AMP LIFE LTD and VALUER GENERAL
[2011] WASAT 8
•20 JANUARY 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: DEVELOPMENT & RESOURCES
ACT: VALUATION OF LAND ACT 1978 (WA)
CITATION: AMP LIFE LTD and VALUER GENERAL [2011] WASAT 8
MEMBER: JUSTICE J A CHANEY (PRESIDENT)
MR J JORDAN (MEMBER)
HEARD: 22 JULY 2010
DELIVERED : 20 JANUARY 2011
FILE NO/S: DR 421 of 2009
BETWEEN: AMP LIFE LTD
Applicant
AND
VALUER GENERAL
Respondent
Catchwords:
Land valuation - Unimproved value - Site value - Assumptions to be made - Whether new planning scheme affected unimproved value - Whether removal of discretion to approve non complying development should be ignored in light of planning history of site
Legislation:
City of Perth Planning Scheme No 1, cl 48, cl 138
City of Perth Planning Scheme No 2, cl 27
Minor Town Planning Scheme No 16
Valuation of Land Act (1978) WA, s 4(1), s 33, s 33(1)
Result:
Valuation set aside and new value assessed
Category: B
Representation:
Counsel:
Applicant: Mr P Sheiner
Respondent: Ms C Ide
Solicitors:
Applicant: Gadens Lawyers
Respondent: State Solicitor's Office
Case(s) referred to in decision(s):
AMP and Valuer General [2007] WASAT 257
Luton v Valuer General [1971] 1 NSWLR 280
Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] 91 CLR 610
Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The Tribunal was called upon to decide whether, as a result of a change in the applicable city planning scheme, the unimproved value of a prominent central business district property had been affected.
The Tribunal reviewed a previous decision of the Tribunal in relation to the same land under the pre-existing planning regime, and the provisions of the new planning scheme. It concluded that the removal of a discretion on the part of the City of Perth to approve a building of the size of the existing building on the site would have prevented such a development in the absence of an amendment to the relevant planning scheme. Although the Tribunal accepted that the City would be likely to support that amendment, the delay and costs associated with the amendment would, as the parties agreed, result in a diminution in the value of the site. The Tribunal concluded that the coming into operation of the new planning scheme did have an effect on the unimproved value of the site and answered the question accordingly. As a result, the review of the Valuer General's valuation was allowed and a lower value substituted.
The issue for determination
AMP Life Ltd (AMP) served a notice on the Valuer General pursuant to s 33(1) of the Valuation of Land Act 1978 (WA) (VL Act) objecting against the valuations by the Valuer General on 1 August 2004 and 1 August 2005 of land, which it owns, located on the corner of William Street, St Georges Terrace and Hay Street, Perth (subject site). The Valuer General had assessed the value of the subject site at $17 million on each of the valuation dates. The Valuer General refused to modify the assessed value, and, pursuant to s 33 of the VL Act, AMP required the Valuer General to refer the valuation to this Tribunal for review.
The valuation had previously been the subject of determination by this Tribunal in respect to valuations in 1999, 2000, and 2003 - see AMP and Valuer General [2007] WASAT 257. The Tribunal had determined the value as $23.4 million at 1 August 1999, when it accepted that a premium applied to land within the central business district of Perth, and as $17 million as at 1 August 2000 and 1 August 2003.
The valuation by the Valuer General for 1 August 2004 and 1 August 2005 was $17 million, based upon there having been no material change in circumstances from 1 August 2003 until 1 August 2004, and from 1 August 2004 until 1 August 2005. AMP contended, however, that there had been a material change in circumstances, namely the coming into effect on 9 January 2004 of the City of Perth City Planning Scheme No 2 (CPS 2). It argued that the effect of CPS 2 was to limit the development potential of the subject site, were it to be in its unimproved state, as compared with its development potential under the planning controls applicable prior to CPS 2 coming into force. The valuers engaged by the parties agreed that if the enactment of CPS 2 affected the development potential of the unimproved site in the way contended for by AMP, the unimproved value of the subject site would be reduced to $14 million on each of the valuation dates.
In those circumstances, the parties identified a discrete question for determination by the Tribunal, namely 'Did the coming into operation of the City of Perth City Planning Scheme No 2 affect the unimproved value of the subject site?' If the answer to that question is no, then the parties are agreed that the subject site should be valued on the relevant dates at $17 million. If the answer to the question is yes, then the parties are agreed that the valuation on the relevant dates should be $14 million.
The relevant facts
The parties provided a statement of agreed facts. It is convenient to set out the facts as agreed by the parties, which are as follows.
Description of Subject Site and Location
5.The subject site is on the corner of William St, St Georges Terrace and Hay Street and is within the core of the central business district of the City of Perth ("the City"). The corner of St Georges Terrace and William Street is the site of four major high rise office towers, being 111 St Georges Terrace (ex National Mutual/AXA Centre), the Challenge Bank Building, the AMP Tower and the prestigious Bankwest Tower. To the west within 100 metres of the subject land is Perth’s tallest office tower, Central Park.
6.The subject site is bounded to the west by two high rise office blocks on St Georges Terrace identified as the Commonwealth Bank Building and the prestigious Central Park Tower which occupies a through lot having both St Georges Terrace and Hay Street frontages.
7.The Hay/William Street frontages, located immediately west of the prime Hay Street Mall retail precinct, incorporate a landscaped area known as “Central Park” and a single storey tenancy occupied by Qantas. The pedestrian Hay Street Mall, Perth’s premier retail location, is approximately 300 metres long and connects with the Murray Street Mall to the north via a number of shopping arcades and dual frontage department stores such as Target and David Jones.
8.The area of the subject site is 5,167m². The site is substantially rectangular in shape with a frontage to St Georges Terrace of 47.78 metres and to Hay Street of 47.71 metres, with the William Street return frontage being 107.95 metres, yielding a total site area of 5,167m2. The site is level with the road on both frontages although the land falls naturally 3-4 metres from Hay Street to St Georges Terrace. The land comprises sandy soils which offer no impediment to high rise development.
History of development on the subject site
9.On 2 October 1987, Minor Town Planning Scheme No 16 ("Minor TPS 16") which applies to the subject site and adjoining Central Park and Commonwealth Bank sites was gazetted. Minor TPS 16 stipulates that for the purposes of determining plot ratio and car parking requirements for land within the Scheme area, the Scheme area shall be treated as one site. The Scheme Area comprises the three office buildings known as 140 St Georges Tce (the AMP building) which is on the subject site, 150 St Georges Terrace (Commonwealth Bank building) and 152-158 St Georges Terrace (Central Park Tower). At the time the Minor TPS 16 came into effect, the AMP and Commonwealth Bank buildings were in existence but Central Park Tower had yet to be developed.
Relevant history of the subject land
10.As at 1 August 2003 the City of Perth Planning Scheme No. 1 (“CPS1”) stipulated a plot ratio of 5:1 for the AMP Site at 140 St Georges Terrace, Perth (“AMP Site”).
11.Under CPS1 the Council of the City of Perth (“Council”) had the ability to permit a bonus plot ratio of 20% (up to 6:1) under clause 138 and a general discretion to otherwise approve an application for planning approval under clause 48.
12.However, Town Planning Scheme 16 (“TPS16”) created a Minor Scheme Area within the City of Perth which included the AMP Site.
13.Pursuant to TPS16 at all material times for the purpose of determining plot ratio the Minor Scheme Area, including the AMP Site, was to be treated as a single site.
14.In 1987 the Council passed a resolution for the Central Park Development (the 1987 CPD Approval).
15.Central Park Development was within, or substantially within, the Minor Scheme Area under TPS 16.
16.The 1987 CPD Approval purported to allow a plot ratio of 6:1 for the Central Park Development.
17,In issuing the 1987 CPD Approval the Council excluded from the plot ratio calculation the area of the car parking spaces of short term fee paying parking.
18.Absent the exercise of its discretion under clause 48 of CPS1, the Council was otherwise required under CPS1 to include in the calculation of plot ratio the area of the car parking spaces of short term fee paying parking bays.
19.If short term fee paying parking bays had been included in the calculation of plot ratio for the Central Park Development, the plot ratio allowed under the 1987 CPD Approval was;
(a)more than 6.54:1; or alternatively
(b)at least 6.54:1,
within the Minor Scheme Area.
20.By reason of the matters set out in paragraphs 17 to 19 above, the 1987 CPD Approval was given by the Council in reliance upon clause 48 of CPS1 in the exercise of a discretion to vary the plot ratio requirements otherwise prescribed by CPS1.
21.(deleted)
22.By reason of the operation of TPS16, following the 1987 CPD Approval, the plot ratio available for the AMP Site within the Minor Scheme Area, assuming a maximum plot ratio of 6:1 (without counting public car spaces), was 5.43:1.
Valuation facts
23.As at 1 August 2003, having regard to the terms of CPS1, the 1987 CPD Approval and TPS16, a prudent purchaser of the AMP Site would have been entitled to assume that the Council would approve a development of the magnitude of the existing AMP Building.
24.The Council could only have given an approval of a kind referred to in paragraph 23 above in the exercise of the Council’s discretion to approve a plot ratio of greater than 6:1 under clause 48 of CPS1.
25.The unimproved value of the AMP Site as at 1 August 2003 was $17,000,000.
26.City Planning Scheme No.2 (“CPS2”) came into effect on 9 January 2004 replacing CPS1.
27.Under CPS2 the area of car parking bays and aisles in public fee car parks were required to be included in the calculation of plot ratio.
28.Under CPS2 the plot ratio of existing buildings within the Minor Scheme Area is as follows;
Central Park
57,187m2
Commonwealth Bank
7,066m2
Public Car Park (450 bays*)
9,072m2
Qantas Building
285m2
AMP Building
28,055m2
Total Plot Ratio Floor Area
101,665m2
Total Site Area (TPS 16)
15,039m2
Total Existing Plot Ratio
6.76:1
* The area of the public car park is calculated as follows:-
Area of Car Bay (2.4m x 5.4m)
12.96m2
Area of Aisle (2.4m x 3m)
7.20m2
Total Area of Each Car Bay
20.16m2
29.The existing plot ratio utilized on the subject site is as follows, - AMP building has a plot ratio floor area of 28,055m² plus 285m² of floorspace in the Qantas building plus 3,790m² attributed to 188 public car bays totalling 32,130m².
30.In order to amend CPS 2, the following steps would need to be undertaken.
(a)The amendment would need to be initiated by the Council (s7 TPDA);
(b)Amendment documents would need to be prepared and drafted by the Council (s7(1) TPDA);
(c)The amendment documents would need to be referred to the Environmental Protection Authority for assessment (s7A1 TPDA);
(d)Western Australian Planning Commission consent is required to authorise advertisement of the amendment (r25AA TPR);
(e)The amendment would need to be advertised for public comment (s7(2)(a) TPDA);
(f)The Council would need to consult public authorities and persons that appear likely to be affected by the amendment (s7(2aa) TPDA);
(g)Public submissions would need to be considered by Council (r17 TPR);
(h)The amendment would need to accord with Western Australian Planning Commission Policy Statements made under s5AA of the TPDA (s7(5) TPDA);
(i)The amendment must be consistent with the Metropolitan Region Scheme (s35 MPSA);
(j)The amendment would need to be referred to the Western Australian Planning Commission (r18(1) and r25 TPR);
(k)The amendment would need to be submitted to the Minister for Planning (s7(2)(b) TPDA);
(l)The amendment would need to be approved (or refused in the exercise of his or her discretion) by the Minister (s7(2a) TPDA);
(m)If endorsed by the Minister the amendment would need to be gazetted (s7(3) TPDA);
(n)Elected members of Council must resolve to adopt the amendment (r13, r17(2)(a) and r25 TPR).
31.There was little or no market movement in the rate per square meter [sic] of floor area in the Perth CBD between 1 August 2003 and 1 August 2004.
32.There was little or no market movement in the rate per square meter [sic] of floor area in the Perth CBD between 1 August 2003 and 1 August 2005.
33.The appropriate Unimproved Value assessment of the subject land at the respective dates of valuation assuming development was permissible at 4.01:1 (although the Respondent does not accept that this is the case) would be:
Base Date
Agreed Unimproved Value
1 August 2004
$ 14,000,000
1 August 2005
$ 14,000,000
34.Assuming (although the Respondent does not accept that this is the case) that an amendment to CPS 2 would be required to permit development consistent with the existing plot ratio on the subject land at 5.43:1, the valuers agree the following Unimproved Value assessments:
Base Date
Agreed Unimproved Value
1 August 2004
$ 14,000,000
1 August 2005
$ 14,000,000
35.Based on the assumption that Council would have approved development on the land in accordance with the existing development approval without any requirement for amendment to CPS2, the valuers agree appropriate Unimproved Value assessments at each date of valuation are as follows:
Base Date
Agreed Unimproved Value
1 August 2004
$ 17,000,000
1 August 2005
$ 17,000,000
In these reasons we will adopt the abbreviations used by the parties in the agreed facts. We note that the parties defined Town Planning Scheme 16 twice, once as 'minor TRS 16' and once as 'TPS 16'. We will adopt the latter.
The 2007 decision
A significant issue in the 2007 decision was the development potential of the AMP site. AMP argued then that the site is severely constrained by virtue of the provisions of TPS 16, whereas the Valuer General contended that having regard to the existence of TPS 16, the 1987 CPD approval in respect of the whole of the land in the scheme area, and the development actually carried out under that approval, the development potential of the AMP site at the relevant dates would reflect, more or less, the extent of improvements actually carried out on the site at the relevant dates.
To understand that issue, it must be borne in mind that the relevant valuation is of the 'unimproved value' of the land. 'Unimproved value' is defined under s 4(1) of the VL Act as the 'site value' which in turn is defined as 'the capital amount that an estate of fee simple in the land might reasonably be expected to realize upon sale assuming that any improvements to the land, other than merged improvements, had not been made …'.
The Tribunal accepted at [49] that that formulation of unimproved value makes it necessary to assume that the subject site is stripped of any development or improvements, but that development on neighbouring sites exists - Luton v Valuer General [1971] 1 NSWLR 280 (Luton) at 283 per ElseMitchell J. The Tribunal also recognised that planning controls affecting the development of the subject land at the relevant dates must also be taken into account - Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] 91 CLR 610 at 625 (Royal Sydney Golf Club). Neither of those propositions was disputed by either party in these proceedings, and we accept them as correct statements of principle.
The competing arguments of the parties in the 2007 decision were explained at [52] - [56] as follows:
52In St Martins' Centre Pty Ltd v Valuer General (2003) 30 SR (WA) 218, the former Land Valuation Tribunal of Western Australia accepted in relation to a minor town planning scheme that had a similar operation to minor TPS 16, that the subject land within the minor scheme area should be assessed for value on the basis that the improvements on the other lots in the scheme area affected at relevant valuation dates the available plot ratio and so the development potential of the subject land.
53Accordingly, the approach advocated by the applicant in this case is that the GFA available to the AMP site is to be ascertained by determining the GFA available under minor TPS 16 and by then deducting the GFA actually used by the other existing developments (on the Commonwealth Bank site and the Central Park site) that are affected by the minor TPS 16 as at the relevant dates. The applicant says that development approval under which the Central Park development was constructed does not give any development approval to the applicant and must effectively be ignored. As a consequence, whereas Mr Collins for the Valuer General valued the AMP site on the basis that Lot 29 alone could support a development with a buildable area of 28,300 square metres, Mr Jackson conducted his valuation on the basis that the relevant buildable area was only 11,267 square metres.
54The Valuer General says that the approach of the former Tribunal in this regard is wrong and the applicant's contention is a non sequitur because the result of the applicant's approach is that only a minor development of the AMP site would, in fact, be possible at the relevant dates because the other two sites had effectively swallowed up the available plot ratio and development potential in the minor TPS 16 scheme area.
55The Valuer General argues that while it may be accepted that the 1987 CPD approval does not constitute an approval to develop or redevelop the whole of the AMP site at relevant dates it does not follow it is therefore open to ignore its existence. The Valuer General says the 1987 development application allowed for a plot ratio of 6:1 over the whole of the minor scheme area and recognised and took into account the GFA of the existing AMP and CBA buildings at the time it was granted in order to calculate the GFA available to the Central Park development and other related developments, which included public car parking and the Qantas tenancy on Lot 30 of the AMP site. In other words, the GFA of the CPD approval in the minor scheme area was predicated on the GFA of the existing AMP and CBA buildings. Thus, the Valuer General contends, in order to use the Central Park development logically as the basis of a deduction of GFA available to the applicant, the availability of the GFA of the AMP tower recognised when the 1987 CPD approval was issued, must also be assumed to subsist at the relevant dates, but not including public car parking spaces also approved at that time.
56The Valuer General contends a more logical and consistent approach to that of the applicant would be to accept the existence of the 1987 CPD approval and the allocation of plot ratio under the development approval as a proper basis for assessing the development potential of the subject site.
As noted in the agreed facts, the CPS 1 permitted not only a bonus plot ratio of 20% (up to 6:1), but also contained a general discretion to approve an application for planning approval under cl 48, notwithstanding that it did not meet a development standard prescribed by the scheme. In the 2007 decision, AMP argued that, while the planning authority may have a discretion to provide a bonus plot ratio, for valuation and planning purposes in circumstances like those that arise under CPS 1 and TPS 16, it could not be assumed that a bonus would be awarded, and thus a prudent purchaser would start out believing that they could only develop the subject site on the basis that the whole of the land in the minor scheme area would be accorded a five to one plot ratio. The Tribunal rejected that contention saying at [72] and [73]:
72This argument has at best a superficial attractiveness to it, but on immediate closer inspection of the sort a properly advised prudent purchaser would give it, the argument breaks down. While it is necessary to assume the removal of all improvements from a subject site to achieve the proper valuation of its unimproved value, that does not mean that the existence of minor TPS 16, or the reasons for its making, or the existence of the developments on the Commonwealth Bank site or the Central Park site, or the means and basis of their approval under the 1987 CPD approval must be or would be ignored. The reality is that the reason those two sites have the notional plot ratio they do have, is because in 1987 the Council of the City of Perth allocated a plot ratio to the whole development area of 6:1 and approved the Central Park development and the other minor forms of development, as referred to above. Accordingly, the prudent purchaser would be amazed, having taken professional advice, if anyone were to suggest that somehow the Council could or would ignore the 1987 allocation of a plot ratio to the area. Rather they would rightly assume the Council would treat that plot ratio as given and confirm that the AMP site was entitled under minor TPS 16 to the remaining plot ratio entitlement of 5.43:1, as Mr Collins has calculated it.
73The prudent purchaser would also regard such professional advice as that the Tribunal received from Ms Smith, planner from the City of Perth, that the Council could be expected to approve a 6:1 development on the whole of the site in any event, given its historic attitude to sites of this landmark nature and that the terms of draft CPS 2 would not have any material influence on this approach. Taking into account the objectives of minor TPS 16 to achieve park, pedestrian and traffic enhancements in the scheme area and the immediate locale, the prudent purchaser would expect the Council to be quite anxious to confirm the decision it made in granting the 1987 CPD approval in order to secure these central city planning outcomes. For these same reasons the prudent purchaser would also have the confidence that what Ms Smith said in evidence would in fact transpire, that the Council would not second guess their decision in granting the 1987 CPD approval to not count the public car parking spaces on the AMP site as part of the GLA for plot ratio purposes.
Later, at [77], the Tribunal said:
77For the Tribunal to find that the development potential of the AMP site at relevant dates to the hypothetical purchaser was limited in the manner suggested by the applicant would require an artificial approach to the planning and development issues raised and, fundamentally, would fail to pay any or any proper attention to the reasons why minor TPS 16 was gazetted in the first place, as well as to the basis of the City's actions in 1987 in approving the development of the Central Park site and the grant of a 6:1 plot ratio over the whole development area.
In reaching its conclusion, the Tribunal referred to cl 48 of CPS 1 in its discussion of the relevant provisions of CPS 1. At [34], the Tribunal said:
34In granting the 1987 CPD approval the City plainly was aware of the existing development, comprising about 28,055 square metres of floor space in the AMP office tower, on Lot 29. The allocation of plot ratio to the whole of the site of 6:1 was given by the Council under the terms of minor TPS 16, bearing in mind the requirements and powers of the Council under CPS 1, cl 48.
In essence, the Tribunal in the 2007 decision considered that a prudent purchaser of the subject site in its unimproved state would assume that approval could be obtained to construct a building essentially the same as the existing improvements on the site. That assumption was open, given the discretion which existed both under cl 138, and cl 48, of CPS 1 to permit a building of the same plot ratio as the existing AMP building.
AMP also argued that a prudent purchaser in 2003 would have had regard to the provisions of CPS 2 as a seriously entertained planning proposal, and that the discretion to approve developments over the scheme area of a plot ratio was limited to a 20% increase over the generally permitted 5:1 plot ratio. The Tribunal considered that CPS 2 would have been afforded greater weight as a seriously entertained planning process after June 2001, but that was not determinative of any particular planning outcome. It is clear that the Tribunal concluded that the City would have approved a development reflecting the existing improvements notwithstanding the constrictions of the seriously entertained CPS 2.
Discretion under CPS 2
Clause 27 of CPS 2 requires development to comply with plot ratios specified in the plot ratio plan. The relevant plot ratio for the subject site is 5:1.
A review of CPS 2 reveals that whilst, at the relevant time, there was capacity for the local government to grant planning approval for a noncomplying application, that capacity was limited to cases where the increase is no more than 20%. It follows that, given the agreed calculation as to plot ratio over the minor scheme area when car parking is taken into account, Council could not, once CPS 2 came into effect, have approved developments of the plot ratio of the existing buildings on the subject site, taking into account the existing developments on other sites within the minor scheme area.
Effect of CPS 2 on development potential
The principle explained in Luton requires an assumption that the subject site is vacant, but development on neighbouring sites exists. There is no issue between the parties that the highest and best use of the subject site, as accepted by the Tribunal in the 2007 decision, is as a premium office building.
In the 2007 decision, the Tribunal accepted that the City of Perth would support a development on the subject site of the equivalent density of the existing improvements. In the context of the present proceedings, AMP did not challenge that assumption. In the valuation years to which the 2007 decision was concerned, it was open to the Council to exercise its discretion under cl 48 of CPS 1 so as to approve a development of the plot ratio of the existing buildings on the subject site. The Tribunal in the 2007 decision accepted that a prospective purchaser of the unimproved subject site would assume that Council would exercise its discretion under cl 48 of CPS 1 so as to permit development which resulted in the overall development being of the minor scheme area being substantially in accordance with the overall development inherent in the 1987 CPD approval.
When CPS 2 was enacted, the discretion previously existing under cl 48 was no longer applicable. It follows that, absent an amendment to CPS 2, or possibly TPS 16, Council could not lawfully have given approval for a building enjoying the plot ratio of the existing improvements to the subject site. Council's support for overall development of the minor scheme area reflecting existing development, and in particular locating a building of the prominence of the existing AMP building on the premier corner location of the subject site, could only be accommodated by a scheme amendment. The delay and cost associated with any such amendment, and its effect on the unimproved value of the subject site, were matters agreed by the parties.
In our view, it is impossible to ignore the planning constraints which existed by virtue of the terms of CPS 2 on the subject site at the relevant valuation dates. To do so would be to ignore the principle explained in Royal Sydney Golf Club, and accepted by the Tribunal in the 2007 decision.
In our view, that conclusion is not inconsistent with the observations of the Tribunal in the 2007 decision at [72] which are set out above. In that paragraph, the Tribunal concluded that a prospective purchaser would 'rightly assume that Council would treat (the allocated plot ratio over the minor scheme area) as given and confirm that the AMP site was entitled under … TPS 16 to the remaining plot ration entitlement of 5.43:1'. We accept that, as at 1 August 2004 and 1 August 2005, a purchaser would assume that Council would support development of the dimensions of the existing AMP building. The problem for the prospective purchaser would be that Council's capacity to permit such a development was dependent upon a town planning scheme amendment which would not have been required prior to the coming into force of CPS 2.
The respondent argues that the modification of the Council's powers effected by CPS 2 should be ignored for two reasons. The first argument is set out at para 13 of the respondent's written submissions as follows:
13.Firstly, one cannot hypothetically presume the improvements on the subject land never existed. Luton requires regard to be had to developed buildings on neighbouring lots when considering the unimproved value of the land in question. Consistent with the principle cited in Luton, it is appropriate to have regard to the existence of the Central Park building when considering the unimproved value of the subject land. In understanding and having regard to Central park as required by Luton, one cannot ignore the fact that improvements of the subject land equating to 32,130m² exist(ed). For the purpose of this valuation exercise, one cannot take the additional hypothetical step of presuming that no improvements ever existed on the subject land, as to do so would render the existence of the Central Park building inexplicable. The fact that Central Park was built when AMP consumed a plot ratio of approximately 5.43:1 strongly suggests that a building of that size could, and would, once again be built.
We do not accept that argument. The requirements to assess unimproved value involves assessment of the site value. The statutory definition of site value requires an assumption that any improvements to the land had not been made. Whether or not the existing improvements had existed at some time in the past, makes no difference. If an assumption is made, hypothetically, that the existing AMP building was on the site at the time of the 1987 CPD approval, (which provides an explanation and context for the 1987 CPD approval), but had been demolished by the time of the relevant valuation date, the planning constraints of CPS 2 would nevertheless operate in respect of any proposed further development. The statutory definition of site value requires the assumptions explained in Royal Sydney Golf Club.
The second argument raised by the respondent is that the methodology results in absurdity. The Valuer General contends that the process of analysis adopted by AMP, results in a calculation of plot ratio being available for the subject land at 4:1 (20,699 m²), rather than 5.43:1 (32,103 m²) which 'demonstrates the absurdity of the approach' and fails to have due regard to the nature of the site as 'landmark'.
The fact that the planning constraints resulting from CPS 2 substantially diminish the theoretical development capacity of the subject site to a substantially smaller building does not, in our view, demonstrate any absurdity of result, even if that position were irremediable. The result is even less 'absurd' in the circumstances of this case where amendment to the relevant planning scheme would be likely to be supported by the Council so that the ultimate planning objective could be achieved, albeit with some degree of uncertainty and inevitable delay. The fact that the value of the land is less in light of the planning restrictions does not lead to absurdity.
The second element of the alleged absurdity is that, if the same approach were applied to the neighbouring Commonwealth Bank site which is within the minor scheme area, its development capacity would be reduced from the existing 7066 m² to only 917 m². Accepting for present purposes that that outcome would be inconsistent with proper planning for that site, and the minor scheme area generally, the likelihood is that Council would, for that reason, favour scheme amendment. It might be thought that there is a high degree of certainty that a scheme amendment could be achieved. That would lead to an approach to valuation of the Commonwealth Bank site utilising what Biscoe J referred to as the 'top down methodology' which he explained in Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243, and which was discussed in the 2007 decision at [65] - [67]. In those circumstances, an acceptance of the planning restrictions imposed by CPS 2 on a notional unimproved Commonwealth Bank site would not, in all likelihood, result in an absurdly low value of the Commonwealth Bank site.
In short, we do not consider that the unimproved value of the subject site should be assessed as though the valid and enforceable restrictions on the development potential of the land under CPS 2 do not exist. It follows that our answer to the question posed is 'yes' and that accordingly, the valuation agreed by the parties in that circumstance, namely $14 million, is the unimproved value of the subject site on each of the relevant valuation dates.
Orders
1.The answer to the question 'Did the coming into operation of the City of Perth Planning Scheme No 2 affect the unimproved value of the subject site?' is 'yes'.
2.The valuation by the Valuer General of Lot 29 on Diagram 78377 in Certificate of Title Volume 1957 Folio 825 and Lot 30 on Diagram 78377 in Certificate of Title Volume 1957 Folio 826 on 1 August 2004 and 1 August 2005 are set aside, and the value of $14 million is substituted for the value of those Lots on each of the valuation dates.
I certify that this and the preceding [29] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE J A CHANEY, PRESIDENT
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