Australia: Valuation expert values the wrong thing yet the court still finds value in the evidence

In brief

The case of Suncorp Metway Insurance Pty Ltd v Valuer-General (No.2) [2017] QLC 46 concerned an appeal against the Valuer-General's valuation of the site on which, in general terms, the Sofitel Hotel is located in the Brisbane CBD.

The Valuer-General's valuation was originally $39,500,000 but was subsequently reduced during the course of the appeal to $34,500,000.

The Appellant contended that the site had no value or a nominal value of $1 because of its unappealing location and the restrictions on construction. Alternatively, if a certain development was possible, the Appellant contended that a site valuation of $13,180,000 was appropriate.

The Court found that the Valuer-General's valuation expert had valued the wrong thing and the evidence was therefore based on significant errors of fact. However, the Court still found some utility in the evidence.

The Court ultimately found that the Appellant's valuation expert's evidence was the better evidence, despite the Court cautioning the expert for being argumentative. The Court allowed the appeal and reduced the valuation to $13,180,000.

Valuer-General's valuation expert valued the wrong thing

The Court had to first determine what was to be valued.

The Appellant contended that the appeal concerned Lot 2, being a volumetric lot with a footprint having an area of 7,432 square metres. The lot sits within the volumetric lot which is over Central Station in the Brisbane CBD.

In the course of the appeal, the Valuer-General wrote to the Appellant and reduced the amount of the valuation but, in doing so, referred to the property in question as being land the subject of certain leases, being leases to the Appellant from Queensland Rail. Further, the Valuer-General later sought to amend its statement of facts, matters and contentions so that the land being valued included the leases to Queensland Rail.

The Court was not satisfied that such an amendment was possible and held that the thing being valued was Lot 2, being the volumetric lot having a footprint of 7,432 square metres and not including the leases to Queensland Rail. As such, the Valuer-General's valuation expert had valued the wrong thing.

Although the Court found that the Valuer-General's valuation expert had valued the wrong thing, the Court still found some utility in the evidence. The Court stated that the evidence was still useful in considering whether the Appellant's valuation expert had applied the correct rate for determining the value of the site.

Appellant's valuation expert was criticised by the Court but the evidence was still useful

The Valuer-General submitted that the Appellant's valuation expert did not meet the standards expected of an impartial and independent expert as the expert was argumentative and offensive.

Although the Court agreed with the Valuer-General's criticism of the Appellant's valuation expert's behaviour, the Court found that it would be unfair to penalise the Appellant for the lack of professionalism shown by its valuation expert. The Court stated that it would be a last resort, suitable for the most extreme cases, to disregard the evidence of the Appellant's valuation expert.

Consequently, the Court found that the Appellant's valuation expert's evidence was still useful and should be considered on its merits.

The unique attributes of the site made valuation difficult

The Court acknowledged that there "is simply something different to the land the subject of the appeal" (see paragraph 52).

The differentiating characteristics of the land included its location above Central Station in the Brisbane CBD and the associated construction restrictions, as well as the restrictions because of its geographical location.

The Court found that building over a major operational railway would be inherently difficult. The difficulties identified by the Court included the requirement to negotiate with Queensland Rail about the type of development and the construction elements and process, as well as the requirement to manage disruptions to a major operational railway.

Court analysed the valuation evidence of both parties' experts

Despite the Valuer-General's valuation expert valuing the wrong thing and the Appellant's valuation expert being criticised, the Court did not automatically dismiss the evidence of either expert and considered each comparable sale in turn.

The comparable sales were as follows:

  • 111 Mary Street - The valuation experts relied upon different sales of 111 Mary Street.
  • Relying upon the 2010 sale for $38,000,000, the Appellant's valuation expert adopted the rate of $5,253 per square metre. This rate allowed for the excavation of the site to a value of $10,000,000. However the actual cost of the excavation was $24,500,000. This adjustment was criticised by the Court because of the amount of the adjustment and the tenuous basis for the valuation. The Court did not accept that the sale was a reliable guide.

    Relying upon the 2014 sale of the volumetric lot for $29,000,000, the Valuer-General's valuation expert adopted the rate of $637 per square metre of GFA. However, the Valuer-General's valuation expert contended a higher rate was more appropriate because of the improvements in excavation works that had occurred since the sale and the superior location of the site. As such, the Valuer-General's valuation expert valued the site at $1,000 per square metre. The Court rejected the Valuer-General's valuation expert's evidence on the basis that it lacked reliability and was unconvincing.

    Consequently, the Court rejected the analysis of both valuation experts for 111 Mary Street.

  • 304 George Street - The Appellant's valuation expert adopted the same rate used by the Land Court in Brisbane Square Pty Ltd v Valuer-General [2016] QLC 69 being $7,793 per square metre. The Valuer-General's valuation expert agreed with the basis upon which the rate was determined but disagreed with the Appellant's valuation expert's inclusion of the excavation costs in the valuation.
  • The Court found that it was appropriate for the Appellant's valuation expert to take into account the excavation costs because they were used in the redevelopment. The Court accepted the Appellant's valuation expert's analysis of the rate per square metre but observed that the sale at 304 George Street was superior to that of the site and its potential should be considered in the valuation of the site.

  • 65 Mary Street - Only the Valuer-General's valuation expert relied on this sale. It sold in February 2014 for $7,300,000 which amounted to $756 per square metre of GFA. The Valuer-General's valuation expert adopted the same rate per square metre for the site.
  • The Court found that the Valuer-General's valuation expert's evidence was unconvincing as the site was located in an inferior location when compared to 65 Mary Street. As a result, the Court rejected the Valuer-General's valuation expert's evidence relating to this sale.

  • 127 Charlotte Street - This property sold in May 2010 for $9,090,908 which amounted to a rate of $986 per square metre of GFA. Only the Valuer-General's valuation expert relied on this sale.
  • He contended that the site commanded a higher value per square metre because the site is in a superior location. The Court found that, if anything, the property at 127 Charlotte Street is in a superior location. As a result, the Court rejected the Valuer-General's valuation expert's evidence relating to this sale.

  • 30 Albert Street - This property sold in December 2013 for $18,750,000. The Valuer-General's valuation expert determined the rate to be $9,936 per square metre. The Valuer-General's valuation expert again contended that the site was in a superior location when compared to this property. The Court found that the Valuer-General's valuation expert's evidence was unconvincing and rejected the evidence relating to this property.
  • 105/111 Margaret Street - This property sold in July 2011. The sale of 111 Margaret Street, Brisbane was in 2012 and was purchased by the adjoining owner. The Valuer-General's valuation expert relied on both sales as the one transaction. The Court found that the sale "is a confection of two sales" which cannot be treated safely as one. As a result the Court rejected the Valuer-General's valuation expert's evidence regarding this property.
  • 168 Wharf Street - The Valuer-General's valuation expert relied upon this sale and determined the rate to be $977 per square metre. The Valuer-General's valuation expert considered this sale to be primary evidence of the appropriate value of the site because it supports the development of a four star hotel and is located 200 metres from the site. The Court agreed.

The Court preferred the Appellant's evidence and determined that the evidence submitted by its valuation expert was the better evidence. Consequently, the Court allowed the appeal and reduced the site valuation to $13,180,000.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Ian Wright
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