Capaldo v Capaldo - [2011] SASC 28

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division: Civil)
CAPALDO v CAPALDO & ORS
[2011] SASC 28
Judgment of The Honourable Justice Kourakis
1 March 2011
REAL PROPERTY - VALUATION OF LAND - METHODS OF VALUATION - COMPARABLE SALES
REAL PROPERTY - VALUATION OF LAND - METHODS OF VALUATION - CAPITALISATION OF RETURNS
Plaintiff seeks sale and division of land - preliminary question of value to be determined. Parties agree land to be valued by capitalising market rent - how market rent determined - significance of passing rent - special value adjoining owner - capitalisation rate to be applied.
Held: value of subject land $850,000 - market rent determined by reference to comparable rentals - passing rent not determinative - special value adjoining owner relevant - capitalisation rate determined with reference to characteristics of subject land in given case and comparable yields.
Robinson Brothers (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee [1937] 2 KB 445, applied.
Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508; Bopark Building (No 8) Pty Ltd v Minister of Lands (1968) 70 SR (NSW) 336, discussed.
Sheath and Anor v The Valuer-General (1963) 64 SR (NSW) 415; Players Pty Ltd v City of Adelaide [2001] SASC 369, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"methods of valuation" "market rent" "capitalisation"

CAPALDO v CAPALDO & ORS
[2011] SASC 28
Civil

KOURAKIS J: The plaintiff and defendants are the registered proprietors of allotment 68 in Filed Plan 134419 being the whole of the land comprised in Certificate of Title Register Book Volume 5709 Folio 19 (the subject land). The registered proprietors of the subject land are Kevin, Christopher and Steven Capaldo of three undivided fourth parts, with no survivorship, and John Capaldo and Rosemary Lombardozzi of one undivided fourth part with no survivorship. The registered proprietors of the subject land hold their interests as trustees of their respective superannuation funds.
The plaintiff seeks the sale and division of the subject land. At the request, and with the consent, of the parties I have ordered that the value of the subject land be determined as a preliminary question.
The plaintiff and defendants are siblings. Until the recent resignation of the plaintiff as a director they were all both directors and shareholders of Capaldo Investments Pty Ltd (Capaldo Investments). Capaldo Investments operates the Glynde Mitre 10 Hardware Store (Glynde Hardware Store) at the corner of Glynburn and Montacute Roads, Hectorville. The Glynde Hardware Store stands, largely, on the land comprised in Certificate of Title Register Book Volume 5407 Folio 654 being Allotment 1000 in Deposited Plan 30115. The registered proprietors of the land are John Capaldo and Capaldo Holdings Pty Ltd. I will refer to that land by its address, 16 Glynburn Road.
The address of the subject land is 4 Montacute Road and it has a frontage, but no current access to Montacute Road. It is contiguous with 16 Glynburn Road, and has been incorporated into the Glynde Hardware Store site. It…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Capaldo v Capaldo

Details

AGLC: Capaldo v Capaldo [2011] SASC 28
Case: [2011] SASC 28
Decision Date: 1 March 2011

CaseChat Overview and Summary

The case of Capaldo v Capaldo involved a dispute over the valuation of a parcel of land located at 4 Montacute Road, Glynde, which was leased to Capaldo Investments for use as part of the Glynde Hardware Store. The plaintiff sought the sale and division of the land, and a preliminary valuation was required to determine its worth. The court was tasked with resolving how the market rent should be determined, the relevance of the passing rent, the special value held by the adjoining owner, and the appropriate capitalisation rate to apply. The primary legal issue was the valuation of the subject land by capitalising the market rent, and how the various factors should be considered in determining its value.

The court began by addressing the method of valuation agreed upon by the parties, which was to capitalise the market rent. The plaintiff argued that the passing rent should be accepted as the market rent, while the defendants contended that the passing rent substantially exceeded the market rent and that the market rent should be determined by reference to comparable rentals. The court largely accepted the defendants' contention but found that their valuation gave insufficient weight to the special value of the subject land due to its importance to the operation of the Glynde Hardware Store. The court held that the passing rent was not determinative of the market rent and that the special value held by the adjoining owner was relevant. The capitalisation rate was to be determined with reference to the characteristics of the subject land and comparable yields. Ultimately, the court valued the subject land at $850,000, taking into account the special value but also considering the disadvantages of the land, such as its zoning and access.

In reaching its decision, the court relied on the case of Robinson Brothers (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee, which it applied to the present case. The court concluded that the special value of the subject land, arising from its integration with the Glynde Hardware Store and the removal of the risk of independent development, warranted a premium of just over 5 per cent of the floor value. This resulted in a final valuation of the subject land at $850,000. The court's decision was based on a careful consideration of all the relevant factors and a balanced approach to the valuation of the land.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

However, the resulting increase in the value of the subject land brought about by the special interests to which I have referred is necessarily limited because of the disadvantages of the subject land such as its current zoning, the poor access it would have from Montacute Road and its underdeveloped state. Even though Mr Piccinato’s prediction that persons with an interest in 16 Glynburn Road might be prepared to pay up to 20 per cent above its value may be right, it is, in my assessment, unlikely that they would need to, in order to secure the subject land. It is also important to keep in mind that the probability of the continuing lease and use of the subject land as part of the Glynde Hardware Store has already been taken into account in fixing the discount rate. The special value now under consideration is the value arising from the removal of any risk that the subject land may be developed independently from the Glynde Hardware Store and the possibility of a redevelopment of the entire site. I will allow a premium at just over 5 per cent of the floor value to which I have referred.Conclusion Taking the special value referred to in the preceding paragraph into account, I determine the value of the subject land to be $850,000.

Ratio Decidendi

Legal Principle Established

The address of the subject land is 4 Montacute Road and it has a frontage, but no current access to Montacute Road. It is contiguous with 16 Glynburn Road, and has been incorporated into the Glynde Hardware Store site. It is leased to Capaldo Investments and is utilised as the garden centre of the Glynde Hardware Store and as a car park. The parties agree that the subject land should be valued by capitalising the market rent. The plaintiff contends that the passing rent should be accepted as the market rent while the defendants claim that I should find, by reference to comparable rentals catalogued by the valuer they called, that it substantially exceeds the market rent. For the reasons which follow, I largely accept the defendants’ contention but find that the valuation urged by them gives insufficient weight to the special value of the subject land generated by its importance to the operation of the Glynde Hardware Store. I value the subject land at $850,000.The primary valuation considerations The subject land is within the suburb of Glynde about seven kilometres north east of the Adelaide General Post Office. It is on the southern side of Montacute Road about 30 metres east of the intersection of Glynburn, Payneham and Lower North East Roads. Although the subject land lies within a residential zone, the Campbelltown (City) Zone, it is close to a local commercial zone which runs to the south along Glynburn Road. The Glynde Hotel is on the south western corner of the intersection. A Bob Jane T-Mart occupies the north eastern corner. There are a number of restaurant and retail premises to the north west. Residences lie to the east and south. The subject land is rectangular in shape with a total area of 1,584 square metres. An area of 515 square metres, which abuts the Glynde Hardware Store, has been improved with a partially enclosed canopy. It is that part of the subject land which serves as the garden centre of the Glynde Hardware Store. Even though there is currently no direct access to the subject land from Montacute Road, it is common ground that if the owners were to request such access, it would be granted. Nonetheless, egress from the subject land would be difficult because it must be negotiated across the turn left lane for west bound traffic on Montacute Road. Commercial use is non complying in the residential zone. The major planning objective of the residential zone is detached dwellings on individual allotments. Nonetheless, it is common ground that a non residential use is likely to be approved if the subject land were developed separately from the Glynde Hardware Store. The subject land is leased by Capaldo Investments. The lease, which is for a five year term with options to extend it for a further two terms of five years, was executed on 1 July 2005. It provides for the rent to be fixed by agreement or by an independent calculation of the market rent, on the exercise of the renewal option. The lease provides for CPI increases in other years. The lease was renewed on 1 July 2010 without an independent valuation of the rent. The lease provides for CPI increases in other years. The passing rent in 2010 was $83,064 per annum.The valuations