BRZEZINSKI and OFFICE OF THE VALUER GENERAL
[2008] WASAT 166
•18 JULY 2008
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: DEVELOPMENT & RESOURCES
ACT: VALUATION OF LAND ACT 1978 (WA)
CITATION: BRZEZINSKI and OFFICE OF THE VALUER GENERAL [2008] WASAT 166
MEMBER: MR M SPILLANE (MEMBER)
MR D LIGGINS (SENIOR SESSIONAL MEMBER)
HEARD: 24 APRIL 2008
DELIVERED : 18 JULY 2008
FILE NO/S: DR 53 of 2008
BETWEEN: MARIAN BRZEZINSKI
Applicant
AND
OFFICE OF THE VALUER GENERAL
Respondent
Catchwords:
Valuation of land - Unimproved value - Methodology of valuation - Expert evidence - Use of comparable sales evidence
Legislation:
Valuation of Land Act 1978 (WA)
Result:
The application for review is dismissed
The decision under review is affirmed
Category: B
Representation:
Counsel:
Applicant: Selfrepresented
Respondent: Mr M Palandri (Acting as Agent)
Solicitors:
Applicant: Self-represented
Respondent: Valuer General's Office
Case(s) referred to in decision(s):
Duffy v The Minister for Planning [2003] WASCA 294
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Mr Brzezinski objected to the determination of the unimproved value of his property in Mandurah. The Valuer General had valued the unimproved value as at 1 July 2007 at $1,000,000.
The applicant declined to call any expert valuation evidence but rather relied on his own opinion. He believed the Valuer General had arrived at its valuation on an incorrect basis.
The Tribunal did not accept Mr Brzezinski's arguments and was satisfied that the correct valuation procedure had been adopted by the Valuer General and its decision on value was affirmed.
Land the subject of the review
Mr Brzinski (applicant) is a registered joint tenant with his wife Mrs Janina Brzinski of No 185 (Lot 7) Ormsby Terrace, Mandurah in the City of Mandurah being land more particularly described on Certificate of Title Volume 213 Folio 200A (land).
The applicant has sought a review in this Tribunal of a determination by the Valuer General of the unimproved value of the land, claiming that the valuation was too high and arrived at on an incorrect basis.
The applicant calculated the "gross value" of his property based on the average selling price of properties in Mandurah as being a "generous" $450,000 and stated that the unimproved valuation would of course be lower.
The Valuer General considers that the land is in a unique location on the beach front with 180 degree ocean views.
Valuation and objection
The applicant received a land tax Notice of Assessment based on land owned as at 30 June 2007 for the assessment period 2007/2008 with the date of valuation 1 July 2007.
The applicant objected to that assessment by letter dated 1 November 2007 and received a Notice of Decision to that objection by letter dated 12 December 2007 which stated:
"The unimproved value is considered to be fair and reasonable, and your objection is disallowed. The unimproved value is to remain at $1 million."
By letter of 28 January 2008, the applicant wrote to the Valuer General informing him that he was dissatisfied with the decision. The Valuer General by letter of 7 February 2008 referred the valuation and the objection to this Tribunal for a review pursuant to s 33(2) of the Valuation of Land Act 1978 (WA) (Act).
The hearing of that review took place on 24 April 2008.
Respondent's submissions and evidence
The respondent called Ms Peart-Whelan, a certified practicing valuer who had made the valuation decision in respect of Mr Brzezinski's property on behalf of the Valuer General under the authority of s 8 of the Act. Ms PeartWhelan's worksheets were before the Tribunal which confirmed that the valuation of the land had been carried out from office records only, without inspection. The worksheets also outlined the supporting sales evidence used and confirmed they had been coordinated with surrounding properties.
The date of valuation was confirmed in the Valuer General's correspondence as being 1 July 2007 and confirmed by Ms PeartWhelan as based on valuations as at August 2006. At the hearing Ms Peart-Whelan confirmed in evidence that the valuation method used by her had been the comparable sales evidence method, she stated:
"[I]n valuing your property we go through our system and I receive as many properties that have sold around the date of valuation, August 200[6], as possible. Your property is in a unique situation. It's in a unique location. It's on Ormsby Terrace and any other property on any other street isn't really comparable to your property. So I really needed to get properties that have sold around the date of valuation on your street.
...
One in particular that came up was 181 Ormsby Terrace. ... [I]t's about four properties away from the subject. That sold just before the date of valuation, April 2006. ... for 1.2 million. It's considered highly comparable to the subject. It has the same zoning, which is R12.5/20. ...
...
It's slighty larger ... [i]t's 821 square metres, where the subject I think is 855. Location obviously is pretty much identical. It's right on the beach front. It's got similar views, close to Mandurah, and obviously on the same street. As I said, it's considered highly comparable and because I was relying heavily on this property, I needed to make sure that it was, you know, an arm's length transaction, a valid transaction. I rang the settlement agent, who in her opinion said that was the market value. ...
... I also rang the real estate agent. She also considered that to be market value at the time, an arm's length transaction. I asked her if she thought it was an over zealous buyer. She said no. ... So in the end that stood out to be a very relevant and highly comparable sale at 1.2 million. ... I was really interested in properties that sold on the same street, because of its unique location - 155 Ormsby Terrace sold after August 2006. That sold for 1.5 million and that was vacant land ...
The next sale on Ormsby Terrace was 201 Ormsby Terrace. That also sold February 2007. That sold for 1,475,000. Again it's an identical situation, on the same street, good ocean views, beach front. ... Similar zoning, similar price and it was an arm's length transaction as well. So the[re] were three sales that fairly well convinced me that 1 million was actually quite a conservative value to put on the land."
The applicant in crossexamining Ms Peart-Whelan raised other properties nearby that he said were comparable and in reply Ms PeartWhelan stated:
"... The most comparable properties would be the properties on the same street as your property. I really need to get properties that have similar views and similar locations. ..."
And in referring to the properties pointed to by the applicant, Ms PeartWhelan stated:
"These properties don't have beach frontage and they don't have ocean views, which reflects in the price".
In particular, Mr Brzezinski raised 105 Ormsby Terrace.
In reply Ms Peart-Whelan apart from explaining that the date was well after the date of valuation, stated:
"... 105 Ormsby Terrace is fairly close to Mandurah. ... Ormsby Terrace is quite long. ... [I]t also does veer away from the coastline as it gets closer to Mandurah. ...
...
It's not comparable ..."
When the Tribunal viewed the plans it was clear that 105 Ormsby Terrace was in fact one block back from the beach without beach views.
In a direct question from the applicant as to "actually how do you value properties", Ms PeartWhelan stated:
How we value properties is we print out all the properties that have sold recently in your area. For your particular property, it's quite unique, in that it has beach frontage and it has ocean views. So I choose the properties as close to the date of valuation as possible that have characteristics and location similar to your property. That property, whatever that sold for, which - lets take, for example, 181 Ormsby Terrace, sold for 1.2 million, and then we make adjustments to that in comparison to your property. So if it's bigger, your property may be worth a little less. If has better views, your property may be worth a little bit less, but in actual fact, that property, 181, it has the same views as your property. It's similar in size. It's got beach frontage, the same as what your property has. Does that answer your question?"
Applicant's submissions and evidence
The applicant filed written submissions with the Tribunal and also attended the hearing, crossexamined witnesses and gave evidence personally.
Despite the Tribunal explaining the value of expert evidence and offering to adjourn the hearing to afford the applicant an opportunity to call an expert valuer, the applicant declined the offer and declined to produce any expert evidence to rebut the evidence of Ms PeartWhelan. In answer to the Tribunal's question as to whether he wished to call expert professional valuation evidence, the applicant stated:
"No, I would like to express my own view about it and I think my view could be just as important as the valuer's."
The applicant's written submissions in commenting upon the respondent's valuation and in outlining his views, stated:
(Emphasis is applicant's emphasis.)
"We submit that this valuation is incorrect on the grounds that it was executed by an overzealous 'valuer' of the Australian Valuation Office in a haphazard manner, based on hearsay and opinion, without our presence or the valuer's inspection of the property. Most of all it is inconceivable that the Unimproved Value of the property has risen by more then 100% within 2 years, from $490,000 to $1.000,000 [sic].
It is UNFAIR since we have purchased this property 'on prescription' from our medical practitioners for the purpose of rehabilitation from injuries received in a serious motor vehicle accident in 1977. Both of us suffered complex bony fractures and were advised to have regular swimming and walking exercises and still would like to use the property for that purpose.
We did not purchase this property with the view of speculation or capital gains.
We have now allowed our Son to live in our recreational home for the last 10 years, and cannot sell this property on moral grounds, because that would deprive him of a roof over his head. Our Son does not own any real estate. We feel that there would be no 'better use' this property could be put to, then to provide him with the support, any caring parents would, as envisaged by 'The Child Welfare and Security Act' (sec. 'Parental Responsibility') and we still want to use the property for health recreation, family gatherings and reunions.
The land was acquired in 1979 for approx. $22,000 and a house build upon it at a cost of some $31,000. Together with cosmetic improvements we have spent no more then [sic] $65,000.
...
Valuation Methodology:
...
The Valuation Office compare values of selected expensive properties that have actually been sold with our property that is not intended for sale and is not on the market. It's like comparing apples with oranges.
In this case we are dealing with the value of our property at 185 Ormsby Terrace, Mandurah only, and the value of other properties including that of any penthouse in Mandurah or in St George's [sic] Terrace, Perth have no bearing on it.
The 'direct sales comparison approach' which involves 'the collection and analysis of sales property in the surrounding locality' put forward by the VG, is subjective and lacks proper individual assessment requirements.
We have now received the disallowed 'notice of Decision on objection to UV $1,000.000 [sic]' from Landgate (copy attached, page: 10), where the Valuer General is selectively quoting two very expensive properties as examples of comparable sales evidence, which by his definition should have been excluded from the equation to establish fair and reasonable criteria for fixing of values.
This is contrary to his own 'rule' of 'UV Valuation Methodology' which states:
'UV Valuation Methodology
Market based UV's are determined by reference to the land market at the date of valuation. All sales relevant to the predetermined date of valuation are investigated and where considered necessary, the parties interviewed.
Unsuitable sales, for example sales between related parties or those with special circumstances are discarded. By this process fair and reasonable criteria is established for the fixing of values.'
In our case, a considerable number of cheaper properties in the surrounding locality and even in the same street has not been included in the VG comparative analysis.
We have recently received an unsolicited letter from H & N PERRY Real Estate Agents in Mandurah seeking the sale listing of our property (Copy attached, page:11) quoting 5 properties in OUR AREA which have sold recently. Taking out the exceptionally expensive sale of $1,457.500 [sic] ('special circumstances'), which according to the Valuer General's 'Methodology' should be discarded, the remaining four indicate an average sale price of $437.500 [sic] which is close to the average sale price of properties in Mandurah, currently being $424.000 [sic]. We must keep in mind that the statistical average price is inflated by the inclusion of the very expensive mansions of the Canal Developments.
We have requested a list of properties recently sold in our area from another reputable Real Estate Agent (Kevin Green) and from the 5 properties listed the indication is that the average sale price was $466.800 [sic]. (Copy attached, page: 12). It must be kept in mind that he Estate Agents like to brag and therefore select the more expensive properties they have sold to entice new customers.
...
The Valuer General contends that the valuation conforms with the 'professional valuation standards and as its basis of operation it applies the Revised 2005 International Valuation Standards definition of "market value"', which reads:
'... The estimated for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherin [sic] the parties had each acted knowledgeably, prudently, and without compulsion'.
In the process of valuing our property, none of the stipulated conditions of this 'definition' have been satisfied.
1.The estimated amount for which a property should (but not necessarily would or did) 'exchange' on the dated of valuation, is simply an 'estimate', not a valuation and it does not apply.
2.There was no willing buyer and no willing seller on the dated of valuation.
3.No proper or other marketing of the property was undertaken prior, on the date or after the valuation.
4.There are no parties to a transaction that had each acted knowledgeably or prudently, and without compulsion on the date of valuation.
5.There was no 'in an arm's length transaction' or any other transaction on the date of valuation.
I am doubtful that such a definition has been or would have been adopted by the prudent Commonwealth or State Legislators or whether it was only adopted by the Valuer General or whether it is at all relevant in our situation?
In evidence before the Tribunal, the applicant raised No 128 Hickman Road in particular and stated:
"Well, in the list here that I have put up with the comparative sales, there's a very interesting case of 128 Hickman Road."
However, on examination it was found that the property was a strata title with three units, each on 200 square metres of land, not on the beachfront and with no sea view.
The applicant also raised the issue of valuations by the Australian Valuation Office for social welfare purposes. However it was explained that such valuations were done under different legislation for different purposes.
Statutory framework and valuation methodology
It is not in dispute that the applicant is "a person liable to pay any rate or tax assessed in respect of land who is dissatisfied with the valuation of such land" within the meaning of s 32 of the Act.
Secondly, it is not in dispute that the applicant has properly objected to his valuation within the meaning of Pt IV of the Act and that the review of the Valuer General's decision has been properly brought under Pt IV of the Act.
The applicant contested the definitions used by the respondent on the basis that he believed they allowed a "subjective" valuation.
The respondent on the other hand confirmed that the method of valuation of land is by of determining the "unimproved value of the land" as per the Act.
With this in mind, it is necessary to set out the statutory framework under which the Valuer General must act together with some of the relevant case law where the Courts have examined and discussed the issues over the years.
The definition of "unimproved value" is set out in s 4 of the Act as:
"'Unimproved value' means -
(a)in relation to any land situated within a town site, [which this land is considered to be] ... the site value."
The "site value" is also defined as follows:
"'Site value' of land means the capital amount that an estate 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 ..."
Improvements are defined as being:
"'improvements' in relation to land means the value of all works actually effected to land, whether above or below the surface, and includes fixtures, but does not include -
(a)machinery, whether fixed to the land or not; or
(b)any below ground works used in the extraction of minerals or petroleum;"
The land in the present case has been assessed by the respondent, apparently consistently with these definitions, on "an unimproved value (site value) bases".
As to what "comparable sales method" means, the Tribunal refers to the comments of the Full Court in Duffy v The Minister for Planning [2003] WASCA 294 when McLure J (with whom Anderson J and Steytler J agreed) stated as follows:
"Comparable Sales Method
22The test of market value is what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land: Commonwealth v Arklay (1952) 87 CLR 159 at 169-170; Spencer v Commonwealth (1907) 5 CLR 418 per Griffiths CJ at 432.
23One method of ascertaining market value is the comparable sales method. That method requires that the sales evidence relied on be relevant and sufficient in volume: Maurici v Chief Commissioner of State Revenue [2003] HCA 8 at [18]; (2003) 195 ALR 236 at 242 [18].
24A helpful description of what the comparable sales method involves was given by Wells J in Brewarrana Pty Ltd v Commissioner of Highways (1973) 32 LGRA 170. He said (at 179180):
'It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances … appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v The Commonwealth of Australia … to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape … land use (actual and potential), scope for, and difficulties of, development, …; and in relation to the transaction of sale, the valuer must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected.'
25There is no hard and fast rule by which a valuer can draw the line that clearly separates sales that are comparable from those that are not. It is a matter of degree. Some adjustment is always necessary but too much adjustment may render it unsafe to use a sale. Where the line is to be drawn is a matter for the expert valuer to determine. Further, just because a sale is excluded from use in the comparable sales reasoning process does not necessarily mean that it is irrelevant: Brewarrana (supra) per Wells J at 180.
The Evidence of an Expert Valuer
26The general principles relating to the admissibility of and weight to be given to expert evidence are not in dispute. The basic principle is that an expert must either prove by admissible means the facts on which the opinion is based or explicitly state the assumptions as to fact on which the opinion is based: Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370; Pollock v Wellington (1996) 15 WAR 1; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705.
27Further, the process of inference that leads to the opinions of the valuer must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about their reliability. If not, the opinion can carry no weight: Pollock v Wellington (supra) at 4 per Anderson J; Makita (Australia) Pty Ltd v Sprowles (supra) at 741.
28The expert must fully expose the reasoning relied on in reaching his or her opinion and the opinion must be rationally based: Maurici v Chief Commissioner of State Revenue (supra).
29However, those principles have to be applied in the context of the valuers 'art'. The established principles were stated in Spencer v Commonwealth (supra) where Isaacs J quoted with approval the following passage in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391:
"It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at."
30An illustration of the practical application of the principles is seen in Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409. In that case the subject land to be valued was a container terminal site. It was common ground that that was the best and highest use for the land. Notwithstanding that there was no sales evidence of container terminals, one expert used the comparable sales method and the basic sale he relied on was of industrial land with no water frontage. The valuer added between $100,000 - $120,000 per hectare as an adjustment for the subject land's water frontage. It was common cause that the expert did not have any sales evidence on which to rely for his quantification of the water frontage adjustment and he said it was fixed as a matter of judgment. The appellant in that case submitted that while judgment based on experience is a permissible method of making adjustments in the course of valuing, the selection of a figure based on nothing could not alter its character as in essence a guess or an arbitrary figure. The Court held that the need to make adjustments to values to arrive at the true valuation of subject land does not preclude the valuer or the Court who has the task of valuing the land from making adjustments which may be nothing more than the best guess that can be made in the circumstances. The Court also rejected an argument that a judgment of that nature was not valid unless there was evidence to establish the upper and lower limits within which the judgment must operate.
31An opinion that is not based on sales or other empirical evidence is often referred to as a judgment, usually said to be based on skill and experience. Sometimes it may be difficult to draw the line between judgment and mere speculation. A rule of thumb is that a judgment formed without some disclosed rational basis will be speculation to which little, if any, weight should be given. However, generalised statements of principle are best avoided because whether and if so what weight should be accorded to a valuer's opinion will depend on the facts and circumstances of each case.
32As to what is required disclosure, the appellant relies on a statement by Pullin J in Arcus (supra) (at [78]) that:
"It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method, to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land."
33.The first sentence is uncontentious. The second sentence is not. Insofar as it is contended that the second sentence states an absolute requirement with automatic consequences as to weight, that cannot be so. The formation of an opinion on value has been likened, correctly in my view, to the exercise of judicial discretion. Rules affecting weight must be sufficiently generalised to allow for different methodologies and circumstances."
Consideration
From a close examination of the written submissions and the evidence given at the hearing, it was clear that the applicant believed the respondent had only chosen expensive properties to compare in arriving at the valuation of his property and further contended that other sales in the area had been ignored.
The respondent's expert on the other hand confirmed that the comparable sales method was adopted and that the applicant's property had unique features such as beach front location and unlimited sea views. When the Valuer General compares properties they look for the most comparable properties, which in this case were properties that were in close proximity to the applicant's property, on the same street and had similar views and similar location.
It was clear from an examination of the plan submitted by the respondent as Exhibit 1 and titled "Brzezinski Sales Evidence" that apart from the properties specifically referred to in the respondent's expert evidence the other properties identified on the plan which included all of the properties referred to by the applicant could clearly be distinguished both in location and outlook particularly as to beachfront location and sea views from the properties put forward by the respondent as being comparable.
Furthermore, when it was put to the respondent's expert as to the degree of difference, location and sea views could have on the value, the respondent's expert confirmed that on many occasions it could be up to 100%.
This observation appeared to be borne out by examining the value of properties put forward by the applicant which did not have the benefit of beach front location or sea views.
It was unfortunate that the applicant chose to conduct the case without the benefit of any expert evidence. The applicant did submit sales evidence received from two estate agents in the Mandurah area but apart from a three bedroom one bathroom home in Ormsby Terrace which the applicant described as "exceptionally expensive sale of $1,457,000 (special circumstances)", a property identified and relied on by the respondent, there were no other beachfront sales directly comparable to the applicant's property included in the applicant's sales evidence and there was no evidence as to whether the properties listed by the applicant could or should be compared as like properties with the applicant's.
The applicant submitted that, in his opinion, the respondent's valuer was highly subjective in choosing a hypothetical value for his property. However, a professional valuer's judgment on value is made in a context informed by the principles outlined earlier, the valuer's experience and the comparative evidence, a process the Tribunal is satisfied was followed in this case.
The Tribunal is satisfied on the evidence before it that the respondent has established the case supporting the assessment under review.
The applicant although invited, declined to call any expert evidence to rebut the respondent valuer's opinion and although the Tribunal has carefully reviewed and considered the applicant's argument, it is not persuaded by them.
There is clear evidence to support a finding by the Tribunal that the correct process was adopted by the respondent based upon the accepted principles to be used. The application for review will be dismissed and the decision under review affirmed.
Orders
1.The application for review is dismissed.
2.The decision under review is affirmed.
I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR M SPILLANE, MEMBER
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