulting in a significant loss. This is understood to have been the initial year of operation. As Mr Adams saw it, “private boarders would provide a better return than homestay, but private boarders are usually local whereas homestay provides a tourist attraction” (and accommodation for guests of much shorter duration). The Department has interpreted the use of the property as being that of a “boarding house” which use, it is submitted, is not “incidental” to exclusive use for purposes of a single dwelling-house. Reliance is placed on the Macquarie Dictionary definitions as follows: “boarding house”:a place, usually a home, at which board is furnished, often with lodging; “board”: daily meals, especially if provided for pay; -- 2 of 7 -- 3 “lodging: a room or rooms for residence in another’s house. The Department’s submission is that while part of a dwelling may be used by persons other than the owner’s family as furnished rooms, it was not intended that the meaning of a single dwelling-house in s.17(2)(b)(ii) be extended to include the provision of meals to the occupants of those furnished rooms. Section 17 of the Act as it relates to “exclusive use for single dwelling-house” provides as follows: “(1) In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house ... any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made. (2) In subsection (1) - ‘a single dwelling house’ means - (a)a dwelling used solely for habitation by not more than 1 family; or (b) a dwelling occupied by the resident owner and used solely for habitation - (i)part of which stands converted for use as a flat; or (ii)part of which is used or for use as a furnished room or furnished rooms; by a person or persons other than the owner’s family; or (c)a building used solely for habitation and that consists of 2 flats, 1 of which is occupied by the resident owner;” The present provisions in s.17 were introduced by s.4(c) of the Valuation of Land Act Amendment Act No. 43 of 1984 which was assented to on 9 May 1984. The Department submits that its interpretation of the provision, as it relates to the use of “Aberfoyle”, is in keeping with the words in the Second Reading Speech of the Honourable MJ Tenni, at that time the Minister for Environment, Valuation and Administrative Services, in support of the relevant Bill. The following passage at p.2480 in Hansard No. 17 of 1984 is quoted: The Bill extends the provisions of the Act that govern the concessional valuation of land exclusively used for purposes of a single dwelling house to allow a concessional valuation to apply to land on which there is a building containing two flats, provided the owner lives in one. These properties would be valued without regard to any enhancement in value that they may have for a higher use beyond -- 3 of 7 -- 4 single residential use. The definition has been widened to include a dwelling in which more than one furnished room is let, provided the dwelling is also occupied by the owner. At present, the concession is granted only when one furnished room is let. This has been proved to be inequitable in its application, as there are many instances in which a land-owner lets more than one furnished room, particularly to students. It is not intended that this should apply to tenement buildings and boarding houses.” (emphasis added) Mr Adams has found that the meaning given to a tenement building (Collins New Standard Dictionary 1977) is - “a piece of land or a house; a part of a house forming a separate dwelling” or, “dwelling place, esp. flat or room rented in a house” (Oxford School Dictionary 1967). In Mr Adams’ opinion the emphasised sentence in Mr Tenni’s speech as it refers to “tenement buildings” is contradictory to the legislation which was introduced. With regard to the definition of a boarding house, Mr Adams suggests that the Department’s interpretation of “homestay” usage is discriminatory, exposed because of the need which existed under the Town Planning Scheme for Council consent to be obtained. He suggests that in practice, an owner of a single dwelling-house who decided to take in private boarders would not need to obtain Council consent. It is observed however that if the use was considered to constitute a “boarding house” then under the Town Planning Scheme, the building or structure would also be termed an “accommodation building” and such use would require consent. There is no definition of “boarding house” in the Town Planning Scheme. However, Mr Adams produced a copy of a letter he had received from the Chief Executive Officer, Shire of Warwick, dated 18 October 1994, which contained the following passages: “... Council shares your concern that the proposed use” (bed and breakfast/homestay) “which conceivably is merely a moderate extension of the existing single dwelling use, would adversely affect the concessional valuation of the land. The Town Plan currently in force for the urban area of Warwick does not specifically address the ‘homestay’ style of guest accommodation. As you will be aware this requires Council to consider ‘homestay’ style proposals under the ‘Accommodation’ provisions of the Town Plan which more appropriately deal with more intensive accommodation and multiple unit developments. Council is of the view that ‘homestay’ guesthouses have nominal, if not negligible, impact above that of a single dwelling-house. It is the intent of the Council to address this issue during the review of the Town Plan for the whole of the Shire.” In further correspondence dated 29 November 1994, the Chief Executive Officer advised Mr Adams as follows: “ Council at its General Meeting held on 23 November 1994, considered a report by the Acting Director of Planning & Development in respect of the application of Food Hygiene Regulations for homestay style developments. As a result of advice received, Council is now prepared to consider applications made by current holders of town planning consents for homestay style developments for -- 4 of 7 -- 5 modification to their town planning consents, requesting the removal of the condition requiring compliance with Food Hygiene Regulations. Council wishes to stress that this invitation to seek modification of your town planning consent, in no way infers Council’s decision on the matter and such application will be dealt with strictly on a merit basis.” There is no definition provided in the Valuation of Land Act for either “boarding house” or “tenement building” although the ordinary usage of those terms in town planning terminology would seem to indicate an intense form of use. Intense use connotation is also seen to flow to valuation terminology, at least as it relates to capital value considerations, based on rental income. It would not, for example, be expected to influence valuations of dwellings where an owner takes in some private boarders. If in s.17 of the Act “boarding house” use was to be excluded solely because of the provision of meals, the Minister’s reference to student accommodation as being permitted, causes doubt in my mind as to whether the provision of meals was intended to be a relevant criterion. It would be seen as more likely that students would be the very occupants of furnished rooms who would require the provision of meals. In any event, s.14B of the Acts Interpretation Act (use of extrinsic material in interpretation) provides: “(1) Subject to subsection (2), in the interpretation of a provision of an Act, consideration may be given to extrinsic material capable of assisting in the interpretation - (a)if the provision is ambiguous or obscure - to provide an interpretation of it; or (b)if the ordinary meaning of the provision leads to a result that is manifestly absurd or is unreasonable - to provide an interpretation that avoids such a result; or (c)in any other case - to confirm the interpretation conveyed by the ordinary meaning of the provision.” It seems to me that if there is any doubt as to the meaning of the s.17, it has been caused by a questionable interpretation of the extrinsic material on which the Department seeks to rely. It is at least clear that the intent of s.17 was not to exclude the commercial aspect of income being produced from rental of parts of a dwelling, provided: (1)the dwelling is occupied by the resident owner and (2)the dwelling is used solely for habitation. If “Aberfoyle” was not occupied by the resident owners, the benefit of a concessional valuation would not be available. Similarly, if some use other than habitation was involved (eg -- 5 of 7 -- 6 professional office or the provision of meals in the absence of lodging) the obvious intent of the statute would be breached. As the Land Appeal Court observed in AR Thomason v. Chief Executive, Department of Lands (as yet unreported - delivered 3 March 1995), when considering the “farming” limb of s.17 - “ For statutory interpretation purposes, the definition of ‘farming’ in section 17(2) of the Act can be contrasted with the definition of ‘single dwelling house’ in the same sub-section. The latter definition has three parts, each of which refers to a dwelling or building ‘used solely for habitation’. Any one part must be satisfied to attract the operation of section 17(1). In its operation with respect to land ‘exclusively used for the purposes of a single dwelling house’, section 17(1) protects land used solely for the purpose specified.” I am not convinced that the provision of breakfast to paying guests in a homestay style establishment breaches the exclusivity of habitation of a single dwelling-house as defined, or that the use of “Aberfoyle” does not fall within a reasonable interpretation of s.17(2)(b)(ii) of the Act. Something should be said about the background to these appeals. The owners have provided the Court with material which indicates wide publicity to the matter and a perception that the interpretation of the statute by the Department was related specifically to the commercial aspect of the use of “Aberfoyle”. It has been suggested that the imposition of “commercial” valuations to properties used for “homestay” or “farmstay” orientated ventures will affect that emerging accommodation sector to the detriment of the tourism industry generally. It is suggested that it could even affect the potential heritage value of historic homes and the like. The facts are that in this case, “Aberfoyle” happens to be located on a site with higher use potential than single unit residential. Valuations made under s.17 are, intentionally, artificially low. The concept of this artificiality was to protect individual residents (and, where applicable, genuine primary producers) from the effects of changing land use and consequently enhanced valuations. In effect, all other ratepayers in a local authority contribute to offset the loss in revenue which would otherwise be occasioned by individual concessional valuations. The original concept of concessional valuations has, over the years, been reviewed. No doubt this has been the result of the perception of inequity as demonstrated in individual cases. However, as a result of amendments to the legislation, the qualification requirements have been interpreted by the Courts as more stringent in some cases and less stringent in others. Each case needs to be treated on its merits. These appeals would be more correctly described as involving the question of whether the use of “Aberfoyle” qualifies as land which should enjoy the benefits of a residential valuation, when the real worth of the land is significantly higher. The owners themselves, through Mr Adams, would have been prepared, realistically, to accept a valuation somewhat higher than pure single unit residential, because they recognise that the use of “Aberfoyle” is -- 6 of 7 -- 7 higher than that of the ordinary meaning of single unit residential. Reference was made to increased insurance premiums for the same reason. Mr and Mrs Adams would have welcomed some negotiation on that valuation point. That however was not possible under the legislation as it stands - either the use of the property qualifies for the concessional valuation provided by the amendment which became s.17(2)(b)(ii), or it does not. It would be wrong to be critical of the Department for not negotiating some “in between” valuation as suggested by the owners, or indeed for taking the stance which it did relative to its interpretation of the amended legislature. Although, in my opinion, the Department’s interpretation was wrong, the burden of proof lay with the appellants. In the event that I had agreed with the Department’s interpretation, it was suggested that if the Court also saw the existence of an anomaly, then such an expressed observation in the written reasons “might” influence the drafting of further amending legislation. The fact is that as the matter will now stand, the Department has the right to challenge this finding or alternatively to make its own recommendations as to any legislative amendment it might consider necessary. The appeals are allowed and the valuations of the chief executive set aside. The unimproved value of the land is determined in the amount of Twenty-eight Thousand Dollars ($28,000) as at 30 June 1993 and in the amount of Thirty-two Thousand Five Hundred Dollars ($32,500) as at 1 January 1995. RE WENCK MEMBER OF THE LAND COURT -- 7 of 7 --