LAND COURT OF QUEENSLAND

CITATION: St Columb Ltd v Department of Natural Resources and Water [2006] QLC 67

PARTIES: St Columb Ltd (appellant) v. Chief Executive, Department of Natural Resources and Water (respondent)

FILE NO: AV2005/0608

DIVISION: Land Court of Queensland

PROCEEDING: Appeal against an annual valuation of land under the Valuation of Land Act 1944.

DELIVERED ON: 20 October 2006

DELIVERED AT: Brisbane

HEARD AT: Cairns

MEMBER: Mr RS Jones

ORDER: Appeal AV 2005/0608 is allowed and the unimproved value of Lot 4 on Crown Plan CWL 369, Parish of Dunkalli is determined in the amount of one million one hundred thousand dollars ($1,100,000).

CATCHWORDS: S.33 Valuation of Land Act 1944 – Presumption of correctness of statutory valuation – comparable sales – unacceptable sales – relativity with other unimproved values.

APPEARANCES: Mr Veall, for the appellant Mr W Isdale of Crown Law for the respondent.

[1] St Columb Ltd, the appellant, has appealed against the assessment of the unimproved value of its land by the Chief Executive, Department of Natural Resources and Water, the respondent to the appeal. [2] The unimproved value determined by the respondent pursuant to the Valuation of Land Act 1944 as at 1 October 2004 (effective as at 30 June 2005) is $1,300,000. In its notice of appeal, the appellant's estimate of the unimproved value was $500,000 but at the hearing of the appeal it contended for a value of $650,000. [3] The appellant was represented by Mr I Veall, a director of the appellant company. The respondent was legally represented by Mr W Isdale of counsel employed by Crown Law. Both parties relied on the evidence of registered real estate valuers. Background [4] The appellant is the registered proprietor of Timana Island which is located east of Tully and approximately 5.5 kilometres southeast of the South Mission Beach public boat ramp. The island is more properly described as Lot 4 on Crown Plan CWL 369 Parish of Dunkalli, County of Cardwell and contains an area of 15.98 hectares. [5] The island is made up of moderate to steeply sloping land which, to a large extent, is thickly vegetated with tropical scrub down to the high water line. None of the usual urban services and amenities are available and there is no scheduled regular transport to and from the island. As at 1 October 2004 the island was zoned Natural Resource Protection under the Interim Planning Scheme for the Council for the Shire of Cardwell. [6] Improvements on the island are really limited to a timber dwelling which is approximately 20 years old and some minor ground improvements. Issues in the Appeal [7] Consistent with the provisions of s.3(1)(b) of the Valuation of Land Act 1944 (VLA) the valuers for both parties valued the island on the basis that the improvements on it did not exist. Also, having regard to the use to which the island was being put as at the date of valuation it was treated by the respondent, pursuant to s.17 of the VLA, as a large single unit residential site. [8] Pursuant to s.33 of the VLA, the valuation appealed against is deemed to be correct and therefore the appellant bears the burden of proving that it is wrong. In Brisbane City Council v Valuer General1 the High Court considered that the presumption in favour of the correctness of the statutory valuation may be rebutted where it can be shown that the valuation was based on a wrong principle and/or involved a significant error of fact and/or was made by a fundamentally erroneous method. Also of relevance in appeals such as this is that pursuant to s.45(4) of the VLA the appellant is limited to the grounds stated in its notice of appeal and bears the burden of proving each and every ground of appeal relied on.

1 (1977 – 78) 140 CLR 41 at 56-57: See also G Cominos & Co Pty Ltd v Chief Executive, Department of Lands (1996 – 97) 16 QLCR 311 at 331 -332 (LAC). 2 [9] In its notice of appeal the appellant set out a number of facts and circumstances upon which it relied to show that the island was unique in comparison to other islands within the same general vicinity. At the end of the day the real contest between the valuers came down to trying to identify the most reliable sales evidence and how the valuation appealed against sat, in relative terms, with the unimproved values applied by the respondent to other islands or large residential allotments located on other islands. Both valuers readily conceded that their task was a difficult one made all the more difficult because of the lack of truly comparable sales evidence. [10] Mr Purcell, the valuer called on behalf of the appellant, in arriving at his valuation had regard to three island sales and the sale of two large home sites on East Bedarra Island which are part of a relatively exclusive group title complex. In addition to the sales evidence, Mr Purcell also had regard to the unimproved value attributed to a number of other islands extending along the northern coastline of Queensland. It was Mr Purcell's opinion that when regard was had to the reliable sales evidence and the levels of unimproved values attributed to the other islands, the valuation appealed against was excessive. [11] Mr Cross, the valuer called on behalf of the respondent, had regard to not only island sales but also sales of mainland beachside lots located at Wongaling and Mission Beaches. Like Mr Purcell, Mr Cross also sought to draw some comfort from the relativity between the unimproved value attributed to the subject island and the unimproved values attributed to other island properties. The Sales Evidence Orpheus Island [12] This island has been extensively improved with, according to Mr Purcell, a full-scale tourist resort including guest facilities, administration buildings, staff quarters, a helipad and a jetty. The island had not been recently inspected by Mr Purcell and no attempt was made to carry out any meaningful analysis of the details of the sale including the value of the improvements on the land. In the circumstances of this appeal I am of the opinion that the sale of this island provides no reliable evidence of the unimproved value of the subject. Pumpkin Island [13] The sale of this island was relied on by both valuers. (Mr Purcell's Sale 2 and Mr Cross' Sale 6). Neither valuer had carried out a physical inspection of this island. In fact, Mr Cross had not carried out an on-site inspection of the subject island although did carry out a close view of it by boat.

3 [14] Pumpkin Island has been developed with six fairly primitive cabins erected on it, each capable of generating holiday rental income. Mr Purcell analysed this sale to show a land value of $400,000. This figure was arrived at by giving a value of $900,000 to the improvements on the island. As I understood Mr Purcell's evidence about this, the figure of $900,000 was arrived at having regard to the income generating potential of the cabins. [15] At page 9 of his report (Exhibit 3), Mr Cross shows an analysed value of the land ex- improvements in the amount of $790,000. However, as the evidence emerged, it became clear that the figure of $790,000 came from an analysis of this sale by another valuer, Mr M McCosker.2 Unlike Messrs Cross and Purcell, Mr McCosker had inspected the island and attributed a value to the improvements of only $452,401. A value of $7,200 was attributed to plant and machinery. Mr McCosker was called by Mr Isdale to give evidence and was cross-examined by Mr Veall. In circumstances where Mr McCosker was the only valuer who had carried out an inspection of Pumpkin Island, I prefer his largely unchallenged evidence concerning the analysis of its sale. [16] Pumpkin Island is in a different location to the subject being situated in the Keppel Island group east of Rockhampton. Apart from its location, it is also significantly different from the subject in respect of a number of physical characteristics. It is much smaller and, in my opinion more significantly, it is a less attractive island. In this context Mr Purcell conceded in cross-examination that in terms of aesthetic appeal it would "not come close" to the subject. [17] It was Mr Purcell's opinion that, having regard to the income potential associated with Pumpkin Island it was overall slightly superior to the subject. Overall, Mr Cross thought Pumpkin Island was inferior but he had not physically inspected this island or the subject island. When pressed in cross-examination Mr Purcell conceded that when the islands were compared on an unimproved basis Pumpkin Island was "somewhat inferior" to the subject. Mr McCosker, the only person who physically inspected the island, was not asked to comment about this issue. [18] Given the state of the evidence concerning this sale I consider it is only able to be used in any meaningful way by establishing a base line for the subject. That is, in my opinion, the unimproved value of the subject cannot be less than $790,000. It follows from this that I find Pumpkin Island to be inferior to the subject.

2 See Exhibit 6. 4 The East Bedarra Island Site Sales [19] In his report, Mr Purcell refers to the sale of two group title lots on East Bedarra Island. His Sale 4 involved a vacant 2,983 m² lot and his Sale 5 a 2,531 m² lot improved with a substantial dwelling. Mr Cross had regard to the same sales. Mr Purcell's Sales 4 and 5 are Mr Cross' Sales 1 and 7. Mr Cross analysed these sales to show an analysed unimproved value of $570,000 for Sale 1 and $600,000 for Sale 7. Mr Purcell did not attempt to analyse these sales as he considered that they were not able to be sensibly compared to the subject. I agree with Mr Purcell about this. [20] These sales involve parcels of land of less than 3,000 m². Timana Island is nearly 16 ha in area. These sales have an established communal water supply, Telstra service and regular and relatively cheap water taxi access. Timana has none of these services and/or amenities. Significantly, these sales are also part of a 10 lot group title development. In this context, the evidence of Mr Cross was clearly to the effect that a material premium attached to the exclusivity and privacy offered by owning and being able to live on your island. For all of the above reasons I do not consider that those sales offer any probative evidence of the unimproved value of the subject. Little Green Island [21] Little Green Island was Mr Purcell's Sale 1 and Mr Cross' Sale 5. It involved a 25 ha island which sold in October 2004 for $1,800,000 and was analysed by Mr Purcell to a vacant land value of $1,450,000. At page 9 of his report, Mr Cross records that the unimproved value of this island is $1,300,000. However, Mr Cross also states that he, unlike Mr Purcell, had not inspected this sale and, as I understand his evidence about this, the analysis of the sale was carried out by another valuer employed by the respondent. If that valuer was Mr McCosker he was not asked about it. In these circumstances, I intend to adopt Mr Purcell's analysis of the sale. [22] At page 12 of his report Mr Purcell expressed his opinion that this sale involved an island substantially superior to the subject. He said: "Overall this is considered to be a substantially superior property as it is a larger site with more useable area, less development constraints, superior access (both locally and with regard to air services) and superior development potential. This island has also attracted a degree of international attention as the previous owner is reportedly Edward De Bono, the well known author and lecturer. We were advised that it was marked (sic) for an extended period (over one year) before the substantial sale price was achieved."

[23] Mr Purcell's opinions about useable area, development constraints and access were not seriously challenged. In respect of the issue of area Mr Cross' evidence was to the effect

5 that, while there is not a direct relationship between area and price, generally speaking larger sites attracted higher prices. [24] Turning to the respective development potential the two islands might have I am of the opinion that while from a local council perspective they might have similar prospects of an application for more intense development being approved, the physical characteristics of Little Green Island are more amenable to more intense development than the subject island. Whether or not Mr De Bono was or was not associated with the island is of no significance in the circumstances of this appeal in my opinion . [25] Mr Cross expressed the opinion that Little Green Island was "marginally" inferior to the subject. However, in circumstances where he has not physically inspected either island, I cannot place much weight on that opinion or comparison. [26] On balance the evidence leads me to the conclusions, and I so find, that the sale of Little Green Island is the most reliable sales evidence and that it is materially superior to the subject island. [27] Turning then to the balance of the sales relied on by Mr Cross, they can be dealt with quickly in my opinion. Sale 6 occurred in 2001 and was only relied on by Mr Cross to provide an indication of how the market had risen between 2001 and 2004. Sales 2, 3 and 4 are of mainland beachside lots ranging in area from about 900 m² to about 2,300 m². The fact that they are mainland lots of such a small area means, in my opinion, that they are not able to be sensibly compared to the subject. Mr Cross candidly conceded as much referring to these sales as having little or none of the privacy and exclusivity elements usually associated with island properties. It was Mr Cross' opinion that these elements set island properties apart from mainland lots. At one stage he went so far as to suggest that comparing them would be like comparing cheese with chalk. Accordingly, I find that Mr Cross' Sales 2, 3, 4 and 6 are of no probative value in the circumstances of this appeal. The Relativity Evidence [28] Before descending into this evidence it needs to be borne in mind that it is now well established that first, usually the best evidence for the assessment of the unimproved value of a parcel of land is that of sales of vacant or lightly improved comparable lands. And, second, that while the maintenance of appropriate relativities of value is important, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence.3

3 Fischer v Valuer General (1983) 9 QLCR 44 at 46 (LAC); Grahn v Valuer General (unreported decision of LAC, 20 November 1992, AV 90-472 and 473). 6 [29] Mr Purcell's "second" approach was to analyse and compare the unimproved value applied by the respondent to other islands and island sites with that applied to the subject.4 [30] As it turned out the unimproved values attributed to all of the islands except two of those identified at page 18 of Mr Purcell's report were arrived at pursuant to an agreement reached between resort owners and operators and the respondent (Exhibit 5). Mr Purcell conceded that the existence of this agreement made it impossible to make any sensible comparisons of levels of unimproved value. The only properties exempt from the agreement were the East Bedarra Island sites and Hamilton West Island. [31] When Mr Purcell became aware of the difficulties caused by the existence of the aforesaid agreement he sought to draw support from a comparison of the unimproved value attributed to yet other islands and island sites. The details of these analyses are set out in Exhibit 4, a document produced by or for Mr Purcell. [32] Turning then to Exhibit 4 it is my opinion no sensible comparison can be made between the subject and Long Island and Marble Island. These islands are 3,495 and 723 hectares in area respectively. Both are used for cattle breeding and fattening. Comparisons with Keswick Island and Hamilton West Island are also, in my opinion, of no probative value. Keswick Island has been zoned to accommodate a 200 million dollar resort according to Mr Purcell. As to Hamilton West Island it is more than ten times the size of the subject and is proximate to the well-established and highly developed Hamilton Island resort in the Whitsunday shire. As to the evidence concerning St Bees Island, as was the case with Hamilton West Island and Keswick Island, I was not told in any meaningful way how it could be applied to the subject or how it might be otherwise relevant. [33] Mr Cross also had regard to the unimproved values attributed to the sites located on East Bedarra Island and Dunk Island when determining the appropriate level of unimproved value for the subject. To this end Mr Cross carried out a quite detailed comparison of these sites with the subject at page 14 of his report. [34] The unimproved value of the Dunk Island site and the East Bedarra Island site are $1,200,000 and $1,250,000 respectively. Of some interest is the fact that the unimproved value of the East Bedarra site was increased by Mr Cross from $1,000,000 to $1,250,000. As I understand the evidence, the increase occurred during Mr Cross' preparation for this appeal. Further, the change was made because, according to Mr Cross, the $1,000,000 was out of line with the $1,300,000 applied to the subject and the $1,200,000 applied to the Dunk Island site. To achieve a more appropriate level of relativity between these

4 Refer to Exhibit 4 and page 18 of Exhibit 2. 7 three properties Mr Cross considered it desirable, if not necessary, to increase the unimproved value of the East Bedarra Island site by $250,000. [35] Returning to the exercise carried out by Mr Cross at page 14 of his report, it is my opinion that in his consideration of the 6.07 ha site on East Bedarra Island, he underestimated the "privacy" element associated with that site when comparing to the subject. It is true that when the individual group title lots making up this site are considered individually, privacy and exclusivity would be compromised. However, if the sites are treated not individually but as one large 6 ha site there is no reason to expect that a high level of privacy and even exclusivity could not be achieved. As already mentioned, privacy and exclusivity were elements which Mr Cross considered had a positive influence on the price paid for island properties. As to the Dunk Island site I consider that the positives and negatives of being located near a significant tourist resort make it difficult to directly compare it with the subject. [36] The hearsay evidence concerning the possible sale of the Dunk Island site does not have to be considered as no sale in fact occurred. [37] For the reasons canvassed above, the only comparisons I consider to be of any real assistance in the circumstances of this appeal are with the unimproved values applied to Little Green Island and the East Bedarra Island site. Summary of Findings and Conclusions [38] For the reasons canvassed above I find that the best evidence of the unimproved value of the subject Island is the sale of Little Green Island. I also find that Little Green Island is materially superior to the subject and that the best evidence of the analysis of that sale is that provided by Mr Purcell. [39] The only other sale I consider to be of any real use in the circumstances of this appeal is that of Pumpkin Island. However, for the reasons canvassed above, I consider that this sale does little more than provide a level of value below which the subject cannot go. [40] As to the evidence concerning relativity, I consider it to be inferior to the sales evidence and at best only a guide as to what might be an appropriate level of value. [41] Based primarily on my findings concerning the Little Green Island sale, I have reached the conclusion that the appellant has provided sufficient evidence to conclude that the valuation appealed against is wrong and ought be reduced to $1,100,000. [42] It is my opinion that a valuation of $1,100,000 sits comfortably with my findings concerning the Little Green Island sale. I also consider that the figure sits reasonably comfortably with the "analysed" unimproved value arrived at by the respondent ($1,300,000) and the vacant land value for this island arrived at by Mr Purcell

8 ($1,450,000). Both Mr Cross and Mr Purcell considered the "applied" unimproved value applied to this island in the amount of $1,650,000 was too high. [43] It is also my opinion that when all of the relevant matters are considered, the amount of $1,100,000 is not inconsistent with the unimproved value applied to the 6 ha site on East Bedarra Island and, for what it is worth, the unimproved value applied to the Dunk Island site. In this context the evidence surrounding Pumpkin Island is too uncertain to provide any guidance in my opinion. The only valuer to visit this island was Mr McCosker. Mr McCosker arrived at an analysed unimproved value for this island of $790,000 but applied a figure of $367,500. No explanation was given for the reduction of more than 50%. [44] For the reasons set out above I allow the appeal and determine that the unimproved value of the subject land, as at 1 October 2004, is $1,100,000. Order Appeal AV 2005/0608 is allowed and the unimproved value of Lot 4 on Crown Plan CWL 369, Parish of Dunkalli is determined in the amount of one million one hundred thousand dollars ($1,100,000).

R S JONES MEMBER OF THE LAND COURT

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