DEFLECTOR GOLD PTY LTD and VALUER GENERAL

Case •

[2023] WASAT 81

•

31 AUGUST 2023

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: VALUATION OF LAND ACT 1978 (WA)

CITATION:   DEFLECTOR GOLD PTY LTD and VALUER GENERAL [2023] WASAT 81

MEMBER:   MS R PETRUCCI, MEMBER

HEARD:   2 JUNE 2023

DELIVERED          :   31 AUGUST 2023

FILE NO/S:   DR 125 of 2022

BETWEEN:   DEFLECTOR GOLD PTY LTD

First Applicant

GULLEWA GOLD PROJECT PTY LTD

Second Applicant

AND

VALUER GENERAL

Respondent


Catchwords:

Reviewable decision - Real property - Valuation of land - Date of valuation - Interim valuation - GRV - Assessed value - Level of values at date of valuation - Improvements to land - Allowance for physical depreciation - Proper construction of definition of 'capital value' in s 4(1) Valuation of Land Act 1978 (WA)

Legislation:

Local Government Act 1995 (WA), Pt 6, Div 6
State Administrative Tribunal Act 2004 (WA), s 17(1), s 27(1), s 29(1), s 29(3)
Valuation of Land Act 1978 (WA), s 4(1), s 18, s 19, s 20, s 22, s 22(1), s 23, s 23(4), s 23(4)(b), s 23(4), s 23(5), s 31(1), s 32(1), s 32(3), s 33(1), s 33(2), s 33(3), Pt III, Div 1
Valuation of Land Bill 1978 (WA)

Result:

Application dismissed
Decision under review affirmed

Category:    B

Representation:

Counsel:

First Applicant : Mr T Russell
Second Applicant : Mr T Russell
Respondent : Ms C Ide

Solicitors:

First Applicant : N/A
Second Applicant : N/A
Respondent : State Solicitor's Office

Case(s) referred to in decision(s):

Beiler v Valuer-General (1980) 23 SASR 385 (1980) 42 LGRA 131

Boland v Yates Property Corp Pty Ltd [1999] HCA 64

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384

Citic Pacific Mining Management Pty Ltd and Valuer-General [2016] WASAT 23

Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503

Cooper Brookes (Wollongong) Pty Ltd v FCT (1981) 147 CLR 297

Director General of Department of Transport v McKenzie [2016] WASCA 147

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28

Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373

Timberside Villas Management Pty Ltd v Parker [2005] WADC 246

Western Australian Meat Marketing Cooperative and Valuer-General [2005] WASAT 227

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

  1. These proceedings turn on the proper construction of the second limb of the definition (highlighted by underlining) of 'capital value' of land in s 4(1) of the Valuation of Land Act 1978 (WA) (VL Act) which provides:

    capital value of land means the capital amount which an estate of fee simple in the land might reasonably be expected to realize upon sale — provided that where the capital value of land cannot reasonably be determined on such basis, the capital value of such land shall be the sum of, first, the unimproved value of the land, and, secondly, the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical deprecation, and such other factors as are appropriate in the circumstances.

  2. The applicants seek review of the valuation by the Valuer-General of the gross rental value (GRV) of two sites referred to as 'the TWA village' and 'the admin/workshop' (subject sites) which are located within the Shire of Yalgoo (Shire) at the date of valuation, being 1 August 2014[1] (the date of valuation). 

    [1] Western Australian Government Gazette notice of 14 July 2015, Hearing Book (HB) at page 139.

  3. The subject sites are situated on Portion of Lot 11816 on Deposited Plan 220201 and are described in Crown Land Title Volume LR3074 Folio 589 as Unallocated Crown Land.

  4. The applicants are both wholly owned subsidiaries of Silver Lake Resources Limited.  Deflector Gold Pty Ltd is the registered owner of mining lease 59/00442 on which the admin/workshop is situated and is liable to pay rates in relation to that site.  Gullewa Gold Project Ltd is the registered owner of mining lease 59/00356 on which the TWA village is situated and is liable to pay rates in relation to that site.

  5. By Western Australian Government Gazette notice of 21 July 2020, the Minister determined that the method of valuation to be used by the Shire as the basis for a rate on the mining tenements in respect of the subject sites is to be GRV with effect from 1 July 2020[2] (the Minister's 2020 determination).  The portion of land to which the Minister's 2020 determination applies is set out in column 2 of the Schedules (Portion of Land) to the Minister's 2020 determination.  That is, the Minister's 2020 determination applies to the Portion of Land and not to individual dwellings.

    [2] HB at pages 227 to 229.

  6. The applicants say unfairness has arisen because the condition of the improvements to the subject sites over the years have not been taken into account by the Valuer-General in determining the GRV for the subject sites at the date of valuation for the 2020/21 financial year of assessment by the interim valuation.[3]

    [3] ts 45, 2 June 2023.

  7. In the reasons which follow, I explain why I do not accept the applicants' preferred construction of the definition of 'capital value' in s 4(1) of the VL Act. The result is that the application is dismissed and the decisions under review in respect of the GRV for the subject sites at the date of valuation for the 2020/21 financial year of assessment are affirmed.

Subject sites

  1. The land of the subject sites is owned by the State of Western Australia and the responsible agency on the title is the Department of Planning, Lands and Heritage.  Further, the land of the subject sites is zoned as 'Rural/Mining' under the Shire of Yalgoo's Town Planning Scheme No 2.

  2. The subject sites are not lots but rather area or the Portion of Land as described in the Minister's 2020 determination.

  3. The subject sites are situated relatively close to each other (approximately 1.2 kilometres apart) and are located about 50 kilometres south-west of the Yalgoo townsite.

  4. In 2016, 136 accommodation units (and associated amenities) were constructed on the TWA village.  An additional 36 units were added to the TWA village in 2019. 

  5. Improvements on the admin/workshop site were built in 2016 and a boardroom building was relocated to the admin/workshop site as part of an expansion project in mid-2019.

  6. The improvements on the subject sites are specialist infrastructure constructed for the sole purpose of supporting the operation of the Deflector Gold Mine within the Shire.

The application for review and the reviewable decisions

  1. According to the applicants, on 4 September 2020, Silver Lake Resources (but not the applicants) received a Rate Notice/Tax Invoice - Notice of Rate and Valuation from the Shire for the 2020/21 financial year of assessment reflecting a combined GRV of $605,000 for the subject sites.

  2. On 28 July 2021 Gullewa Gold Project Pty Ltd received from the Shire a Notice of Rate and Valuation reflecting a GRV of $480,000 for the TWA village at the date of valuation for the 2020/21 financial year of assessment.  On the same date, Deflector Gold Pty Ltd received from the Shire a Notice of Rate and Valuation reflecting a GRV of $52,000 for admin/workshop at the date of valuation for the 2020/21 financial year of assessment.

  3. Further, according to the applicants, on 18 November 2021 Gullewa Gold Project Pty Ltd received from the Shire a revised Notice of Rate and Valuation reflecting a GRV of $410,000 for the TWA village at the date of valuation for the 2020/21 financial year of assessment. 

  4. Following the applicants lodging an objection to the amended GRVs for the subject sites, the Valuer-General, on 6 May 2022, allowed the objections in part and reduced the GRV for the TWA village to $398,400 (down from $410,000 and previously $480,000) at the date of valuation for the 2020/21 financial year of assessment.  Further, on 20 May 2022, the Valuer-General disallowed the objection in relation to the admin/workshop with the GRV remaining at $52,000 at the date of valuation for the 2020/21 financial year of assessment (the objection decisions).

  5. Following the objection decisions, on 4 August 2022, the applicants served notice on the Valuer-General under s 33(1) of the VL Act requiring the Valuer-General to refer the valuations (GRV of $398,400 for the TWA village and $52,000 for admin/workshop at the date of valuation) to the Tribunal for review (notice).

  6. The applicants' ground of review in these proceedings is stated as follows:[4]

    [T]he [GRVs are] incorrect [as] the methodology used by the Valuer­General to determine the gross rental value of the Relevant Infrastructure is inconsistent with the provisions of the VL [Act] in respect of the Valuer-General's calculation of the estimated replacement cost of the improvements (being, the estimated replacement cost of the Relevant Infrastructure)[.]

    [4] HB at pages 13 and 27.

  7. The parties agree:

    (a)the method of calculating the GRV in principle by reference to the 'assessed value' and the 'capital value' of the subject sites;

    (b)the prescribed percentage of the capital value for the purposes of determining the assessed value, being 5%;

    (c)the calculation of the Unimproved Value (UV) component of the 'capital value' of the subject sites is $315,333 for the TWA village and $220,000 for the admin/workshop; and

    (d)the calculation of the construction costs of the improvements for the admin/workshop is $745,683 and for the TWA village is $6,957,017.

  8. What is in dispute, and what is the crux of the application, is whether the cost of the improvements to the TWA village and to the admin/workshop site are to be depreciated in order to determine the replacement cost of the improvements to determine the 'capital value' of the subject sites at the date of valuation for the 2020/21 year of assessment.

  9. The objection decisions are a 'reviewable decision' for the purposes of s 17(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act). 

  10. The Valuer-General's role is to refer the notice along with a copy certified by, or on behalf of, the Valuer-General of the record of the valuation and the reasons, if any, for the valuation to the Tribunal, whereupon the referral is treated as an application by the applicants. This is provided for in s 33(2) and s 33(3) of the VL Act.

  11. On 7 August 2022 the Valuer General referred the matter to the Tribunal for review in accordance with s 33(2) and s 33(3) of the VL Act.

  12. Section 27(1) of the SAT Act provides that the review of a reviewable decision by the Tribunal is by way of a hearing de novo.  The Tribunal is not limited to a consideration of the material that was before the original decision­maker and may take into account additional material not before the original decision­maker.

  13. By reason of s 29(1) of the SAT Act, the same functions and discretions of the original decision­maker are conferred on the Tribunal, and s 29(3) of the SAT Act confers power on the Tribunal to give effect to the Tribunal's conclusions on the review of the reviewable decision. The Tribunal may:

    (a)affirm the decision that is being reviewed; or

    (b)vary the decision that is being reviewed; or

    (c)set aside the decision that is being reviewed and:

    (i)substitute its own decision; or

    (ii)send the matter back to the decision-maker for reconsideration in accordance with any directions or recommendations that the Tribunal considers appropriate,

    and, in any case, may make orders the Tribunal considers appropriate.

Issues for determination

  1. The parties agree that the ultimate issue for determination in these proceedings is, what is the GRV of the subject sites at the date of valuation?

  2. In determining the GRV by reference to the 'assessed value' of the subject sites, the parties agree an issue arises in determining the 'capital value' as to what is the estimated replacement cost of improvements to the subject sites after making such allowance for obsolescence, physical depreciation and such other factors as are appropriate in the circumstances, and more particularly, whether an allowance for depreciation should be made.

Statutory framework

VL Act

  1. The definition of 'capital value' per the VL Act is provided at [1] above.

  2. The terms assessed value, general valuation, GRV, improvements, interim valuation, land, rateable land and valuation district are defined in s 4(1) of the VL Act as follows:

    assessed value of land means such percentage of the capital value of the land as may from time to time be prescribed either —

    (a)in respect of land generally; or

    (b)in respect of a class of lands which includes the land[.]

    general valuation means a general valuation made or deemed to be made under section 22;

    gross rental value of land means the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year upon condition that the landlord were liable for all rates, taxes and other charges thereon and the insurance and other outgoings necessary to maintain the value of the land, provided that —

    (a)where the gross rental value of land cannot reasonably be determined on such basis, the gross rental value shall be the assessed value [.]

    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;

    interim valuation means a valuation made under section 23;

    land means lands, tenements and hereditaments, and any improvements to land, and includes any interest in land[.]

    rateable land means land in respect of which any rate or tax is assessed under any of the rating and taxing Acts or is, in the opinion of the Valuer-General, reasonably likely to be assessed under any of those Acts prior to such land being valued in a general valuation[.]

    valuation district means a valuation district constituted or reconstituted under section 17[.]

  3. Part III of the VL Act is titled 'Valuation'. Div 1 of Pt III of the VL Act deals with general and interim valuations. Relevant to these proceedings are s 18, s 19, s 22 and s 23 of Div 1 of Pt III of the VL Act.

  4. Section 18 of the VL Act requires the Valuer-General to determine for the purposes of a general valuation, the GRV or UV of rateable land as far as that value is required by a rating or taxing authority for the purpose of assessing any rate or tax or is, in the opinion of the Valuer­General, reasonably likely to be so required before the next general valuation of the land is made.

  5. Section 19 of the VL Act identifies the time for the date of valuation applicable to a general valuation and s 20 of the VL Act identifies when a general valuation comes into force.

  6. Section 22 of the VL Act deals with the frequency of general valuations. Section 22(1) of the VL Act provides that:

    (1)A general valuation shall be made within each valuation district constituted or reconstituted for the purposes of determining gross rental values at such times as the Valuer-General shall determine; but the Valuer-General shall ensure that, so far as practicable, the valuations comprising a general valuation shall at all times be accurate and up-to-date.

  7. Interim valuations are dealt with in s 23 of the VL Act as follows:

    (1)The Valuer-General may, at any time, value or cause to be valued any rateable land where such land has not previously been valued or separately valued under this Act or where in his opinion it is necessary or expedient for any reason that such land be valued.

    (2)The Valuer-General shall value or cause to be valued any rateable land where in his opinion the value thereof has for any reason significantly increased or decreased in relation to the value of land of the same or a similar character in the same valuation district.

    (3)The Valuer-General may value any land or cause it to be valued under subsection (1) or subsection (2) without carrying out a general valuation of all rateable land in the same valuation district.

    (4)Where a valuation is made under subsection (1) or subsection (2), the value of the land shall be determined —

    (a)if there has been a previous general valuation under this Act of rateable land within the same valuation district as that land, in accordance with the level of values prevailing in relation to land of the same or a similar character at the date of valuation of the last general valuation; or

    (b)if there has been no previous general valuation under this Act of rateable land within the same valuation district as that land —

    (i)in accordance with the level of values prevailing at the time of the last general valuation of land in that valuation district made under any of the rating and taxing Acts;

    (ii)or if no such general valuation had been made, in accordance with the level of values prevailing at the date fixed by the Valuer­General.

    (5)A valuation made under this section shall come into force and supersede any previous valuation of gross rental value or unimproved value, as the case requires, in force under this Act and affecting the land to which the valuation relates as from such day, whether before or after the day on which the valuation is made, as the Valuer-General shall determine.

Local Government Act 1995 (WA)

  1. Part 6 Division 6 of the Local Government Act 1995 (WA) sets out the processes by which local government (in this case the Shire) apply rates to properties.

Valuation methodology

  1. The parties agree there is no comparable rental evidence in relation to the subject sites. The consequence of this is the parties agree that the GRV for the subject sites is to be determined on the 'assessed value' which is a defined term in s 4(1) of the VL Act and which refers to the 'capital value' of the land which is also a defined term in s 4(1) of the VL Act.

  2. As already noted, the parties agree that the prescribed percentage of the capital value of the land for the purposes of determining the 'assessed value' of the subject sites is 5%. 

  3. Further, the parties agree that the 'capital value' in this case is to be determined, as provided for in s 4(1) of the VL Act, by reference to the summation of:

    (a)the UV of the subject sites; and

    (b)the estimate replacement cost of improvements to the subject sites after making such allowance for obsolescence, physical depreciation and such other factors as are appropriate in the circumstances.

  4. The parties agree as the UV of the subject sites.  However, the parties disagree as to what is the estimated replacement cost of improvements to the subject sites.

  5. The applicants' position is that depreciation should be applied to the improvements to the subject sites in the calculation of the GRV for the subject sites at the date of valuation for the 2020/21 financial year of assessment.  Further, the applicants say that the rate of depreciation to be applied is 8% per annum calculated per the Valuer-General's statement[5] (as set out in the next paragraph).

    [5] Applicants' Outline of Submissions dated 2 June 2023 at pages 1 to 2.

  6. The Valuer-General's position is that at the date of valuation no depreciation is to be applied in the calculation of the GRV for the subject sites.  However, if the Tribunal determines that a rate of depreciation is to be applied in the calculation of the GRV for the subject sites at the date of valuation, then the Valuer-General accepts the appropriate rate of depreciation for the improvements to the subject sites is 8% per annum calculated as follows:[6]

    [6] HB at pages 302 to 303.

    Calculation of the subject GRV for the mining village allowing for depreciation:

    Improvements

Description

Cost

Depreciation @ 8%pa2

DRC (ex-GST)

GST

DRC (inc GST)

Improvements value

Original 136-unit village (2016)

$6,362.809

32%

$4,326,710

$432,671

$4,759,381

Additional 36 units (2019)

$594,208

8%

$546,671

$54,667

$601,339

$5,360,720

Land

No of SPQ units

Adopted rent/unit pa

Adopted rent pa

Capitalisation rate

Capitalised rent

GST

Land value

172

$200

$34,400

12%

$286,667

$28,667

$315,333

Capital Value (Land + Improvements):

$5,676,053

5% of Capital Value:

$283,803

Rounded:

$283,800

The calculation of the subject GRV for the admin/workshop allowing for depreciation:

Improvements

Description

year commissioned

Cost

Depreciation @ 8%pa

DRC (ex-GST)

GST

DRC (inc-GST)

Improvements value

Buildings (excluding boardroom mill office & workshop)

2016

$706,979

32%

$480,746

$48,075

$528,820

Boardroom

2018

$28,704

16%

$24,111

$2,411

$26,522

Workshop

2016

$10,000

32%

$6,800

$680

$7,480

$562,823

Land

Land Area

Land Rate/m2

Adopted land value

GST

Adopted land value

$51,200

$4

$200,000

20,000

220,000

Capital Value (Land + Improvements):

$782,823

Capital Value (Land + Improvements):

5% of Capital Value

$39,141

5% of Capital Value:

Rounded:

$39,140

Rounded:

Consideration

  1. It is common ground that until the 2020/21 financial year of assessment, the subject sites were valued as part of the whole of the respective mining leases of which they form a part, with the entirety of each mining tenement valued on a UV basis.  That is, between 2016 and 2020 the subject sites remained valued on an UV even though there were improvement to the subject sites.  Further, it is agreed by the parties that the trigger for the Valuer-General undertaking an interim valuation of the subject sites was the Minister's 2020 determination.

  2. As already stated, it is agreed by the parties that:

    (a)the method of calculation of GRV in principle is by reference to the 'assessed value' and the 'capital value' of the land;

    (b)the prescribed percentage of the capital value for the purposes of determining the assessed value is 5%;

    (c)the UV component of the capital value of the subject sites is:

    (i)TWA village - $315,333; and

    (ii)admin/workshop - $220,000.

    (d)the construction costs of the improvements to the subject sites is:

    (i)TWA village - $6,957,017; and

    (ii)admin/workshop - $745,683.

  3. As noted earlier, in determining what the GRV is for the subject sites at the date of valuation for the 2020/21 year of assessment, it is necessary to determine, whether, on the proper construction of the definition of the term 'capital value' in s 4(1) of the VL Act, and in the context where an interim valuation was conducted by the Valuer‑General, allowance should be made for depreciation in assessing the estimated replacement cost of improvements to the subject sites.

  4. If, on a proper construction of the definition of 'capital value' allowance should be made for physical depreciation in assessing the estimated replacement cost of the improvements to the subject sites, as asserted by the applicants, then, the parties agree that a rate of depreciation of 8% per annum which reflects a lifespan of 12.5 years is to be applied resulting in an amended GRV for the TWA village of $283,800 at the date of valuation for the 2020/21 financial year of assessment and an amended GRV for the admin/workshop of $39,140 at the date of valuation for the 2020/21 financial year of assessment (see table above at [42]).

  5. The term 'capital value' which is referred to in the definition of 'assessed value' in s 4(1) of the VL Act is separately defined in s 4(1) of the VL Act.

  6. It is common ground that the opening words of the definition of 'capital value' do not apply in this case because 'the capital amount which an estate of fee simple in the land might reasonably be expected to realize upon sale' cannot reasonably be determined.

  7. The consequence is that the GRV assessments at the date of valuation for the 2020/21 financial year of assessment will turn on the proper construction of the second limb of the definition of 'capital value' which requires the summation of (see above at [1]):

    the capital value of such land shall be the sum of, first, the unimproved value of the land,

    and

    secondly, the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances.

  8. The date of valuation (1 August 2014) is not in dispute.  The date the valuation comes into force (1 July 2015) is also agreed.  In any event this is provided for in the Western Australian Government Gazette notice of 14 July 2015.[7]

    [7] HB at page 260.

  9. It is also agreed that GRV calculations on an 'assessed value' basis is required at the date of valuation.

  10. In short, the Valuer-General submits that it is proper for him to 'notionally assume' for the purposes of his interim valuation that the improvements constructed or relocated to the subject sites in 2016 and 2019, existed at the date of valuation and are to be treated as being new (though not necessarily of new materials) at the date of valuation.  On that assumption, the Valuer-General says that at the date of valuation he made no allowance for depreciation for the improvements to the subject sites.  In other words, the physical depreciation of the improvements to the subject sites was nil at the date of valuation.

  11. Stated shortly, the applicants' position is that the definition of 'capital value' in s 4(1) of the VL Act requires that depreciation be applied to the estimated replacement cost of the improvements. This is because the material part of the definition of 'capital value' has two limbs as follows. The first limb deals with the UV of the land which is not in contest. The second limb deals with the estimated replacement cost of the improvements to the subject sites. According to the applicants, each limb must be treated separately and given effect. The applicants assert that any 'notional assumptions' relied upon by the Valuer-General have no basis in the VL Act and are not supported by either s 19 of the VL Act, which fixes the date of valuation (in this case, 1 August 2014) nor in s 23(4) of the VL Act which requires that the value of land be determined in accordance with the level of values prevailing in relation to land of the same or similar character at the date of valuation of the last general valuation.

  12. In order to understand the position of each party, it is helpful to set out in some detail the preferred construction of the definition of 'capital value' in s 4(1) of the VL Act put forward by each party. I will start with setting out the applicants' preferred construction.

Applicants' construction of 'capital value'

  1. The applicants' construction of the definition of 'capital value' is set out primarily at paragraphs 35 to 60 of their Statement of Facts Issues and Contentions as follows.[8] 

    [8] HB at pages 29 to 34.

  2. Land is defined in the VL Act as 'lands, tenements, and hereditaments, and any improvements to land, and includes any interest in land'. It includes both the land component and any improvements.

  3. The definition of 'capital value' distinguishes between, and treats differently, these two components of the definition of land.

  4. The first limb requires an assessment of the UV land component of the land and the second limb requires an assessment of the estimated replacement cost of improvements to the land.

  5. The second limb requires that allowance be made for depreciation in assessing the estimated replacement cost of improvements to the land.  Those words in the balance of the definition of 'capital value' must be given their full meaning and effect, particularly where this is a specific definition that applies only to the circumstance where:

    (a)GRV cannot reasonably be determined on the basis of 'gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year…'; and

    (b)capital value cannot reasonably be determined on the basis of 'the capital amount which an estate of fee simple in the land might reasonably be expected to realize upon sale'.

  6. The applicants say a number of points arise from the language of the second limb of the definition of 'capital value'.  First, it is a different and more specific assessment compared to merely assessing the value of 'any improvements to land' as part of the definition of 'land'.  Second, those words are directed at identifying matters that would otherwise reduce the value of the estimated replacement cost of the improvements.  Third, the use of 'other factors' is broad further indicating that other matters that may similarly reduce the estimated replacement cost of the improvements are required to be considered.

  7. The applicants submit that the Valuer-General's calculation of the estimated replacement cost of the improvements to the subject sites without any allowance for depreciation is incorrect as it is inconsistent with the express requirements of the definition of 'capital value' which requires that allowance be made for 'obsolescence, physical depreciation and other factors as are appropriate in the circumstances' when determining the estimated replacement cost of improvements to the subject sites.

  8. Further, the applicants submit that the notional assumptions made by the Valuer­General in his interim valuation are artificial and are not supported by the language of the VL Act. The Valuer-General's valuation does not observe the requirements of the second limb of the definition where no step is taken in the valuation process to 'make such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances'.

  9. The applicants accept that s 23 of the VL Act empowers the Valuer‑General to undertake an interim valuation and that s 23(4) has application in determining the relevant date in identifying the prevailing values of land, however, the applicants submit that the definition of 'capital value' expressly distinguishes between the UV of land and the estimated replacement cost of improvements to the land and therefore require each of those components to be considered by reference to the requirements of that definition.

  10. Further, the applicants accept that s 32(3) of the VL Act prescribes a ground upon which an objection may be made and that the provision may explain the Valuer-General's wish to maintain consistency and to coordinate and align property values, however, according to the applicants, it cannot justify an approach that does not apply the express requirements of the definition of 'capital value', particularly the requirement to make such allowance for obsolescence, physical depreciation and such other factors as are appropriate in the circumstances in assessing the estimated replacement cost of the improvements to the subject sites.

  11. The applicants say that any difficulty the Valuer-General may have in determining depreciation cannot overcome a requirement to do so. The application of depreciation is confined to those circumstances where the balance of the definition of 'capital value' applies and not to 'pre-existing values' of other properties determined by other valuation methods or to the 'vast number of improved properties in the State' which are normally assessed by other valuation methods as required by the VL Act as suggested by the Valuer-General.

  12. The applicants' advance the following reasons as to why their construction of 'capital value' in s 4(1) of the VL Act should be preferred.[9]

    [9] Applicants' Outline of Submissions dated 2 June 2023 at pages 5 to 7.

  13. First, the plain words of the second limb of the definition of 'capital value' requires that allowance be made for 'obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances'.  Those words are directed at identifying matters that would otherwise reduce the value of the estimated replacement cost of improvements.  The use of 'other factors' is broad further indicating that other matters that may similarly reduce the estimated replacement cost of improvements are required to be considered.  A construction of those words that gives effect to their plain meaning and purpose should be preferred.

  14. Second, the definition of capital value is a specific definition with application to a discrete subset of the circumstances in which GRV is assessed.  The valuation in this case has arisen from the Minister's 2020 determination in relation to specific portion of the tenements, the subject of the valuations, with the consequence that the unusual method of valuation required by the balance of the definition of capital value must be applied.

  15. Third, the statutory text expressly distinguishes between the land component in the first limb of the definition of 'capital value' in s 4(1) of the VL Act and the value of improvements in the second limb. In doing so, it requires that they be assessed separately and by different criteria. The first limb is concerned with the UV of the land. The definition of UV in s 4(1) of the VL Act relevantly includes the following:

    …

    (b)in relation to any land not included in any area referred to in paragraph (a), where any such land is —

    (i)land —

    …

    (vii)land to which any of subparagraphs (i) to (vi) do not apply —

    (I)the capital amount that an estate in fee simple in the land not including improvements might reasonably be expected to realize upon sale[.]

  16. Applying the reasoning in Citic Pacific Mining Management Pty Ltd and Valuer-General [2016] WASAT 23 at [80] to [81], the applicants submit that the definition of UV in s 4(1) of the VL Act at (b)(vii)(I) applies, which reinforces the distinction between the value of the land and the value of the improvements. The exercise required by the second limb of the definition of 'capital value' in s 4(1) of the VL Act is a different and a more specific assessment compared to merely assessing the value of 'any improvements to land' as part of the definition of 'land'. It requires that estimated replacement cost of improvements be determined and that allowance be made for the factors specified, which affect their utility (obsolescence), condition (physical depreciation) and any other factors.

  17. In that context, while s 23(4) of the VL Act has application in determining the relevant date in identifying the prevailing values of land, in this case, the definition of 'capital value' expressly distinguishes between the unimproved value of the land and the estimated replacement cost of improvements to the land, requiring each of those components to be considered by reference to the requirements of that definition.

  18. Fourth, had it been intended that the Valuer-General in determining GRV based on an 'assessed value', must make each of the 'notional assumptions' as asserted by the Valuer-General, a clear expression of the basis for each of those assumptions would be expected to arise from the text of the VL Act. Neither s 19, s 20, s 23(4) nor s 32(3) of the VL Act are capable of supporting the 'notional assumptions' made by the Valuer­General, the effect of which is that no allowance is made for the condition of the improvements to the land, despite the plain words of the second limb of the definition of capital value.

  19. Finally, the applicants identify two options in applying their preferred construction of 'capital value' in s 4(1) of the VL Act as follows.[10]

    [10] Ibid at pages 7 to 8.

  20. The first option determines the GRV with an UV land component only with the prevailing values as at the date of valuation (1 August 2014) and treats the subject sites as vacant land on the basis that there were no improvements to the subject sites at the date of valuation.  The estimated replacement cost of improvements taking into account five years of depreciation from 2016 to 2021 would then be picked up and included in the GRV calculated in the next Yalgoo general valuation (coming into force on 1 July 2022).  This, the applicants say, reflects the Valuer­General's practice where Mr Lester Cousins stated in his statement filed with the Tribunal[11] on 24 February 2023 at paragraph 15 that the Valuer-General treats as vacant land any land with buildings under construction at the date of valuation but are not complete by the date a general valuation comes into force.  The practice extends to land on which buildings are under construction at the date of valuation but are complete by the date that the general valuation comes into force, which are then treated as being complete for the purposes of the valuation.

    [11] HB at page 291.

  21. In this case, the applicants say that at the date of the last general valuation, whether it was the date of valuation or the date the valuation came into force, each of the subject sites was vacant land as no improvements were made until 2016 with further improvements made in 2019.  On that basis, applying the Valuer-General's practice, as set out in the preceding paragraph, the applicants submit that both the land component and the component for the improvements are each to be assessed at the date of valuation then consistent application requires the land to be treated as vacant land reflecting its actual state, and the prevailing values for vacant land be applied at the date of valuation. 

  22. Under the first option, the applicants say there are no 'notional assumptions' about improvements that did not exist at the date of valuation.  The applicants note that the depreciated estimated replacement cost of the improvements to the subject sites have now been assessed by the Valuer-General as part of the general valuation that came into force on 1 July 2022 as reflected in the new GRVs and referenced in the Shire's Notice of Rate and Valuation issued to the applicants on 6 October 2022.

  23. The second option determines the GRV with an UV land component in accordance with the prevailing values at the date of valuation and an assessment of the estimated replacement value of the improvements having regard to their condition (physical depreciation) at the date of the interim valuation.  This option takes into account the reduction in capital value due to changes in the condition of the improvements.

  24. The applicants say that under both options, the UV land component and the estimated replacement cost of the improvements are determined as discrete components, reflecting the two limbs of the definition of 'capital value' in s 4(1) of the VL Act. Further, the applicants say that under option one, the second limb of the definition of capital value still has effect but there are no improvements to which it can be applied. Whereas option two gives effect to the existence of, and actual condition, of improvements at the date of the interim valuation and applies the second limb of the definition of 'capital value' to those improvements.

  25. I now turn to set out the Valuer-General's preferred construction of the definition of 'capital value' in s 4(1) of the VL Act.

Valuer-General's construction of 'capital value'

  1. In this case the Valuer-General fixed the date of valuation as 1 August 2014 for the general valuation that came into force on 1 July 2015 for the valuation district of Yalgoo.  That means all properties rated GRV within the valuation district of Yalgoo had their GRV assessed at the date of valuation (1 August 2014).

  2. The Valuer-General submits that the date the valuation comes into force is significant for the following reasons. First, it is the date by which the general valuation is to be completed by the Valuer-General and provided to the local authorities and other rating and taxing authorities, for example the Shire. Second, valuations completed by the Valuer‑General supersede valuations of GRV or UV previously in force under the VL Act for that land. Finally, it is the date from which local governments and other rating and taxing authorities may use those valuations for their purposes.

  1. According to the Valuer-General, he undertakes general valuations in regional and remote areas usually every five years.  The date of valuation of the last general valuation for Yalgoo was 1 August 2014 which came into force on 1 July 2015 (per the Western Australian Government Gazette of 14 July 2015).  The next general valuation is (was) 1 July 2022.

  2. In this case, an interim valuation was triggered by the Minister's 2020 determination.  The Valuer-General says that an interim valuation may be undertaken for GRV purposes where:

    (a)improvements on a property change from their previous state at the date of valuation of the general valuation, such as by way of addition, improvement or demolition or change of use; and/or

    (b)the subject sites were not previously valued or valued separately; or

    (c)it is otherwise necessary or expedient for any reason for the land to be valued.

  3. The Valuer-General states that if an interim valuation of the subject sites is required, it follows that the requirements as set out in s 23 of the VL Act must be complied with. Importantly, according to the Valuer­General, the valuation is not by reference to the level of values at the date of the interim valuation. Rather, s 23 of the VL Act requires the valuation to be conducted by reference to the level of values applying at the date of valuation.  This is because the purpose of the interim valuation is:

    (a)to capture a change to the property arising from, for example, a change in the level of improvements on the subject sites, but to value that changed property at the date of valuation level of values; or

    (b)where a property was not previously valued as part of the previous general valuation, due to it not being previously rateable or only being brought into existence, to ensure it is valued at a level commensurate with other similar properties valued as part of the last general valuation.

  4. Consequently, it is the position of the Valuer-General that the best way to assess value is to 'notionally assume' that the property had existed in its changed form with the improvements to the subject sites, at the date of valuation (1 August 2014).  The reason for this is to ensure that the interim value coordinates or aligns with other properties that are the same or similar that have already been assessed as part of the general valuation.  In other words, this ensures that the assessment of GRV reflects the level of values that existed at the date of valuation which includes the state of the market at the date of valuation.

  5. In this case, the Valuer-General had originally valued the subject sites together at the date of valuation.  The subject sites were vacant land at the date of valuation.  Then, in 2015 the Valuer-General had not considered that a GRV or UV would be reasonably required for the subject sites before the next general valuation was required (which was ultimately determined to be 1 July 2022).  The Valuer-General submits that if had he valued the subject sites in 2015, he would have valued the subject sites, vacant land, at the date of valuation and assessed them at the date of valuation level of values.

  6. Once the subject sites were developed in 2016, the Valuer General says it was open to him to form the view that the subject sites would be subject to GRV for some rating, taxing or other purpose, prior to the next general valuation (1 July 2022) and therefore would be 'rateable land'.  Further, the Valuer-General submits that if had he done an interim valuation of the subject sites in 2016 it was appropriate for him to value the subject sites as though the improvements were newly constructed (though not necessarily of new materials) at the date of valuation and assessed them at the date of valuation level of values.

  7. In addition, the Valuer-General's position is that when the subject sites were further developed in 2019, he could have undertaken a further interim valuation to account for the further additions by valuing the subject sites as though the improvements in 2019 had been newly constructed (though not necessarily of new materials) and the additions also as built at the date of valuation and assessed at the date of valuation level of values. 

  8. The Valuer-General says he applied the same valuation methodology when he ultimately undertook an interim valuation following the Minister's 2020 determination.  That is, the valuation of the subject sites was to value the improvements made to the subject sites in 2016 and 2019 as though they had been newly constructed (although not necessarily of new materials) and the additions were also as built and assessed at the date of valuation and assessed at the date of valuation level of values. 

  9. According to the Valuer-General, in order for the subject sites to be valued in accordance with the level of values of prevailing of the same or similar land, the subject sites are assessed as if they were in situ new (although not necessarily new materials) at the date of valuation in order to align with prevailing level of values of the same or similar land at the date of valuation.  In other words, what is being adjusted for in the interim valuation in this case is the degree or scale of improvements to the subject sites; otherwise the relativities and coordination of value between land with the same or similar characteristics is entrenched at the date of valuation until the next date of valuation prompted by the next general valuation (which in this case was 1 July 2022).

  10. What is being assessed, according to the Valuer-General, is the change to the subject sites at the date of valuation level of values. 

  11. The Valuer-General provided the following example to explain the rationale for the 'notional assumptions' used for the interim valuation.[12]

    … A 50 unit TWA village was completed on 1 August 2014.  Another identical 50 unit TWA village was constructed immediately next to the first TWA village in 2018 on an identical site for which an interim valuation was determined by the [Valuer-General] to be required.  Both TWA villages ought to be identical GRVs for a [date of valuation] of 1 August 2014[.]

    [12] HB at pages 20 to 21.

  12. The Valuer-General says that, by reference to the above example, there is no way to account for the difference in age between the 2014 and 2019 TWA village when considering a 2014 date of valuation and to otherwise maintain the relativities and coordination between the two properties.

  13. According to the Valuer-General it is not appropriate to have regard to the fact that in actuality some of the improvements on the subject sites were four years old when the interim valuation was undertaken.  Rather, according to the Valuer-General the appropriate assumption to make is to 'notionally assume' that the improvements on the subject sites, that existed at the time of the interim valuation, existed at the date of valuation at that date's level of values, that is on 1 August 2014.  Consequently, it is not appropriate, according to the Valuer-General to take into account deprecation of the improvements at the date of valuation for the interim valuation for the 2020/21 year of assessment.  The reason for this submits the Valuer-General is for fairness and equity for all ratepayers and taxpayers.  Otherwise, according to the Valuer‑General it would be necessary to account for depreciation in all other similar or same properties where depreciation would result in a change of value to the extent it would warrant an interim valuation.

  14. The Valuer-General submits that depreciation is not considered to be a factor which warrants an interim valuation of rateable land on the valuation roll for the following reasons.  First, it is difficult to determine in most instances the degree to which any deprecation changes the value of a property when other factors such as market variation also impacts on values.  Second, it cannot be the case that the calculation of an interim value must prompt the pre-existing values of other properties to be amended.  Third, as a matter of practicality, it cannot be the case that values on the valuation roll must be adjusted for depreciation across the vast number of improved properties in Western Australia between general valuations.

  15. In conclusion, the Valuer-General submits that in his interim valuation following the Minister's 2020 determination that required the subject sites to be GRV assessed at the date of valuation for the 2020/21 year of assessment, it was appropriate for him to 'notionally assume' that the subject sites are subject to the level of improvements that existed at the date of decision to undertake an interim valuation (in the 2020/21 rating year) and that those improvements were in situ at the date of valuation (1 August 2014). On that basis, the Valuer-General submits that in determining the 'capital value' of the subject sites in the second limb of the definition in s 4(1) of the VL Act (see the underlined part of the definition above at [1]) there is no basis in calculating the estimated replacement cost of the improvements to make an allowance for depreciation as no physical depreciation had occurred at that date (that is, at the date of valuation).  In other words, the Valuer-General submits that for the interim valuation where the GRV was assessed at the date of valuation the allowance for physical depreciation of the improvements to the subject sites was nil.

  16. As already explained the fundamental dispute between the parties is whether the depreciation of the improvements to the subject sites from the construction in 2016 through to the first time the subject sites were GRV assessed (the 2020/21 year of assessment) should be provided for. The dispute is resolved by the proper construction of the second limb of the definition of 'capital value' in s 4(1) of the VL Act as follows.

Principles of statutory construction

  1. The principles of statutory construction are well established as stated by the High Court (McHugh, Gummow, Kirby and Hayne JJ) in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, at [69] (Project Blue Sky) as follows:

    The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.  The meaning of the provision must be determined 'by reference to the language of the instrument viewed as a whole' … [T]he process of construction must always begin by examining the context of the provision that is being construed.

  2. The purpose is part of the context.  'Context is understood in its widest sense to include not just the text of the [relevant] Act but also the existing state of the law and the mischief which the statute was meant to remedy':  CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at [88].

  3. In these proceedings, it is therefore in the context of the VL Act which includes the legislative history of the provision, and how the legislation was intended to confirm or change the previous law[13] that the definition of 'capital value' in s 4(1) is to be properly construed or interpreted. In other words, the object of construction is to 'give the words ['capital value'] of [s 4(1) of the VL Act] the meaning that the legislature is taken to have intended them to have'.[14]

    [13] Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at 39.

    [14] Project Blue Sky at [78].

  4. These principles of statutory interpretation were recently summarised by the Court of Appeal (Buss P, Murphy JA and Beech J) in Director General of Department of Transport v McKenzie [2016] WASCA 147 at [45] to [48].

Purpose of the VL Act

  1. In order to properly construe the definition of 'capital value' in s 4(1) of the VL Act, it is necessary to understand the purpose of the VL Act.

  2. Prior to the enactment of the VL Act, most of the valuation work in Western Australia was carried out by the Commissioner of State Taxation where the various rating and taxing Acts empowered him to perform this duty. There were also other provisions which permitted, under certain conditions, local authorities either to employ their own staff valuers or employ private values to determine valuations. Following a committee of inquiry into rates and taxes attached to land valuation chaired by Mr Gerald Keall, in 1978 the Valuation of Land Bill 1978 (WA) (Bill) for the enactment of a Valuation of Land Act, embodying a number of the recommendations by the committee of inquiry was passed by the Western Australian government.[15]

    [15] Valuation of Land Bill 1978 (WA) Second Reading Speech, 24 August 1978 at page 2615.

  3. The long title of the VL Act provides that the VL Act is 'An Act to provide for the valuation of land and for other purposes'.

  4. The purpose of the VL Act is for the valuation of land in Western Australia. It follows that the Valuer-General is tasked with independently 'valuing' land in Western Australia and maintaining the valuation roll in accordance with the provisions of the VL Act. The VL Act therefore establishes a central valuation authority which records and co-ordinates values and the authority carries out valuations on property if practicable for all rating and taxing purposes.

  5. Importantly the VL Act does not deal with rates and taxes. The VL Act is a valuation measure and not a rating or taxing measure. In other words, the VL Act deals with valuations upon which rates are eventually struck by the rating and tax authorities, for example the Shire in this case, and it sets standards and procedures on how values, for example UV and GRV, are to be set. It is in the interest of ensuring that valuations used for tax and rating bases are completely unbiased that the Valuer-General under the VL Act was given the sole control of determining values.

  6. A 'valuation' or 'valuing' has been described as an art and not a science and it involves the exercise of many subjective judgments, and the steps in reasoning are not always able to be articulated fully:  Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 per Privy Council. Further, the task of 'valuation' involves an inquiry about which reasonable minds may well differ widely: Boland v Yates Property Corp Pty Ltd [1999] HCA 64.

  7. A number of different valuation methodologies are contemplated by the VL Act's definition of UV and GRV.

  8. A general valuation may be described as a snapshot of values in a valuation district at the date of valuation reflecting both the condition and age of improvements and the property market. 

  9. An interim valuation, on the other hand, must be undertaken by the Valuer-General where in his opinion the value of the land has for any reason significantly increased or decreased in relation to the value of the land of the same or a similar character in the same valuation district.

  10. The VL Act also provides for a system of objection and review. Where a person is dissatisfied with a valuation of land an objection may be made on the ground that the valuation is not fair or is unjust, inequitable, or incorrect, whether by itself or in comparison with other valuations in force under the VL Act (s 32(1) and s 32(3) of the VL Act).

  11. In summary, according to the then Treasurer's Second Reading speech of the Bill, the VL Act is:[16]

    … designed to give this State uniform provisions for making valuations for rating and taxing purposes, removing anomalies in the existing law, simplifying procedures, and enabling improved efficiency in the control and co-ordination of values, together with common objection and appeal procedures[.]

    [16] Ibid, at page 2617.

  12. Finally, the VL Act is to 'preserve equity as between people within valuation districts and the like'.[17]  The VL Act does this by providing uniformity in standards of valuation from one local authority to the neighbouring local authority. 

Capital value

[17] Ibid, 19 September 1978 at page 3213.

  1. In this case, the GRV of the subject sites is to be the 'assessed value' of the subject sites at the date of valuation for the 2020/21 year of assessment (s 4(1) of the VL Act). The assessed value of the subject sites is 5% of the 'capital value' of the subject sites at the date of valuation. As the parties agree the capital amount that the subject sites might reasonably be expected to realize upon sale cannot reasonably be determined, the 'capital value' of the subject sites is to be calculated by the summation of:

    (a)the UV of the subject sites; and

    (b)the estimated replacement cost of improvements to the subject sites after making such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances.

  2. In the Bill the only reference to 'capital value' is a reference that the term appears in the definitions section.  However, the term is not explained. 

  3. The parties agree on the interpretation of the first limb of the definition of 'capital value' in s 4(1) of the VL Act. It is the UV of the subject sites at the date of valuation. It is common ground that the UV component of the subject sites is $315,333 for the TWA village and $220,000 for the admin/workshop.

  4. It is the second limb of the definition of 'capital value' in s 4(1) of the VL Act where the parties have put forward different and alternative interpretations; in particular in regards to physical depreciation.

Physical depreciation

  1. The applicants' say an allowance should be made for depreciation of the improvements to the subject sites. 

  2. The Valuer-General says the improvements to the subject sites are taken into account as they were in at existence at the date of the interim valuation (August 2020) however the allowance for physical depreciation was nil at the date of valuation (1 August 2014) for the 2020/21 year of assessment.

  3. The term 'physical depreciation' is used in the second limb of 'capital value' in s 4(1) of the VL Act. However, the term is not defined in the VL Act. There is no explanation of the term in the Bill. Therefore, the term is to be interpreted in accordance with its ordinary and current meaning unless the legislation indicates an intention to depart from the accepted meaning of the work: Cooper Brookes (Wollongong) Pty Ltd v FCT (1981) 147 CLR 297 at [310]. There is nothing in the VL Act to indicate an intention to depart from the ordinary and current meaning of the term 'physical depreciation'.

  4. According to the Macquarie Dictionary Online, the noun 'depreciation' relevantly means:

    1.  a decrease in value due to wear and tear[.]

  5. According to the Macquarie Dictionary Online, the adjective 'physical' relevantly means:

    2.  of or relating to material nature; material[.]

  6. Ordinarily then the term, 'physical depreciation', means the decrease in value due to wear and tear, in this case the wear and tear of the improvements to the subject sites.

  7. As the purpose of the VL Act is for the valuation of land, the allowance for physical depreciation, or the wear and tear of the improvements to the subject sites is to be considered in the context of the valuation being undertaken. In other words, the term 'physical depreciation' is not to be read or interpreted in isolation but must be read or interpreted in such a way that it fits in with the other provisions of the VL Act and in this case, in the context of an interim valuation (rather than a general valuation). Crisford DCJ expressed this in Timberside Villas Management Pty Ltd v Parker [2005] WADC 246 at [39] as follows:

    … Different sections must be read in such a way that they fit in with one another.  This may require a section to be read more narrowly than it would if stood on its own (Chikonga v Minister for Immigration & Multicultural Affairs (1997) 47 ALD 49 at [51]).

  8. The VL Act does not prescribe the method for calculating the physical depreciation of improvements.

  9. However, in Western Australian Meat Marketing Cooperative and Valuer-General [2005] WASAT 227 at [44] to [45] the Tribunal held that the straight line method (and not the diminishing value method) of depreciation, which assumes a constant rate of depreciation over the useful life, is the appropriate method to use to depreciate improvements where the GRV of the land in question had to be determined using the capital value based assessment. In that case, the relevant date of valuation was 1 August 2003 and the majority of improvements were constructed when the land was developed as an abattoir in 1973, that is before the date of valuation.

  1. Taking all of the above into account, in my view, the definition of 'capital value' in s 4(1) of the VL Act properly construed, where the capital value of land cannot reasonably be determined on what the land might reasonably be expected to realize upon sale, means the summation of:

    (a)the UV of the land (in this case the subject sites); and

    (b)the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical depreciation and such other factors as are appropriate in the circumstance

    where physical depreciation, or wear and tear, of the improvements is to be calculated using the straight line method of depreciation and that the allowance for physical depreciation may be nil.

  2. It is in the context of the valuation, in this case an interim valuation, that the term physical depreciation is to be properly construed.

  3. While the applicants took issue with the Valuer-General 'notionally assuming' the existence of the improvements to the subject sites at the date of valuation for the 2020/21 year of assessment, the task of 'valuation' does in different circumstances require an artificial (or notional) value to be determined.  For example, see Beiler v Valuer­General (1980) 23 SASR 385 (1980) 42 LGRA 131 where it was necessary to determine the notional value of a perpetual Crown lease. Therefore, for rating and taxing purposes, the 'capital value' may be artificial (or notional) in relation to the particular property at the date of valuation. An interim valuation is, in my view, one of those circumstances when an artificial (or notional) value may be required to be determined at a particular date of valuation for a later year of assessment.

  4. The requirements for an interim valuation are set out in s 23 of the VL Act. Section 23(4)(b) provides that where there has not been a previous general valuation under the VL Act of rateable land within the same valuation district as that the relevant property, then the value of the property is to be determined in accordance with the level of values prevailing at the time of the last general valuation of land in that valuation district made under any of the rating and taxing Acts. Further, s 23(5) of the VL Act provides that the valuation shall come into force and supersede any previous valuation of GRV or UV, as the case requires, in force under the VL Act and affecting the land to which the valuation relates as from such day, whether before or after the day on which the valuation is made, as the Valuer-General determines.

  5. Mr Cousins in his statement,[18] which I accept as a submission by the Valuer-General, stated that typically, interim valuations are for subdivisions of land, new buildings, additions to improvements, change of use and demolitions.  They are also undertaken when properties become rateable or non-rateable by rating or levying authorities including in this case by the Minister's 2020 determination.

    [18] HB at pages 294 to 296.

  6. Returning to s 23(4) of the VL Act, the interim valuation must reflect the property market at the date of valuation of the last general valuation (and not at the date of the interim valuation).  I agree with the Valuer-General's position that:[19] 

    It can be seen that the factor that is being adjusted for via interim valuations is this particular instance is the degree or scale of improvements on site; otherwise the relativities and coordination of value between land with the same or similar characteristics is entrenched at the [date of valuation] (until the next [date of valuation] prompted by the next general valuation)[.]

    [19] HB at page 20.

  7. Further, in my view, the ongoing physical depreciation of the improvements on a property valued on the 'assessed value' basis over the years between general valuations (in this case 1 July 2015 and 1 July 2022) cannot be the trigger for an interim valuation as all improvements on properties that are valued as part of the general valuation will age each year the general valuation remains in force. Such an approach supports the purpose of the VL Act including the maintaining of a valuation roll of coordinated property values which is consistent with s 32(3) of the VL Act that enables an objection to a valuation of land to be made if the valuation is not fair or is unjust, inequitable or incorrect, whether by itself or in comparison with other property valuations in force under the VL Act.

  8. There are two alternatives to the interpretation of 'capital value' which were put forward by the applicants. In my view, neither of the options fits the context and purpose of the VL Act for the reasons which follow.

  9. The first alternative is where the applicants say the interim valuation should be determined on the basis of vacant land as there were no improvements to the subject sites at the date of valuation. In my view, this interpretation does not fit the context and purpose of the VL Act because the improvements to the subject sites did exist during the rating year (2020/21 financial year) when the interim valuation was required to be undertaken as a result of the Minister's 2020 determination, and it is the reason for the basis of the rating being changed from UV to GRV. Had improvements not been made to the subject sites, the subject sites would have continued to be valued as UV as vacant land.

  10. The second alternative put forward by the applicants is that the estimated replacement cost of the improvements is to have regard to their condition at the date of the interim valuation (in August 2020). In my view, this approach does not fit the context and purpose of the VL Act because s 23(4) of the VL Act requires that the interim valuation reflect the property market at the date of valuation of the relevant general valuation (and not at the date of the interim valuation).

  11. Finally, following Project Blue Sky, if I was to accept the construction of 'capital value' in s 4(1) of the VL Act in the context of an interim valuation, as preferred by the applicants, in my view, that would frustrate the purpose of the VL Act. To conclude otherwise, in my view, would require the Valuer-General to undertake an interim valuation whenever there was a decrease in the value of the improvements to a property because of physical depreciation. I refer to the reasons set out by the Valuer-General (see above at [95]) to support this conclusion.

  12. I turn to consider the remainder of the second limb of the definition of 'capital value' in s 4(1) of the VL Act.

  13. The applicants do not assert that an allowance should have been made for 'obsolescence' in determining the 'capital value' of the subject sites. 

  14. Obsolescence is different to physical depreciation.  'Obsolescence' is defined as follows:[20]

    … buildings which are either inadequate or excessive or of unsuitable design for current requirements will also suffer from economic obsolescence.  Their notional replacement cost less depreciation would therefore have no meaning, because they would not be replaced by comparable buildings[.]

    [20] RO Rost and HG Collins, Land Valuation and Compensation in Australia, (2nd ed, 1978), page 112.

  15. In my view, if the improvements on the subject sites were inadequate or unsuitable then it would have been appropriate to make an allowance for obsolescence in determining the 'capital value' of the subject sites at the date of valuation for the 2020/21 year of assessment. 

  16. Finally, the applicants did not put forward any other factors that should be taken into consideration, in the circumstances of this case where an interim valuation was triggered by the Minister's 2020 determination, in determining the 'capital value' of the subject sites at the date of valuation for the 2020/21 year of assessment.

Conclusion

  1. For the foregoing reasons, the application to the Tribunal for review of the GRV of the subject sites at the date of valuation for the 2020/21 financial year of assessment is dismissed.  Accordingly, the correct and preferable decision in relation to the review is that:

    (a)the GRV for the TWA village is $398,400 at the date of valuation for the 2020/21 financial year of assessment; and

    (b)the GRV for the admin/workshop is $52,000 at the date of valuation for the 2020/21 financial year.

Orders

The Tribunal orders:

1.The application for review is dismissed.

2.The decisions under review are affirmed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MS R PETRUCCI, MEMBER

31 AUGUST 2023


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