Bosnakis v Valuer-General - [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 The King (1936) 55 CLR 499; Bargwanna Pty Ltd v Valuer-General (2011) 109 SASR 449, discussed.

BOSNAKIS & ANOR v VALUER-GENERAL
[2017] SASC 158
Land and Valuation Division

PARKER J: This is an appeal under s 25C of the Valuation of Land Act 1971 (SA) (‘the Act’) concerning a valuation by the Valuer-General. The primary issue is the effect, if any, that the presence of a vast amount of surface debris and alleged sub-surface contamination and uncontrolled fill should have on the valuation of the relevant land.
The subject land
The appellants, Mr Chris Bosnakis and Mrs Helen Bosnakis, are the registered proprietors of land at 32-34 Ayfield Road, Para Hills West (‘the subject land’).
The appellants acquired the subject land in 1987 as an investment. They have leased it to a variety of industrial and commercial tenants. Some, and perhaps many, of the former tenants have left a vast amount of debris on the surface of the land. They have allegedly caused sub-surface contamination. The land also allegedly has a significant depth of uncontrolled fill.
The subject land is irregularly shaped, predominantly flat and comprises some 1.664 hectares. As at the date of valuation, it was predominantly vacant but contained a building with a bitumen carpark and was surrounded by mesh fencing. The building is divided into four tenancies; two under a lower-roofed section and two under a higher-roofed section. There is a small office area at the front of the building. One of the expert valuers, Mr Alex Smithson, found it difficult to determine the age of the building but thought it likely that it was built sometime in the 1980s. Mr Smithson also noted that the building had apparently been partly constructed of second hand materials.
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.
The Valuer-General opposed the grant of an extension of time on several grounds. She pointed to the fact that the appellants had been advised of their right to appeal under s 25C of the Act by letters dated 27 April 2012 and 22 May 2012.[1] The Valuer-General also noted that the appellants had failed to effect service despite the express statement in bold type on the notice of appeal that service must be effected upon the respondent within two days. The Valuer‑General also pointed to the fact that an important issue in the appeal was the extent of contamination of the subject land as at the Valuation Date. Additional contamination and dumping of debris may have occurred in the intervening years, thereby potentially prejudicing the Valuer-General’s position.
[1] Further letters dated 28 May 2012 and 20 June 2012 referred back to the preceding letters.
Although the appellants were advised by letter on two occasions by the staff of the Valuer-General that they had a right to appeal to this Court, they were not advised of the time limit. They were simply referred to the Act. However, the 21 day time limit was actually prescribed by r 84.1(5) of the Land and Valuation Division Rules 1978 (SA), rather than the Act. As the appellants were not legally represented, the advice they were given was not helpful. I also noted that, even if the appeal had been lodged on time (i.e. about five weeks earlier) and dealt with in the ordinary way, significantly more than two years would have elapsed between the Valuation Date and the hearing of the appeal. I also took into account that the appellants clearly had an arguable case. Under the circumstances, I ordered that the time for lodgement of the appeal should be extended. However, I remind myself that when the effect of surface debris and contamination on the valuation of the subject land is determined, only debris and contamination that was present as at the Valuation Date can be taken into account.
For completeness, I note that since 29 March 2015 the right of appeal under s 25C of the Act has been to the South Australian Civil and Administrative Tribunal (SACAT).[2] However, the transitional provision in s 216 of the Statutes Amendment (SACAT) Act 2014 (SA) preserves the jurisdiction of the Court in respect of proceedings commenced before 29 March 2015. These proceedings commenced on 25 June 2012 upon lodgement of the notice of appeal. I am also aware, from my former role as President of SACAT, that the appellants have made several applications to SACAT challenging the valuation of the subject land in years after 2010. In my former capacity as President I directed that those applications were not to be listed for hearing until this appeal has been decided by the Court.
[2] The 21 day time limit for lodgment of an application for review by SACAT now appears in s 25C. I suggest that if the pro forma letter has not already been modified to state expressly the time limit, such a change should be made.
Initial valuations and remediation quote
Prior to the lodgement of the appeal several relevant documents came into being.
Valuation submission by the State Valuation Office
On 10 January 2012, the Valuer-General made a comprehensive submission to the review valuer for the purposes of the s 25B review. Her submission referred to two alternative valuation methods, i.e. the method of ‘capitalisation of net imputed returns’ and the method of ‘direct comparison’.
Under the capitalisation of net imputed returns method the subject land was valued as two separate portions. The first portion comprised the office/warehouse area of 920 m² together with approximately 6,222 m² of land while the second portion comprised approximately 10,426 m²of vacant land.[3] The first portion was valued at $55 p/m²at a capitalisation rate of 8.5%. The second portion was valued at $100 p/m². An allowance of $25 p/m³ was made for removal of 15,000 m³ of contaminants, i.e. $375,000.[4] There was no explanation as to the source of the clean-up rate of $25 p/m³, nor was there any explanation as to how the volume of 15,000 m³ had been computed. As the calculation was based upon removal of 15,000 m³of material, I infer that the Valuer-General may have considered the average depth of the rubbish and debris across the second portion of the subject land to be about 1.5 m. After rounding, the Valuer‑General submitted that, under the capitalisation of net imputed returns method, the capital value of the subject land was $1,250,000.
[3] Ms Hawkes pointed out that the relevant area is actually 10,390 m².
[4] It should be noted that the Valuer-General has referred to a rate per cubic metre.
The direct comparison method was used by the Valuer-General to check the results she had derived under the capitalisation of net imputed returns method. Based upon comparable sales of industrial properties in the general area of the subject land, the Valuer-General submitted that the land should be valued at $90 p/m²and the improvements at $50,000. Once again, she submitted that a deduction of $375,000 should be made for clean-up costs at a rate of $25 p/m³. After rounding, it was contended that the valuation under the direct comparison method should be $1,171,000.
In light of the different results of the two valuation methods, the Valuer-General submitted that a valuation of $1,150,000 was fair.
Quotation by De-Construct Pty Ltd
On 8 February 2012, the appellants obtained a quote of $4,268,054 (excluding GST) from De-Construct Pty Ltd for works to remediate the subject land. The quote was based upon bulk excavation of 16,644 m² of contaminates at an average depth of 1.1 m, removal of 33,000 tonnes of contaminates and refilling and compacting the land.
Review Decision
On 19 April 2012, Ms Janet Hawkes completed the review valuation under s 25B of the Act. She affirmed the Revised Valuation of $1,050,000. Ms Hawkes noted the subject land ‘has a lot of scrap materials dumped on it’ and ‘the extent of this material underneath the surface and the amount of soil removal, filling and compaction required to enable the site to be built on is unknown.’ She also commented that the quote of over $4 Million for site remediation was greater than the subject land would be worth upon completion of the works. She also noted that no information was available about the extent of the site remediation actually required.
Ms Hawkes stated that, taking into account the appearance of the subject land and the lack of information about its actual state, it would be very difficult to sell. A significant discount would be required to attract a purchaser. In her opinion, the capital value of the subject land, if in ‘normal’ condition, would be in the order of $1.5 Million. However, it would be necessary to discount the price by about 30% before anyone would take a chance on purchasing it. Ms Hawkes therefore confirmed the Revised Valuation of $1,050,000.
CRW Consulting Engineers site investigation report
On 9 March 2016, the appellants obtained a site investigation report from CRW Consulting Engineers (CRW). The purpose of the report was to determine the site class of the subject land in accordance with Australian Standard AS 2870-1996 ‘Residential slabs and footings’. The report concluded the site class is ‘Class ‘H-D’ (Highly Reactive Soils) ‘P’ (Deep Filling)’. In order to determine site class, CRW drilled six boreholes at various locations across the land on 3 March 2016. The results of the test drilling were explained in oral evidence, to which I will refer shortly.
By email dated 2 April 2016, CRW advised the appellants that a geotechnical engineer should be engaged to investigate the fill for contamination and provide recommendations as to safe removal of fill and restoration of the subject land. The appellants have not acted upon that recommendation.
Second quote from De-Construct Pty Ltd
On 27 June 2017, Mr Bosnakis obtained a further quotation from De‑Construct to:
·Clean up and dispose of visible and protruding debris and rubbish;
·Scrape and clean top vegetation only;
·Clean up oil drums; and
·Remove visible asbestos.
De-Construct quoted a price of $525,000 (excluding GST) for these works to be conducted on 15,000 m² of the subject land.
The appellants did not place direct reliance upon this quotation. However, it was taken into account by the expert valuer called by the appellants, Mr Paul McKay.
Evidence of Mr Bosnakis
Mr Bosnakis gave evidence about the state of the subject land prior to 2010 and described the series of tenants who had occupied the land since 1987. These tenants included concrete and steel manufacturers, a car wrecking yard, two bus companies, landscapers, earth moving contractors, gas contractors, two fibreglass pool companies, motor mechanics, white goods recyclers and crash repairers.
Mr Bosnakis described the type of waste left on the subject land by the tenants. His description was consistent with a large number photographs tendered by the appellants. The evidence of Mr Bosnakis was that these photographs were taken in about 2005, 2006 and 2008, but in any event ‘well before 2010’. Mr Bosnakis noted that ‘a lot of them’ were taken for the purposes of commencing legal action against various tenants. The photographs showed a great variety and volume of items deposited on the subject land, including tyres, concrete pipes, rubble, a large concrete slab, a septic tank, car parts, white goods, polystyrene foam, pallets, sheets of metal, used oil drums and a fibreglass pool shell. Mr Bosnakis stated that all of the rubbish and debris shown in the photographs had been present on the land before 2010.
Mr Bosnakis also stated that he had instructed CRW that he needed ‘to know how much fill and what kind of materials is in the soil’. He stated that CRW purposefully chose areas where they could ‘get in with a machine’ to drill. While he had been advised by CRW that a specialist report would be required concerning contaminants, he had not obtained such a report.
Expert evidence
The appellants called Mr Paul McKay, a valuer with Jones Lang LaSalle. Mr McKay had prepared an expert report dated 2 May 2016 that did not comply with r 160 of the Supreme Court Civil Rules 2006 (SA). That was also the case with a supplementary report provided by Mr McKay dated 26 October 2016. On 28 February 2017, Mr McKay provided a letter to the appellants that adopted his two earlier reports and satisfied the requirements of r 160. Mr McKay also gave oral evidence at the hearing of the appeal.
Mr James Walker from CRW was called by the appellants to explain the results of borehole drilling conducted on the subject land as described in the report from that firm dated 9 March 2016.
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.
Mr McKay stated that while he had proceeded on the assumption that the subject land was free of contamination from hazardous materials, the presence of the uncontrolled fill together with the past and present uses of the land would create a perception that there in an inherent risk of more serious contamination. This perceived risk would adversely affect the saleability of the land and its market price. He anticipated that a significantly extended sale period would be necessary to achieve a sale due to the high level of risk. Furthermore, he expected that most, if not all, buyers would be likely to insist on more thorough environmental testing. Depending on the results, that testing may further diminish the value of the land.
Having regard to these various considerations, Mr McKay considered that the land value should be based on a market price of $25 p/m², which when applied to the area of 16,640 m², resulted in a site value of $416,000. The component of the valuation allowed for the improvements was not affected by the concerns about potential contamination. Thus, the value of improvements remained at $207,000. Mr McKay concluded that the capital value of the subject land as at the Valuation Date would have been $625,000.
In his supplementary report dated 26 October 2016, Mr McKay commented on the report prepared by Mr Smithson of Knight Frank. While Mr McKay considered that the valuation of $40 m² adopted by Mr Smithson was somewhat too generous given the known risks and problems with the subject land, in the absence of sales evidence involving similarly afflicted properties there was a high degree of subjectivity in the approach adopted. Thus, the valuation adopted was a matter of personal judgment with little basis in fact on which to support one conclusion over the other. Mr McKay also noted that the value of $200 p/m² adopted by Mr Smithson for the building was reasonable and not dissimilar from his own valuation of $225 p/m².
Mr McKay stated that he leaned towards treating the surface debris similarly to contamination so that the cost of removal would be taken into account in the same way as the cost of removing contaminated soil. Mr McKay concluded that, in his view, the site value and capital value that he had referred to in his earlier report should be preferred to those suggested by Mr Smithson.
In his oral evidence, Mr McKay stated that the site value of $90 m² referred to in his initial report was based on the premise that the subject land was ready to be built upon and not contaminated or affected by uncompacted fill. While he had not made a specific deduction in respect of the surface debris, he had taken that matter into account when considering the marketability of the land. He also stated that, in his opinion, the most comparable sale was that of an industrial property at 79 Frost Road, Salisbury South which sold in December 2009 for $99 p/m². However, he considered that the Frost Road property was in a more desirable location due to its close proximity to Main North Road.
Evidence of Mr Smithson
Mr Smithson of Knight Frank provided a report to the Valuer-General dated 25 August 2016. He stated that the income reducing potential of the subject land was severely limited by the poor condition of the existing buildings, lack of site improvements, such as paving and stormwater drainage, and the very poor presentation due to the large amount of rubbish on the land. In this light, Mr Smithson concluded that the capitalisation of net income method of valuation was unreliable. He therefore based his valuation upon comparable sales.
Mr Smithson considered that the building was in poor condition due to rust and damage caused by vehicles. Substantial repairs and maintenance would be required to bring the building to a good tenantable condition. While secure, the fencing was also rusted or of poor quality. Although the subject land was zoned industrial, its proximity to residential developments had a potential to cause conflict between land uses.
Mr Smithson stated that much of the subject land was unusable due to the large amount of rubbish that was present on the site. This rubbish included:
… heavy vehicles, car bodies, car and truck tyres, extensive demolition building materials and household appliances etc as well as a number of domestic style garages and demountable huts. There are also a number of large (44 gallon) oil drums which are unsealed and appear to be filled with discarded lubricants.
Mr Smithson also commented that it appeared that the rubbish would have been present at the Valuation Date.
Mr Smithson noted the potential presence of soil contaminants. He also observed that CRW had reported uncontrolled fill up to a depth of 1.3 m in the areas tested. However, Mr Smithson also noted that the CRW report had approached the matter in accordance with the standards for residential slabs and footings even though the site is zoned for industrial use.
Mr Smithson noted that he had verbally requested advice from the Crown Solicitor about how he should treat his knowledge of the fill and site contamination issues. Mr Smithson stated that the Crown Solicitor had instructed him that fill should be taken into account in the valuation process. The Crown Solicitor also referred to Leppington Pastoral Company Pty Ltd v Valuer-General, where the New South Wales Land and Environment Court had held that uncontrolled fill was a form of contamination.[5] The Crown Solicitor also drew Mr Smithson’s attention to the following passage in Hyam, The Law Affecting Valuation of Land in Australia, concerning the effect of site contamination upon the valuation of land:
… the real significance of contamination will only come to the fore when a site (possible or probable) reaches the stage where the actual site is on the verge of moving from a use which necessarily carries with it possibilities or probabilities of contamination to a use which conflicts with the former use – more than likely this will be limited to a residential use.
The key to understanding that principle is that the contaminated material, if it exists, should be seen in the same context as old structures or improvements to the land. If the use of the site is for a purpose which conflicts with any possible contamination effects, then the purchaser of the site would either have to have the decontamination undertaken by the vendor, or be prepared to decontaminate the site himself.[6]
[5] [2010] NSWLEC 1023 at [25].
[6] (5^th ed, 2014), p 153-154, citing Richter v Chief Executive, Department of Natural Resources (1998) 19 QLCR 274 and Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands (1995) 15 QLCR 206.
Mr Smithson considered that the subject land may prove difficult to sell due to the cost associated with waste removal and its very poor presentation. He did not consider that the surface waste should be taken into account for statutory assessment purposes based on his understanding that the unattached items were not ‘fixtures’ for the purposes of the Act. Nevertheless, Mr Smithson noted that ‘removal of these items is likely to incur substantial cost.’ On the other hand, he considered that the fill on the land, which he presumed was uncontrolled, is a ‘site improvement’ as defined in the Act.
In light of the CRW site report Mr Smithson concluded that the fill on the subject land is of very poor quality. Thus, substantial remediation would be required to make the land suitable for major redevelopment. He stated that, in his experience:
… filling of industrial land in an uncontrolled manner is not uncommon throughout metropolitan Adelaide, particularly the northern and north western areas, and sales evidence often includes properties with various amounts of fill. A valuer analysing industrial land sales cannot ascertain the depth and quality of fill and compaction of such materials on sale properties without access to soil testing data for each sale property, and in practice such access is quite rare.
Mr Smithson also observed that the quote for remediation works provided by De-Construct substantially exceeded the value of the subject land in a remediated state. Thus, the cost of that work exceeded what a prudent land owner would consider reasonable. Furthermore, he noted the De-Construct quote was based on the assumption that all fill was contaminated and that had not been proven by testing. Thus, he did not accept the De-Construct quote. Nevertheless, Mr Smithson conceded:
…any purchaser buying the property as at the valuation dated would have some serious concerns regarding the poor quality and lack of compaction of land fill and potential for contamination from obvious signs of petrochemical spillage, and would discount the price paid for the property substantially as [compared] to one which did not display the same levels of risk. Whilst the land may be able to be used without major remediation of the whole site, building construction will be more costly than for a site where such replacement and controlled compaction has occurred…
Mr Smithson found that there was a dearth of sales of comparable land. He considered the subject land to be inferior to the properties discussed in his sales analysis. In his view, the site value as at the Valuation Date was $40 p/m².
The table below shows Mr Smithson’s calculations using the $40 p/m² rate:

Component Area Rate Amount

Vacant land 16,640 m² $40 p/m² $665,600

Improvement 920 m² $200 p/m² $185,000

Total $850,600

Rounded Total $845,000

Mr Smithson provided a further report dated 4 October 2016, in which he reviewed Mr McKay’s report of 2 May 2016. He adhered to his earlier valuation and suggested that Mr McKay’s assessment of the site value was too low. Nevertheless, he also observed that due to the lack of sales of land with the same level of contamination and uncontrolled fill, valuation of the subject land was necessarily quite speculative. While he had not made any specific allowance for the cost of clearing rubbish, on the basis that this material was not a fixture, he could not determine from Mr McKay’s report how he had dealt with this particular issue. He suggested that the lower site value provided by Mr McKay may have included an allowance for removal of the rubbish from the land.
Mr Smithson observed that both he and Mr McKay agreed that the subject land had been substantially devalued by the potential contamination and uncontrolled fill. It had been further devalued by the very large amounts of rubbish stored on the land as the cost of removal would be high.
Mr Smithson also stated that in his experience:
... industrial land throughout Adelaide has varying levels of potential contamination and/or filling and that many sites require some sort of remediation or site compaction. The degree of remediation envisaged in the De-Construct quote would provide a deep and highly compacted base for development which would be substantially in excess of that of most industrial land which has sold throughout Adelaide.
Mr Smithson referred to the fact that Mr McKay had provided a higher valuation for the building but acknowledged that such an assessment was quite subjective. He noted that Mr McKay had provided a very limited description of the building. In Mr Smithson’s view, the building was clearly of inferior quality and condition and he was comfortable with his assessment of its added value.
Mr Smithson gave oral evidence. He accepted that the crux of the difference between his opinion and that of Mr McKay’s lay in their treatment of the surface rubbish. He has significant experience in valuing industrial properties, including those with uncontrolled fill. Mr Smithson stated that the information provided to him about past use of the subject land did not suggest the type of intense industrial use such as a foundry or tannery, which would cause the most serious type of soil contamination. Nevertheless, Mr Smithson accepted that there may potentially be significant contamination by motor oils due to the use of the land for dismantling vehicles involving very poor practices. Mr Smithson also stated that if the land had previously been used for market gardening (which was not known) there was a possibility that it may be contaminated with pesticides and the like. He said that it was not uncommon for land in Adelaide with a history of use for industrial purposes to be contaminated to some degree and affected by fill. Mr Smithson had not compared the level of contamination of the land with other properties, as he had not seen a contamination report.
Mr James Walker of CRW Consulting Engineers
The managing director of CRW, Mr James Walker, gave oral evidence concerning the site investigation report prepared by his firm dated 9 March 2016. There was no objection that the report was not prepared in accordance with r 160 of the Supreme Court Civil Rules 2006 (SA).
Mr Walker has extensive practical experience in the building industry. He is not a professional engineer but employs appropriately qualified staff to ‘sign off’ on reports when necessary. His only formal qualifications are as a building technician. He said that his training was akin to that of a building designer or architectural draughtsperson. I ruled that Mr Walker was qualified by experience to give opinion evidence relating to the categorisation and testing of fill. However, I also ruled that he was not qualified to give opinion evidence about building on the subject land.
Mr Walker has not seen the subject land. His evidence primarily focused upon explaining the meaning and effect of the site investigation report. He acknowledged that he would have preferred to have drilled more than six boreholes but access was limited due to the amount of rubbish on the land.
Mr Walker’s evidence was that the soil described in the site investigation report as ‘mixture sandy silty clays/gravels’ is presumed to be uncontrolled fill until tested and confirmed to be controlled fill. Such material was found in three of the six boreholes drilled on the site. In two instances this material was present to a depth of 1.05 m, while in the third case it was present to a depth of 1.26 m. In the absence of further testing he presumed that this material was uncontrolled fill. One borehole revealed quarry rubble (i.e. road building material) to a depth of 0.1 m. Mr Walker presumed that area was used for parking vehicles. The remaining two of the six boreholes revealed the presence of rubbish described as ‘loose material, builder’s rubbish, fencing wire, polystyrene and timber’ to a depth of 1.3 m and 0.8 m respectively. My understanding of Mr Walker’s evidence is that the presence of a shallow layer of quarry rubble at the sixth location is not problematic.
Mr Walker stated that uncontrolled fill ‘has to be removed and re-compacted’. While he did not specify for what purposes that would be necessary, given that the CRW report was concerned with foundations and slabs for residential building purposes, it might be inferred that this was the purpose he was referring to. He also stated that if a building is constructed on the area, the concrete foundations would need to be strengthened. As this answer was not the subject of an objection, I accept that this non-specific expression of opinion would be within Mr Walker’s expertise based on his experience.
The appellants’ submissions
There is only a marginal difference between the opinions of Mr McKay and Mr Smithson as to the value of the improvements on the subject land. However, their opinions vary significantly on the question of site value. The primary source of that difference was the effect, if any, of the surface rubbish. For that reason the submissions of both counsel focused upon the legal significance of the surface rubbish or debris.
Counsel for the appellants submits that while the definitions of ‘site value’ and ‘unimproved value’ in s 5 of the Act indicate what is to be regarded as an ‘improvement’, the Act is silent as to how matters detrimentally affecting land should be treated for valuation purposes. That issue had been considered by Biscoe J of the NSW Land and Environment Court in Commonwealth Custodial Services Ltd v Valuer-General.[7] Biscoe J held that an improvement was a human operation on land that enhanced its value compared to its natural state. Similarly, in Goode v Valuer-General Wells J held that ‘improvements’ were things which, having regard to the market in which value is to be assessed, ‘actually improve the land’.[8]
[7] (2006) 148 LGERA 38; [2006] NSWLEC 400.
[8] (1979) 22 SASR 247 at 258.
Biscoe J also considered in Commonwealth Custodial Services the notion of a ‘worsement’. His Honour cited the definition of a ‘worsement’ adopted by Rost and Collins in Land Valuation and Compensation in Australia (3^rd ed 1984) at 64:
In some cases … land has suffered a ‘worsement’ and compares unfavourably with its original condition. That is, its present physical condition, as a result of operations upon it, may render it of less value than if such operations had not been undertaken.
Biscoe J made reference to several Queensland cases where the Court had held that where land had been detrimentally affected by human activity that detriment may be described as a ‘worsement’ and taken into account in the valuation process.[9]
[9] Valuer-General v Marano (1978) 5 QLCR 194; Raynbird v Valuer-General (1980) 7 QLCR 106; Caltex Oil (Australia) Pty Ltd v Chief Executive Departments of Lands (1996) 16 QLCR 435; Hegira Ltd v Minister for Natural Resources and Mines [2005] QLC 0051.
Biscoe J referred to the judgment of Gibbs J in Brisbane City Council v Valuer-General where his Honour stated that when:
…something done on or appertaining to land which reduces rather than enhances its value is not an improvement for the purposes of the Act, any more than it would be in the ordinary sense of the word.[10]
[10] (1978) 140 CLR 41 at 51.
Biscoe J held that a ‘worsement’ is the antithesis of an ‘improvement’. A ‘worsement’ describes the effect of human operations on land which have decreased the value of the land compared with its natural state. While the relevant provision of the Valuation of Land Act 1916 (NSW) was silent about ‘worsement’ there was no statutory assumption that ‘worsements’ had not occurred. On that basis, Biscoe J held that a ‘worsement’ should be taken into account in determining the value of land.

Counsel also refers to Leppington Pastoral Pty Ltd v Valuer-General where Parker AC of the NSW Land and Environment Court held that asbestos contaminated soil and uncontrolled fill were forms of contamination which were unlikely to enhance the value of land compared with its natural state and therefore may not be regarded as improvements.[11] Accordingly, Parker AC held that the asbestos contamination and uncontrolled fill could not be disregarded when determining the unimproved value of the land.
[11] [2010] NSWLEC 1023 at [24]-[27].
For these reasons the appellants contend that the Valuer-General erred in assessing the capital value of the subject land as at the Valuation Date to be $1,050,000. The basis for the error was said to be that there had been a failure to have full regard to the ‘worsements’ because the surface rubbish had been taken into account but not the fill. In accordance with the NSW authorities, all ‘worsements’ should have been taken into account. Due to the failure to do so, the valuation was manifestly excessive. The appellants therefore submit that the Court should exercise its power under s 25C of the Act to adopt the valuation made by Mr McKay and thereby decrease the capital value to $625,000, or such other sum as the Court considers appropriate in the circumstances.
The Valuer-General’s submissions
The Valuer-General contends that if the appellants are able to demonstrate an error in the Review Decision, the Court should determine that the capital value at the Valuation Date was $845,000. In other words, if the Court finds that Ms Hawkes erred it should adopt the valuation made by Mr Smithson.
The Valuer-General notes that the term ‘capital value’ is defined in s 5 of the Act, thus:
Capital value of land means the capital amount that an unencumbered estate of fee simple in the land might reasonably be expected to realise upon sale …
The Valuer-General submits that the phrase ‘might reasonably be expected to realise’ that appears in definition of ‘capital value’ is a synonym for ‘market value’. The meaning of ‘market value’ has been explained by Griffith CJ and separately by Isaacs J in Spencer v The Commonwealth.[12] I note that the somewhat lengthy definitions of market value adopted by Griffith CJ and by Isaacs J were succinctly paraphrased by Biscoe J in Commonweath Custodial Services Ltd v Valuer-General as follows:
The value of land is the price arrived at by a willing but not anxious buyer negotiating with a willing but not anxious seller, both perfectly acquainted with the land and cognizant of all circumstances which might affect its value.[13]
[12] (1907) 5 CLR 418 at 432 and 441; see also CSR Limited v Valuer General (1977) 17 SASR 446 at 450, Wells J.
[13] [2006] NSWLEC 400 at [13].
The Valuer-General relies upon the explanation given by Wells J in CSR Limited v Valuer-General of the meaning of the expression ‘in the land’ contained in the phrase ‘unencumbered estate of fee simple in the land’:
The expression ‘in the land’ means, in my opinion, in the subject land together with all improvements including fixtures that, in law, are part of the land. Plainly, industrial plant and equipment is to be excluded unless it passes the rigorous tests for determining fixtures.[14]
[14] (1977) 17 SASR 446 at 450.
In that light, the Valuer-General contends that chattels, including plant and equipment, are not to be considered ‘in the land’ unless they are a fixture. If a chattel rests on land by its own weight, it is prima facie not a fixture, and the burden of proof will lie with the party asserting otherwise.[15] The surface debris present on the subject land is not a fixture and thus not ‘in the land’. The Valuer‑General observes that the appellants have not contended that the rubbish is a fixture.
[15] Reid v Smith (1905) 3 CLR 656 at 663, Griffith CJ; Re May Brothers Ltd [1929] SASR 508 at 513-514, Murray CJ.
The Valuer-General draws further support for her contention that the surface debris cannot be taken into account from reg 11(1) of the Valuation of Land Regulations 2005 (SA). That sub-regulation relevantly provides as follows:
(1) Pursuant to s 34(ab) of the Act, the following fixtures and improvements must not be taken into account when determining or assessing … capital value of land where the determination or assessment is used for the purpose of raising, levying or imposing any rate, tax or impost:
(a)Any item of machinery, plant or equipment that is used in connection with a trade, business or manufactory and is not fixed to the land or premises or is fixed to the land or premises so as to be capable of being removed without structural brackets (other than minor or trivial structural damage) to the land or premises.
A further element of the submission by the Valuer-General is that the term ‘improvement’ has not been defined for the purpose of determining capital value. However, the term ‘improvements’ has been defined for the purposes of the definition of ‘site value’ in s 5 of the Act. That definition refers to buildings and structures (other than site works), wells, dams and reservoirs and the planting of trees for commercial purposes.
The Valuer-General contends that sub-surface contamination is not an ‘improvement’ as it reduces rather than enhances the value of the land.[16] The Queensland Land Court had considered in several cases that the probability of contamination of land was a ‘worsement’ that would be taken into account by the hypothetical prudent purchaser in deciding what they were prepared to pay for the land.[17] The Valuer-General also referred to a passage in Hyam, The Law Affecting Valuation of Land in Australia, where the learned author suggested that:
If the current use of the subject land continues for industrial purposes, then there would appear to be no case to require any further reduction in valuation for probable contamination purposes.[18]
[16] Morrison v Federal Commissioner of Land Tax (1914) 17 CLR 498, 503 Griffith CJ; Leppington Pastoral Company Pty Ltd v Valuer-General, [2010] NSWLEC 1023 Parker AC at [24]-[27].
[17] See, Valuer-General v Marano (1978) 5 QLCR 194; Raynbird v Valuer-General (1980) 7 QLCR 106; Caltex Oil (Australia) Pty Ltd v Chief Executive Departments of Lands (1996) 16 QLCR 435; Hegira Ltd v Minister for Natural Resources and Mines [2005] QLC 0051.
[18] (5^th ed, 2014), p 154.
The Valuer General submits that the effect of the observations by Wells J in the CSR case is that the phrase ‘in the land’ means the subject land together with all improvements, including fixtures that are, at law, part of the land. While a ‘worsement’ (such as sub-surface contamination) would decrease the value of the subject land, the surface debris was not a ‘worsement’ because it was not a fixture and therefore not ‘in the land’. Thus, it is not relevant to the determination of value.
The Valuer-General further submits that contamination does not necessarily always constitute a ‘worsement’. The Queensland Land Appeal Court in Caltex Oil (Australia) Pty Ltd v Chief Executive Department of Lands had recognised that contamination is simply a feature of industrial land.[19] In that case, the majority held:
… it does not appear self-evident that the mere possibility of leakage of petroleum products into land is necessarily a detriment or ‘worsement’ akin to what was considered in the cases cited, at least where the highest and best use under consideration is multiple unit development. Purchasers might well consider that they will be carrying out some excavation of land anyway, and paving with concrete, and that any problems will be overcome by these measures.[20]
[19] [1996] QLAC 48.
[20] Ibid at [22].
The Valuer-General also submits that the evidence had not clearly established the extent to which the subject land was affected by uncontrolled fill and by sub-surface rubbish. The soil sampling comprised only six bore holes spread across a large area. While two of the six bore holes revealed sub-surface rubbish, the drill samples were not sufficient to confirm that the material suspected to be uncontrolled fill found in three of the bore holes was in fact uncontrolled fill. Mr Walker simply assumed that the material found in those three bore holes was uncontrolled fill but he could not say so definitively.
In that light, the Valuer-General submits that there was no more than a mere possibility that there was uncontrolled fill. She further submits that there was no evidence to confirm that there was sub-surface contamination.
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.
The decision of Wells J in Fenton Nominees was appealed to the Full Court[28] and to the High Court.[29] While neither the Full Court nor the High Court found it necessary to decide the principles to be applied when a court decides a valuation appeal, Jacobs J in the Full Court observed that whether or not the principles expressed by Wells J were correct would have little practical significance.[30] The basis for his Honour’s observation was that it will be very rare for an appeal to be made against a valuation that is not tainted by an error in principle, or a significant error of fact, or is so obviously excessive that some error or taint can be inferred.
[28] Fenton Nominees Pty Ltd v Valuer-General (No 2) (1982) 29 SASR 348.
[29] (1982) 150 CLR 160.
[30] Fenton Nominees Pty Ltd v Valuer-General (No 2) (1982) 29 SASR 348 at 355-356.
Whether or not a valuation appeal must be approached in the same way as the exercise of a judicial discretion was touched upon by Kourakis J (as he then was) in Bargwanna Pty Ltd v Valuer-General.[31] His Honour held:
Although it is not necessary to show error in the way in which the valuation below was arrived at, an appellant appealing pursuant to s 25C of the Act, like any other appellant, has an onus. The appellant must satisfy this Court that a different valuation should have been made. That onus is discharged by leading evidence of the value of the property. If on that evidence the valuation is shown not to fall within the proper range of values for the land, the appeal will be allowed and a different value substituted. I do not intend to derogate in any way from those authorities which hold that a mere difference in value is not, in itself, an error. In my view, the burden of those decisions is that in the case of the valuation of land, the value is not a precise single dollar figure. Rather, the value of land necessarily being imprecise, it is recognised that, for all practical purposes, the valuation will fall within a monetary range. The limits of that range will obviously vary from case to case.[32]
(footnotes omitted)
[31] (2011) 109 SASR 449.
[32] Ibid at 451-452.
Kourakis J commented in a footnote in Bargwanna that there is no basis to approach a valuation appeal as if the valuation was the exercise of a judicial discretion. For that reason, his Honour suggested that the observation of Wells J in Fenton must be taken to refer to practical, evidential ways in which the appellant may choose to show error. That suggestion is not inconsistent with the observation made by Jacobs J in Fenton (No 2).
As there was no contrary submission, it is not appropriate for me to decide the correctness of the submissions made by the appellants and also by the Valuer‑General to the effect that the House v The King principle should be followed when considering a valuation appeal, nor is it necessary for me to do so. However, consistently with the observation made by Kourakis J in Bargwanna, I accept that, in practice, the appellants may discharge the onus of showing that the valuation under appeal is wrong if they establish either a material process error or an outcome error.
The Valuer-General submits that when confronted with differing expert valuations, it is not the function of the Court to take an average of the valuations. That would be contrary to the accepted principles of valuation.[33] The Valuer-General also submits that it is not permissible for the Court to extract some elements from one valuation and other elements from another so as to produce a third separate valuation.[34]I accept the correctness of those propositions.
[33] Commonwealth v Milledge (1953) 90 CLR 157 at 161, Dixon CJ & Kitto J.
[34] Minister for the Environment v Florence (1979) 21 SASR 108, 116-117, Wells J.
The review valuation by Ms Hawkes
Ms Hawkes noted in the review valuation that there was rubbish present on the site and also referred to the possibility that this material was present beneath the surface. However, the CRW report was not prepared until several years after Ms Hawkes conducted the review valuation. That report revealed sub-surface rubbish and also suggested that there was uncontrolled fill below a significant part of the subject land. Mr Smithson also referred to the risk of petrochemical contamination. The evidence clearly establishes that these several risks were present prior to the Valuation Date. As the Court is conducting a de novo appeal hearing I am entitled to take that additional information into account.
Both Mr Smithson and Mr McKay considered that the information provided in the CRW report would have a significant negative influence on the attitude of a purchaser. I regard their opinion on that question as plainly being correct. Because Ms Hawkes did not have access to the information available to Mr Smithson and Mr McKay, I do not consider it safe to rely upon her valuation. It may be inferred that her capital valuation exceeded that of Mr Smithson by $205,000 (or almost 25%) and that of Mr McKay by $425,000 (or some 68%) because she did not have access to important information relevant to the condition of the subject land as at the Valuation Date. By demonstrating a material process error in the sense discussed at paragraph [92] above, the appellants have discharged the onus of showing that the Review Decision is wrong. I find that the capital valuation of $1,050,000 arrived at by Ms Hawkes should be set aside.
I turn to the findings of fact relevant to the valuation under appeal. I will first consider the issue of sub-surface contamination. I accept the evidence of Mr Smithson that there is a significant and obvious risk that the subject land has been contaminated by petrochemicals and that a prudent buyer would take that likelihood into account. However, Mr Smithson’s evidence about the possibility of past contamination by chemicals used in market gardening is too uncertain to be relied upon. There is no evidence to indicate the land was ever used for market gardening.
The CRW report and the oral evidence of Mr Walker establishes to my satisfaction that part of the subject land (i.e. that explored by boreholes five and six) contains a variety of sub-surface rubbish at depths up to 0.8 m and 1.3 m respectively. Due to the small number of boreholes and the fact that the land comprises 1.664 hectares, the precise extent of the sub-surface rubbish is not known.
Without further testing, Mr Walker was unable to say definitively whether or not the material detected in boreholes two to four was uncontrolled fill. Nevertheless, the CRW report, as explained by Mr Walker, indicates that there is a real possibility that uncontrolled fill underlies a significant proportion of the subject land.
In valuing the subject land Mr Smithson took into account the fact that a potential purchaser would discount what they were prepared to pay because of the risk involved with poor quality and lack of compaction of the landfill. It is important that Mr Smithson did not proceed on the basis that poor quality and uncontrolled fill underlay the whole of the land. His valuation was based on the risk revealed by the CRW report and the influence that information about that risk would have upon the attitude of a potential purchaser. Mr Smithson considered that the land could be used for storage but that new buildings on areas of uncontrolled fill would require excavation and deeper than usual quarry rubble bases.
Mr McKay initially worked on the assumption that the subject land was not contaminated but inferred from the CRW report that the whole of the land required remediation due to the nature of the fill. He also accepted that the De‑Construct quote correctly stated the cost of remediation. However, Mr McKay concluded that remediation would not occur as the cost greatly exceeded the likely value of the land after remediation. For that reason, Mr McKay’s valuation thereafter focused on the use of the land for purposes such as storage or a wrecker’s yard which would not require remediation.

Mr McKay also considered that the price such a purchaser would be prepared to pay would be negatively influenced by the lack of development potential due to the problems with fill and the perceived risk of more serious contamination.
There is little substantive difference between the approaches adopted by Mr McKay and Mr Smithson in relation to the problems with fill and potential contamination. Both recognised that the subject land has a value for uses such as storage, but the very real risk of site contamination and uncontrolled fill would significantly depress the price that a purchaser would be prepared to pay. In other words, because of the real possibility of uncontrolled fill and sub-surface contamination, together with the proven presence of some sub-surface rubbish, the subject land is only likely to attract a buyer who intended to use the land for storage or a similar low value usage. Such a buyer would be willing to pay far less for the land than if it were suitable for a wider range of industrial purposes.
Neither Mr Smithson nor Mr McKay based their opinion on the view that the whole of the subject land was underlaid by rubbish and uncontrolled fill. They both proceeded on the basis that the risks revealed by the CRW report would have a significant negative effect on what a potential purchaser would be prepared to pay for the land. They also both based their opinion on the fact that the land could be used for certain limited purposes, such as storage or vehicle wrecking, regardless of whether the potential problems identified by CRW were substantiated. Thus, the submission by the Valuer-General that the extent of the sub-surface problems had not been adequately proven is immaterial.
The clear cause of the substantial difference in the valuations provided by Mr Smithson and Mr McKay lies in their approach to the issue of surface debris. Mr Smithson acknowledged that the surface debris would have an influence on price but did not take it into account in accordance with his understanding of the relevant legal principles.
Mr McKay did not deduct the sum of $525,000 (plus GST) quoted by De‑Construct on 27 June 2017 for removal of the surface rubbish. He simply treated the surface rubbish as another factor that would negatively affect the price that a purchaser would be prepared to pay for the subject land.
The crucial question in this appeal is the correctness of the approach adopted by Mr Smithson concerning the effect of the vast amount and enormous variety of rubbish that has been dumped indiscriminately across the subject land. In essence, the Valuer-General submits that because the surface debris comprises chattels, not fixtures, it is not part of the subject land and cannot be taken into account when determining the value of the land. The appellant’s argument is that the presence of such a vast amount of debris on the land will significantly depress the price any purchaser would be prepared to pay, as both Mr McKay and Mr Smithson recognised (albeit that Mr Smithson excluded this consideration from his valuation).
I accept the correctness of the Valuer-General’s submission that the various pieces of rubbish are chattels rather than fixtures and do not form part of the subject land.[35] I also accept that the debris is not an improvement in the sense referred to in the definition of ‘site value’, nor is it a ‘worsement’ in the sense of an improvement that negatively affects value as discussed in the Queensland and NSW authorities.
[35] Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700.
I do not consider that the Valuer-General’s case is assisted by the observations made by Wells J in CSR Limited v Valuer-General concerning the meaning of the phrase ‘in the land’. The issue before the Court in that case was the effect upon capital value of a sugar refinery located upon the subject land in circumstances where it was very unlikely that any other company would be interested in buying the refinery. The evidence established that most of the buildings and plant and equipment were so specialised that they could only be used for sugar refining and CSR was the only significant sugar refiner in Australia.
While Wells J was plainly correct in observing that plant and equipment which are not fixtures cannot be taken into account in determining the capital value of land, 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. The observations made by Wells J are not relevant to the present situation.
While I accept that the surface debris is not a fixture, nor is it an improvement or ‘worsement’, this does not mean that its adverse effect on the site value of the subject land must be ignored. The essence of the definitions of ‘site value’ and ‘capital value’ in s 5 is the amount that the land might be reasonably expected to realise upon sale, assuming that any improvements had not been made and disregarding any encumbrances.
It is clear from the evidence of both Mr Smithson and Mr McKay that the presence of the vast amount of rubbish and the very substantial expense that would be incurred in removing it from the subject land must have a negative effect on what a purchaser would be prepared to pay for the land. I therefore consider that the negative effect of the surface debris must be taken into account in assessing the site value. Mr Smithson erred by excluding that consideration from his valuation even though he acknowledged the negative influence it would have upon a potential purchaser. Because of that error by Mr Smithson I adopt the site valuation of $416,000 provided by Mr McKay as at the Valuation Date.
The views I have expressed are equally applicable to the capital value of the subject land. That is because the amount that a potential purchaser would be prepared to pay must be greatly reduced by the presence of the vast amount of debris on the surface of the land. Accordingly, I also adopt the capital value $625,000 provided by Mr McKay as at the Valuation Date.
I will make orders to that effect and hear the parties as to costs.

Component	Area	Rate	Amount
Vacant land	16,640 m²	$40 p/m²	$665,600
Improvement	920 m²	$200 p/m²	$185,000
Total	$850,600
Rounded Total	$845,000