Bosnakis v Valuer-General

Case [2017] SASC 158

SUPREME COURT OF SOUTH AUSTRALIA

(Land and Valuation Division)

BOSNAKIS & ANOR v VALUER-GENERAL

[2017] SASC 158

Judgment of The Honourable Justice Parker

3 November 2017

REAL PROPERTY - VALUATION OF LAND - METHODS OF VALUATION - OTHER CONSIDERATIONS

REAL PROPERTY - VALUATION OF LAND - UNIMPROVED VALUE - ALLOWANCES FOR IMPROVEMENTS

REAL PROPERTY - VALUATION OF LAND - OBJECTIONS AND APPEALS - SOUTH AUSTRALIA

This is an appeal under s 25C of the Valuation of Land Act 1971 (SA) concerning a valuation by the Valuer-General.

The appellants are the registered proprietors of land at Para Hills West (‘the subject land’). The Valuer-General determined the capital value of the subject land to be $1,290,000 as at 1 January 2010. This value was subsequently reduced to $1,050,000 by the Valuer-General and confirmed by a review valuer. The review valuation is the subject of this appeal.

Both parties provided evidence of valuations of the subject land by expert valuers. The primary issue arising from their evidence is the extent to which, if any, the surface debris, uncompacted fill and potential sub-surface contamination should have been taken into account in the valuation.

Held per Parker J, allowing the appeal:

1. The review valuer made a material process error by failing to take into account the presence of uncontrolled fill, sub-surface rubbish and the risk of petrochemical contamination. The valuation of $1,050,000 is incorrect and should be set aside, at [95].

2. The surface debris is not a fixture, and therefore does not form part of the subject land, at [107]. However, the issue in this case is that the potential use of the subject land and thus its attractiveness to potential purchasers is greatly limited by the presence of a vast amount of surface debris. Accordingly, the adverse effect of the surface debris on the value of the subject land cannot be ignored, at [109]-[110].

3. The Valuer-General’s expert erred by failing to take into account the effect of surface debris on the value of the subject land, at [111]. The valuation by the appellants’ expert is adopted, at [112].

Valuation of Land Act 1971 (SA) ss 12, 25, 25B, 25C; Valuation of Land Regulations 2005 (SA) reg 11; Land and Valuation Division Rules 1978 (SA) r 84.1; Statutes Amendment (SACAT) Act 2014 (SA) s 216, referred to.
CSR Limited v Valuer-General (1977) 17 SASR 446, distinguished.
Ardoch Pty Ltd v Valuer-General (No 2) [2006] SASC 217; Perpetual Trustee Company Ltd & Anor v Valuer-General [2006] SASC 216; Commonwealth Custodial Services Ltd as trustee for the Burwood Trust Fund; Trust Company of Australia Ltd v Valuer-General [2006] NSWLEC 400; Brisbane City Council v Valuer-General for the State of Queensland (1978) 140 CLR 41; Leppington Pastoral Pty Ltd v Valuer-General [2010] NSWLEC 1023; Spencer v The Commonwealth (1907) 5 CLR 418; Caltex Oil (Australia) Pty Ltd v Chief Executive Department of Lands [1996] QLAC 48; Fenton Nominees v Valuer-General (1981) 27 SASR 258; House v…

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Bosnakis v Valuer-General [2017] SASC 158
Case
[2017] SASC 158
Decision Date

CaseChat Overview and Summary

Bosnakis v Valuer-General involved a dispute concerning the valuation of a parcel of land located in Para Hills West, South Australia. The appellants, Bosnakis, contested the valuation of their property as determined by the Valuer-General, who had assessed the land's capital value at $1,290,000. After the appellants objected to this valuation, the Valuer-General reduced the assessment to $1,050,000. Dissatisfied with this revised valuation, the appellants sought a review under the relevant South Australian legislation, which resulted in the confirmation of the revised valuation. The appellants then appealed this decision to the court.

The central legal issue was whether the court should set aside the valuation provided by the review valuer, Ms. Janet Hawkes, and adopt the valuation proposed by the Valuer-General's expert, Mr. Alex Smithson. The appellants argued that the valuation should be lower, considering the land's unsuitability for development due to uncontrolled fill and the associated remediation costs. The Valuer-General, on the other hand, contended that the appellants had failed to demonstrate any error in the review valuation and that the court should instead adopt Mr. Smithson's valuation.

The court considered the principles applicable to valuation appeals, which are de novo in nature. The appellants bore the burden of proving that the valuation under appeal should be set aside. The court noted that while valuation is more of an art than a science, valuers may reasonably reach differing opinions without error. The court held that it would only interfere with the valuation if the valuer made an error of law, acted on a wrong principle of valuation, failed to consider relevant factors, or had regard to irrelevant factors. The court also found that the appeal was lodged out of time due to procedural errors, which further complicated the appellants' case.

Ultimately, the court found that the appellants had not discharged their burden of proving any error in the review valuation. The court upheld the valuation provided by Ms. Hawkes and dismissed the appeal.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The Valuer-General called Mr Alex Smithson, a valuer with Knight Frank, to provide expert evidence. Mr Smithson provided a report dated 25 August 2016 and a supplementary report dated 4 November 2016. Mr Smithson also gave oral evidence at the hearing of the appeal.The evidence of Mr McKay Mr McKay noted that he had been provided with the report prepared by CRW dated 9 March 2016 together with a further email advice from CRW. The effect of this advice, according to Mr McKay, was that the subject land contains uncontrolled fill at an average depth of 1.1 m across the site. CRW had noted that the land was unsuitable for development for this reason and recommended the removal of uncontrolled fill and its replacement with controlled fill. In that context, Mr McKay referred to the quotation from De‑Construct dated 8 February 2012, which quoted the cost of remediation works at $4,268,054. Mr McKay observed that he was not an environmental expert, nor an expert in the costing of specialised work of the type referred to in the quote from De‑Construct. His valuation proceeded on the assumption that the advice provided by CRW was correct and also on the assumption that the cost estimate provided by De‑Construct was reasonable. Mr McKay also referred to the substantial volume of debris present on the subject land which may present an environmental risk. He was not an expert in the detection or quantification of environmental problems, nor had he seen any report about that issue. He had been advised that no testing for contamination in the form of hazardous materials had been carried out, although the land had been used for a number of potentially contaminating uses. He assumed in his report that there were no hazardous materials present that may increase the cost of remediation or impose any restrictions in the development and ongoing use of the land for commercial or industrial purposes. Mr McKay based his report upon an analysis of comparable sales. In his opinion, the value of the improvements was $225 p/m2. As the improvements covered 920 m2, they had a value of $207,000. He valued the remaining land at $90 m2. The application of that value to the land area of 16,640 m2 resulted in a valuation of $1,497,600. Thus, the capital value as at the Valuation Date was $1,704,600. However, deduction of the estimated remediation cost of $4,268,054 resulted in a negative net value of $2,560,000 (rounded). In that light, Mr McKay advised that remediation of the subject land was not financially feasible. While he was not aware of any contamination, the presence of the uncontrolled fill made the site unsuitable for building and thus prevented its further development. Nevertheless, Mr McKay noted that there may be potential purchasers who did not wish to develop this land and may be content to use it for storage purposes. He referred to a wreckers’ yard as an example of such a use. The land would have some utility and value to such a user provided that it did not suffer from contamination issues, which would create an additional liability.

Decision

Reasons for decision

The subject land has dual street road frontage and is close to arterial roads, namely McIntyre Road and Main North Road. It is within the City of Salisbury. The surrounding area mainly comprises industrial premises of a similar scale. Land in the wider suburb of Para Hills West is used for a mixture of industrial, residential and horticultural purposes. The subject land is zoned industrial under the City of Salisbury Development Plan. The valuation decisions The appellants were advised in a rates notice dated 15 October 2010 issued by the City of Salisbury that the Valuer-General had determined the capital value of the subject land to be $1,290,000 (‘the First Valuation’). In accordance with s 12 of the Act, the date of that valuation had been fixed by the Valuer-General at 1 January 2010 (‘the Valuation Date’). The appellants objected to the First Valuation under s 24 of the Act. The Valuer-General allowed the objection and reduced the valuation to $1,050,000 (‘the Revised Valuation’). The appellants then applied for a review under s 25B of the Act by a review valuer selected from a panel. The Valuer-General submitted to the review valuer that the capital value of the subject land was $1,150,000. On 19 April 2012 the review valuer, Ms Janet Hawkes, confirmed the Revised Valuation of $1,050,000 (‘the Review Decision’). The appellants were advised of that decision by letter dated 27 April 2012. On 25 June 2012, the appellants appealed to this Court. Section 25C of the Act confers a right to appeal against either the valuation made by the Valuer‑General or that made by the review valuer. The appellants stated in the notice of appeal that they were appealing against both the Revised Valuation and the Review Decision. As the subject land was valued at $1,050,000 in each instance, nothing turns on the distinction. Nevertheless, as the appellants exercised their right to apply for a review under s 25B, the Review Decision should be treated as the operative decision, albeit that it confirmed the Revised Valuation. The appellants failed to serve the notice of appeal on either the Valuer‑General or the Crown Solicitor. Thus, they were unaware of the appeal. For that reason, and also because the Court file was apparently misfiled, no action was taken to advance the appeal until the appellants contacted the Registry in about July 2015 to inquire about progress. The appellants have deposed in a joint affidavit that they had contacted the Registry in July 2012 and June 2013 to provide information about their availability for listing of the appeal. It appears to me that the tenor of that contact may not have alerted Registry staff that something was amiss. The combined effect of s 25C of the Act and r 84.1(5) of the Land and Valuation Division Rules 1978 (SA), as they stood at the relevant time, was to require the appeal to have been lodged with the Court within 21 days after notice in writing had been given of the Review Decision. The appeal was thus lodged about five weeks out of time.

Ratio Decidendi

Legal Principle Established

The Valuer-General also submits that the appellants have not discharged their onus of establishing that there was any error in the review valuation conducted by Ms Hawkes. Thus, the Valuer-General only relies upon the evidence of Mr Smithson in the event an error is found in the decision of Ms Hawkes. In that event, she submits that the Court should adopt the valuation provided by Mr Smithson in preference to that of Mr McKay. The latter valuer had erred by taking into account both the effect of the surface debris in assessing the marketability of the subject land and the costs of removal, which were in fact unknown at the time he provided his report. The Valuer-General also contends that a further reason for preferring the evidence of Mr Smithson is that he has a significant level of expertise in the valuation of industrial land and the effect of issues such as uncontrolled fill and sub-surface contamination. Consideration The submissions of the parties are consistent as to the principles to be applied by the Court in deciding a valuation appeal. They both accept that an appeal under section 25C of the Act is an appeal de novo rather than an appeal in the strict sense or an appeal by way of re-hearing.[21] That is because the Valuer-General, when assessing the value of land, does not conduct a hearing, receive evidence or give reasons. [21] Fenton Nominees Pty Ltd v Valuer-General (1981) 27 SASR 258 at 260, Wells J; Ardoch Pty Ltd v Valuer‑General (No 2)(2006) 148 LGERA 408; [2006] SASC 217 at [24], Debelle J; Bargwanna Pty Ltd v Valuer-General (2011) 109 SASR 449 at [4]-[5], Kourakis J (as his Honour then was). The appellants carry the burden of persuading the Court that the valuation under appeal should be set aside.[22] As valuation is more of an art than a science, valuers may reasonably, and without having made any error, reach a different opinion as to the value of land.[23][22] Fenton Nominees Pty Ltd v Valuer-General (1981) 27 SASR 258 at 260-261, Wells J; Ardoch Pty Ltd v Valuer-General (No 2)(2006) 148 LGERA 408; [2006] SASC 217 at [28], Debelle J; Bargwanna Pty Ltd v Valuer-General (2011) 109 SASR 449 at [6], Kourakis J (as his Honour then was).[23] Fenton Nominees Pty Ltd v Valuer-General (1981) 27 SASR 258 at 263; Players Pty Ltd v The Corporation of the City of Adelaide [2001] SASC 369 at [21]; Perpetual Trustee Co Ltd v Valuer-General (No 2) (2007) 99 SASR 251 at [61]; Ardoch Pty Ltd v Valuer-General (No 2)(2006) 148 LGERA 408; [2006] SASC 217 at [31]; Bargwanna Pty Ltd v Valuer-General (2011) 109 SASR 449 at [6]. Both the appellant and the Valuer-General refer to the judgment of Debelle J in Ardoch Pty Ltd v Valuer-General (No 2)in support of their submissions concerning the nature of a valuation appeal.[24] Both parties state that, on appeal, the Court will not interfere with the valuation unless it is shown that the valuer made an error of law, acted on a wrong principle of valuation, failed to have regard to relevant factors or had regard to irrelevant factors, misapplied principle or erred in some other way. The Court will also interfere where the valuation is manifestly excessive or manifestly low.[25] Similar observations were made by Wells J in Fenton Nominees Pty Ltd v Valuer-General.[26] The effect of the observations made by Debelle J in Ardoch and by Wells J in Fenton Nominees is to apply to a valuation appeal the principles expressed by the High Court in House v The King[27] concerning appeals against the exercise of a judicial discretion. The Valuer-General expressly submits this is the case.[24] (2006) 148 LGERA 408; [2006] SASC 217. [25] Ardoch Pty Ltd v Valuer-General (No 2) (2006) 148 LGERA 408; [2006] SASC 217 at [32]-[33], Debelle J.[26] (1981) 27 SASR 258 at 263-264.[27] (1936) 55 CLR 499 at 505, Dixon, Evatt and McTiernan JJ.