HTI Watson Pty Limited v Commissioner for ACT Revenue
[2020] ACAT 30
•5 May 2020
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
HTI WATSON PTY LIMITED v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2020] ACAT 30
AT 33/2019
Catchwords: ADMINISTRATIVE REVIEW – land valuation – lease variation charge – methods of valuation – comparable sales method – full hypothetical development method – hybrid method – principle in Toohey’s case – comparable sale method preferable
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 68
Planning and Development Act 2007 ss 276B, 277, 277A, 407, 408A
Rates Act 2004 s 6
Cases cited:Boland v Yates Property Corporation Pty Ltd (1994) 74 ALJR 209
Commonwealth Custodial Services Pty Ltd v Valuer-General (2007) 156 LGERA 186
Doherty v Commissioner of Highways (1974) 7 SASR 57
Estate of James v Valuer-General (1942) 15 LGR (NSW) 110
Fenton Nominees v Valuer-General (1981) 27 SASR 258
Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275
ISPT Pty Ltd and City of Melbourne [2007] VCAT 652
Krisgay Pty Ltd v Valuer-General [2007] NSWLEC 600
Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111
Marroun v Roads and Maritime Services [2012] NSWLEC 199
Nap Nap Station Pty Ltd v Valuer-General (1989) 72 LGRA 275
Toohey’s Ltd v Valuer-General (1925) AC 439
Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160
Waalt Homes Pty Ltd v Road Construction Authority (1984) 64 LGRA 346
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
Texts/Papers cited: Alan A Hyam, The Law Affecting Valuation of Land in Australia (4th ed, 2014)
Tribunal: Senior Member R Orr QC (Presiding)
Senior Member D Lovell
Date of Orders: 5 May 2020
Date of Reasons for Decision: 5 May 2020
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 33/2019
BETWEEN:
HTI WATSON PTY LIMITED
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL:Senior Member R Orr QC (Presiding)
Senior Member D Lovell
DATE:5 May 2020
ORDER
The Tribunal orders that:
The decision of the respondent in a notice dated 18 October 2018, as confirmed in a notice dated 11 April 2019, in relation to the lease variation charge payable by the applicant for the variations concerning the Crown lease of block 2 section 64 Watson is set aside and replaced by a substitute decision that the before value (V2) is assessed to be $7,100,000 and the after value (V1) is assessed to be $26,350,000.
The matter is remitted to the respondent for a determination of the lease variation charge based on these amounts.
………………………………..
Senior Member R Orr QC
Senior Member D Lovell
REASONS FOR DECISION
On about 1 April 2016 HTI Watson Pty Limited (HTI Watson or applicant) agreed to purchase block 2 section 64 Watson which was about 44,215 square metres (subject site) for $8,600,000. [1]
[1] Exhibit T1 page T180; exhibit A2, tab 2
On about 13 December 2016 the applicant lodged a lease variation and development application (DA 201630707) (development application or DA ) in relation to the subject site to vary the Crown lease to include a broader range of uses, to subdivide the subject site into 16 blocks, resulting in seven new Crown leases, and for staged construction of 319 residential dwellings. The lease variation and DA were approved subject to conditions on about 31 October 2017.[2]
[2] Exhibit T1 pages T101 and following, especially pages T180-T183, and page T41 and following.
The original lease purpose clause was for:
… the transmission of transient images and/or sounds and/or other matters permitted by the Broadcasting and Television Act and for the purpose of doing all such other things allied thereto or incidental or conducive to the attainment thereof.[3]
The new leases provided generally for commercial accommodation, limited to serviced apartments, residential use, and in some cases broader commercial uses or other uses, and reflected the subdivision of the original Crown lease into 16 blocks resulting in seven leases.[4]
[3] Exhibit T1 page T227
[4] Exhibit T1 page T101 and following. There was an amendment in relation to the purpose on one of the leases, see exhibit T1 page T39
Under section 276B of the Planning and Development Act 2007 (Planning Act), the ACT Planning and Land Authority must not execute a chargeable variation of a nominal rent lease unless the lessee has paid to the Territory the amount of a lease variation charge (LVC). In summary terms, the LVC is worked out on the basis of the difference between the unimproved value of the lease as varied (V1 or the after value) and the unimproved value of the lease as not varied (V2 or the before value). The LVC is 75% of this amount with various remissions (sections 277 and 277A).
The ACT Valuation Office in a letter dated 19 December 2017 assessed the V2 for the subject site to be $3,530,000 and V1 to be $27,500,000.[5] On this basis the Commissioner for ACT Revenue (Commissioner or respondent) issued a notice of assessment dated 18 October 2018 for the LVC in an amount of $7,525,625 (original decision).[6]
[5] Exhibit T1 pages T572-T585
[6] Exhibit T1 pages T553-T555
HTI Watson applied for a reconsideration of this original decision. The Commissioner confirmed their original decision in a letter dated 11 April 2019.[7]
[7] Exhibit T1 pages T12-T14
HTI Watson now applies to this Tribunal for review of that decision.
Summary of Tribunal decision
At the beginning of this hearing and throughout most of it the respondent maintained their position that the before value, V2, was $3,530,000. However in closing submissions, the respondent agreed with the applicant’s before value of $7,100,000.[8] The Tribunal briefly considers, and does not see a basis for rejecting, this agreed position as the before value (V2).
[8] Respondent’s closing submissions at [2]
The respondent maintained its position that the after value or V1 was $27,500,000.[9]
[9] Respondent’s closing submissions at [5]
The applicant’s position was that the after value was $18,000,000.[10] This figure was obtained by a number of methods. One was a full hypothetical development method. Another was through some comparable sales, with the applicant in the end regarding the sale of block 36 section 64 Watson as particularly comparable. But the primary method was called a hybrid method which involved a calculation of the value of the land based on comparable sales of what were said to be ‘development ready’ blocks (a figure of $32,726,000), less a figure for profit and risk (which gave a figure of $28,457,000, close to the respondent’s value at paragraph [9] above), and then less the cost of required civil works to get the subject site to the development ready stage (which gave a figure of $19,078,832). In summary the major difference between the parties was whether the civil works cost should be deducted in this assessment.
[10] Applicant’s closing submissions at [5] and [107]
The respondent principally argued that the hybrid method was not available. The respondent also argued that its version of a comparable sales approach was preferable.
The Tribunal has some legal and factual concerns about the use of the hybrid method and the full hypothetical development method by the applicant. The Tribunal is of the view that the comparable sales method is preferable and possible in this case. The Tribunal cannot see how the comparable sales method as applied by the applicant supports the applicant’s after sale (V1) amount. The Tribunal can generally see how the comparable sales method as applied by the respondent supports the respondent’s after sale (V1) amount. The Tribunal’s own assessment of the after value (V1), based on the material available and focusing on a few key comparable sales, is $26,350,000. This is close to the respondent’s valuation, and is a reduction of about 20% from the applicant’s comparable sales value obtained by the hybrid method, but without its deductions. In our view $26,350,000 is the appropriate figure for the after value (V1).
The Tribunal therefore decides that the decision of the respondent on 18 October 2018, confirmed on 11 April 2019, is set aside and replaced by a substitute decision that the before value (V2) is assessed to be $7,100,000 and the after value (V1) is assessed to be $26,350,000. The matter is remitted to the respondent for a determination of the lease variation charge based on these amounts.
Background
Section 277 of the Planning Act relevantly provides:
Lease variation charges—s 277 chargeable variations
(1)The commissioner for revenue works out the lease variation charge for a s 277 chargeable variation of a nominal rent lease as follows:
LVC (V1-V2) x75%
(2)In this section:
LVC means the lease variation charge payable for the s 277 chargeable variation of the lease.
V1—…
(b)for a variation that is a consolidation or subdivision, means the capital sum that the new lease or leases to be granted under the consolidation or subdivision might be expected to realise if—
(i)the consolidation or subdivision were to take place as proposed; and
(ii)the new lease or leases were genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require; and
(iii)the rent payable throughout the term of the new lease or leases were a nominal rent.
V2—
…
(b)for a variation that is a consolidation or subdivision, means the capital sum that the lease or leases to be surrendered under the consolidation or subdivision might be expected to realise if—
(i)no consolidation or subdivision were to take place during the remainder of the term of the surrendered lease or leases; and
(ii)the lease or leases were genuinely offered for sale immediately before the consolidation or subdivision on the reasonable terms and conditions that a genuine seller would require; and
(iii)the rent payable throughout the term of the lease or leases to be surrendered were a nominal rent.
(3)If the amount worked out as V1 is equal to or less than the amount worked out as V2, no lease variation charge is payable.
(4)If the development approval for the relevant development application relates to 2 or more s 277 chargeable variations, V1 and LVC are worked out as if the s 277 chargeable variations were a single s 277 chargeable variation of the lease.
Section 277A provides in part:
Lease variation charge under s 277 — improvements
(1)In working out V1 and V2 under section 277, an improvement in relation to the land comprised in the lease must not be taken into account.
Note Power to make a regulation in relation to a matter includes power to make provision in relation to a class of a matter (see Legislation Act, s 48 (2)).
(2)However, an existing improvement by way of clearing, filling, grading, draining, levelling or excavating the land may be taken into account.
‘Improvement’ is broadly defined in section 277A(3). Although the expression is not used, the valuation concept in this context is similar in some respects to that of the ‘unimproved value’ of land, which is defined in section 6 of the Rates Act 2004.
The terms of section 277(2), the definition of V1, paragraph (b)(ii), suggest that each of the new leases should be valued separately. Neither party did this, and rather valued the new leases as one entity. No issue was raised in relation to this by the parties in the hearing.
The applicant originally provided to the respondent a valuation by Knight Frank, dated 7 November 2016.[11] This proposed:
(a)an after value (V1) of $15,475,000; and
(b)a before value (V2) of $8,845,000.
[11] Exhibit T1 pages T204-T221
The valuation of the ACT Valuation Office’s first assessment was:
(a)an after value (V1) of $27,500,000; and
(b)a before value (V2) of $3,530,000.[12]
This valuation was the basis of the original decision set out above at paragraph [5].
[12] Exhibit T1 pages T572-T585
The applicant sought a review of the original decision, based on a further valuation by MMJ.[13] This provided for:
(a)an after value (V1) of $23,150,000; and
(b)a before value (V2) of $14,500,000.
[13] Exhibit T1 pages T258-T304
A reconsideration by the ACT Valuation Office came to:
(a) an after value (V1) of $27,500,000; and
(b)a before value (V2) of $3,530,000.[14]
This was exactly the same as the previous assessment by the Office.
[14] Exhibit T1 pages T188-T196
The decision under review was set out in a notice of assessment dated 11 April 2019. This stated it was for the subject site, and noted the DA. It provided for a LVC of $17,977,500. A number of deductions were made from this charge which provided for an amount payable of $7,525, 625.[15] The earlier notice of assessment was dated 18 October 2018 and had stated the same figures.[16]
[15] Exhibit T1 page T28
[16] Exhibit T1 page T31
However the earlier notice apparently also included a working out statement,[17] which set out:
(a)an after value (V1) of $27,500,000; and
(b)a before value (V2) of $3,530,000;
(c)to give an added value of $23,970,000.
There was some information about the remissions, but these are not in issue in these proceedings.
[17] Exhibit T1 page T33
HTI Watson appeals to this tribunal in relation to this decision.[18] The tribunal’s role when reviewing a decision of an entity is provided for in section 68(2) of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) which says: “The tribunal may exercise any function given by an Act to the entity for making the decision.” Section 68(3) then provides that when reviewing an administrative decision, the tribunal must:
(a)confirm the decision;
(b)vary the decision; or
(c)set aside the decision; and
(i) make a substitute decision; or
(ii) remit the matter for reconsideration by the decision-maker.
[18] See sections 277(1), 277E, 407, 408A and Schedule 1, item 28 of the Planning Act
The tribunal can therefore make its own decision based on the evidence before it. On an appeal to the Supreme Court, Refshauge ACJ in GiusidaPty Ltd v Commissioner for ACT Revenue[19] adopted comments by Zelling J who said in Doherty v Commissioner of Highways:[20]
Judges do not have to accept the valuations of the valuers of either side and frequently arrive at a figure or figures, which constitute a modification or modifications of the figures submitted by one or more valuers. … They are guided in coming to the conclusion by the evidence of the valuers together with the other evidence in the case.
This is also the case in the tribunal.
[19] [2016] ACTSC 275 at [154]-[157]
[20] (1974) 7 SASR 57 at 83
The applicant filed an application for review dated 8 May 2019. The applicant provided a further report for these proceedings by Mr Richard Swinbourne attached to a statement dated 2 August 2019 (exhibit A1). Mr Swinbourne made valuations on a number of bases. For the before value, a comparable sales method was used, and this provided a before value (V1) of $7,100,000.[21]
[21] Exhibit A1 at page 39 (30). Exhibit A1 has two numbering systems, the numbering system for the statement, and the numbering system for the report only which is attached to the statement. In these reasons we give the page number for the statement first, and then the page number for the report only second in brackets; applicant’s closing submissions at [5] and [149]
Mr Swinbourne used a range of bases for assessing the after value (V2). One was what was called the hybrid method which gave an after value of $18,200,000.[22] Mr Swinbourne also had regard to three comparable sales to obtain an after value of $11,400,000.[23] He further had regard to a full hypothetical development method which gave an after value of $17,800,000, adjusted in the hearing to $12,700,000.[24] In conclusion Mr Swinbourne suggested an after value of $18,000,000.[25]
[22] Exhibit A1 pages 47(38) and 50(41)
[23] Exhibit A1 page 50(41)
[24] Exhibit A1 page 50 (41); see also applicant’s closing submissions at [120]
[25] Exhibit A1 page 51(42); applicant’s closing submissions at [5] and [149]
The applicant also provided a report from James Osenton dated 2 August 2018 (exhibit A10).[26] This formed an integral part of Mr Swinbourne’s hybrid method. Both Mr Swinbourne and Mr Osenton gave oral evidence and were cross-examined.
[26] The date of this statement seems to be a mistake; it seems it should be 2 August 2019, since annexure C is dated July 2019.
The applicant provided a wide range of additional documentation. It also provided submissions on the correct and preferable decision (dated 8 August 2019), as well as applicant’s closing submissions (dated 11 November 2019), and applicant’s submissions in reply (dated 26 November 2019).
The respondent provided the T documents (exhibit T1). A witness statement was provided by Geoff McInerney dated 21 August 2019 (exhibit R2). Mr McInerney maintained the position of the respondent set out at above, namely:
(a)an after value (V1) of $27,500,000; and
(b)a before value (V2) of $3,530,000. [27]
[27] Exhibit R2 page 36 at [24]
Mr McInerney gave oral evidence and was cross-examined. The respondent provided a number of documents, submissions on the correct and preferable decision dated 30 August 2019, as well as closing submissions.
Before value (V2)
At the beginning of this hearing and throughout most of it the respondent maintained its position that the before value, V2, was $3,530,000. However in closing submissions, the respondent agreed with the applicant’s before value of $7,100,000.[28]
Applicant’s position
[28] Respondent’s closing submissions at [2]
Mr Swinbourne’s primary comparable sale for the before value was a former research establishment at block 4 section 126 Symonston. This had sold in May 2018 for $3,810,000. Mr Swinbourne adjusted this to $3,924,640 to give a rate per square metre of $127. His second comparable sale was the Australian Defence College at block 1212 Weston Creek (or block 2 section 121 Weston). This had sold in October 2014 for $30,500,000. Mr Swinbourne adjusted this sale, to take out the value of the improvements, to $12,362,360 to get a rate per square metre of $137. A third before sale for the applicant was block 22 section 112 Symonston. This had sold in April 2015 for $6,500,000. Mr Swinbourne adjusted this sale to $5,338,800 to get a rate per square metre of $167. Other sales were also considered. Mr Swinbourne stated that he thought the direct comparison method, where the subject property is compared with other sales and adjustments made, was the most appropriate method here. Having regard to this process, he was of the view that the site value of $160 per square metre of land was appropriate, which gave a before value for the subject site of $7,100,000.[29] The Tribunal is of the view that this is a reasonable approach.
Respondent’s position
[29] Exhibit A1 pages 29(20)-39(30)
Mr McInerney, in his original assessment, looked primarily at the sale of the subject site. He took that sale price of $8,600,000, deducted the value of buildings and car parking, driveways, service lines and landscaping, which he assessed at $4,860,000, to give a before value of $3,740,000.[30] He used $80/sqm to get a rounded value of $3,530,000.[31] A similar approach was taken on the review, though with some regard to comparable sales.[32] Further, a similar approach was taken in Mr McInerney’s statement for these proceedings (exhibit R2) [33] and his oral evidence, though with some regard to comparable sales. The Tribunal thinks there is some doubt about this approach, as there is significant evidence that the property was purchased for development, and was not therefore a useful basis for a before value.
Conclusion on before value (V2)
[30] Exhibit T1 page T576
[31] Exhibit T1 pages T576 and T584
[32] Exhibit T1 pages T188-T192
[33] Pages 13-15
The Tribunal therefore thinks it is appropriate to accept the agreement of the parties that the applicant’s before value should be accepted.
After value (V1)
The remaining dispute is therefore about the after value (V1).
Mr Swinbourne for the applicant and Mr McInerney for the respondent provided detailed reports, gave oral evidence and were cross-examined in relation to their assessment of the after value (V1). They each provided a list of sales which they considered to be evidence of the value of the subject land in the after sale (V1) scenario. They generally analysed the sales to derive unit rates, either on a per dwelling basis or a per square metre basis, to apply to the subject site. As to dwellings, it was accepted by both sides that the whole development would consist of 320 residential dwellings, made up of 170 apartments, 125 townhouses and 25 terraces and commercial and childcare uses.[34] Mr Swinbourne also used two other approaches, a full hypothetical development method and his preferred hybrid method for the after value scenario.
[34] Exhibit A1 page 45(36); exhibit R2 page 32; exhibit T1 page T574
The relevant date of valuation is 31 October 2017. The land has an area of about 44,211- 44,217 square metres; the difference is of no consequence.
Mr Swinbourne tendered a table (exhibit A7) which indicated an increase in the moving annual median price for townhouses over the period March 2014 to October 2017 of 5.19%. Both valuers agreed that the market had been relatively stable over the period 2014 to 2018 and so no adjustment was necessary to most of the sales to account for time.
Applicant’s approach to the after value (V1)
Applicant’s method 1 - hybrid method
Mr Swinbourne’s evidence was that the most appropriate method of valuation was by direct comparison sales, but that there were no sufficiently comparable sales to allow the direct comparison method to be meaningfully utilised, and therefore it was necessary to use another approach.[35]
[35] Exhibit A1 page 43(34); transcript of proceedings 5 September 2019 page 152; applicant’s closing submissions at [108]
Mr Swinbourne did identify 45 sales in his table 4 of his report, but he said that these generally represent the sale of development ready sites, and the subject site was not in this condition.[36] We make an important point here, which we return to below; in relation to the 45 sales, Mr Swinbourne provides very little information. Mr Swinbourne’s comments about them are very generalised, broad brush and conclusionary. Mr Swinbourne does identify three sales of larger land areas in his table 5. He does seem to admit that these are more useful as comparable sales.[37]
[36] Exhibit A1 page 43(34)
[37] Exhibit A1 page 47(38)
It seems that in Mr Swinbourne’s view the task of adjusting these development ready sites to be comparable with the subject site was a difficult one. Because of this Mr Swinbourne preferred what he described as a hybrid method, a blend of the full hypothetical development method and the comparable sales method. Mr Swinbourne stated:[38]
The above market evidence [the 45 sales in Table 4, then the 3 large site sales in Table 5] provides indicators of the value for a wide range of development opportunities. While sales of larger land areas are available, such sales are in fact less comparable due to being located along Northbourne Avenue, within the City area or within prime areas of Inner South Canberra.
… the property can be compared with a number of sales that have occurred across Canberra. The sales above of vacant land sites offered for sale by the ACT Government as part of the Land Release Program are of use. But the principle (sic) difference between the subject property and most sale properties is that this Watson property is much larger in land area.
[38] Exhibit A1 page 43(34)
His report then noted that there are 12 development sites within the subject site within which 320 dwellings of various types are proposed. It then stated:[39]
The sales evidence in Table 4 (Page 31) [the 45 sales] points to appropriate units of value to apply to housing types that can be achieved on development of the subject property. Knowledge of these sale properties assists in categorising the deduced values into the … housing types.
[39] Exhibit A1 page 45(36)
Mr Swinbourne therefore proceeded to assess the after value by ascribing values to some development components across the whole subject site. This included consideration of the childcare, commercial and residential components. The residential split was 170 units/apartments, 125 townhouses and 25 terraces. In evidence, Mr Swinbourne stated that he had compared sites within the subject site development and the sales and considered differences such as sizes of blocks.[40]
[40] Exhibit A1 pages 45-46(36-37); transcript of proceedings 5 September 2019 pages 131-2
Values were then assigned to the elements of the subject site development: childcare; commercial; apartments; townhouses and terraces. It was then said:[41]
While each of the 12 sites is developable in its own right (similar to the sale properties), there are costs relating to the servicing of the broader estate that must be brought to account for the sales evidence to be correctly applied.
[41] Exhibit A1 page 45(36)
The report of the quantity surveyors in relation to the civil works was referred to (exhibit A10), and then it was said:[42]
I have adopted the costs to get the individual sites to a serviced stage to be developable and comparable to the above sale properties.
[42] Exhibit A1 page 46(37)
That is, Mr Swinbourne assessed the after value by ascribing values to the development components across the whole site. This includes consideration of the 12 development lots created over the whole original block, including the childcare, commercial and residential components.
His calculations are as follows:[43]
(a) 170 apartments at $50,000 = $8,500,000
(b) plus 125 townhouses at $150,000 = $18,750,000
(c) plus 25 terraces at $180,000 = $4,500,000
(d) plus childcare site 837 sqm = $600,000
(e) plus commercial site 752 sqm at $500 sqm = $376,000
__________________________________________________________
(f) to give a total gross realisation of: $32,726,000
[43] Exhibit A1 page 45 (36) and 47(38)
This became the gross realisation for the development that fed into the hybrid development calculations. Mr Swinbourne then deducted an amount from this figure for profit and risk allowance, this figure was originally $3,292,609. It was later adjusted to $4,268,609.[44]
[44] Exhibit A1 at page 47(38); exhibit A5; applicants closing submissions at [115]
He then deducted the civil works costs to get the subject site to a development ready state. Initially Mr Osenton’s evidence in these proceedings was that the applicant would incur costs of $10,236,934 in undertaking the civil works required to make the site ready for development. This was adjusted during the course of the proceedings to exclude the cost of demolishing the existing structural improvements.[45] The final figure was $9,378,559.[46]
[45] Exhibit A5
[46] Exhibit A1 page 46(37); applicant’s closing submissions at [116]
In summary therefore Mr Swinbourne’s calculation was as follows:[47]
(a) gross realisation (paragraph [48](f) above) $32,726,000
(b) less profit and risk (paragraph [49] above) $4,268,609
(c) less civil works (paragraph [50] above) $9,378,559
___________________________________________________________
(d) to give a residual value of $19,078,832
Mr Swinbourne further adjusted this final figure in his oral evidence at the hearing to $19,350,000.[48]
[47] Applicant’s closing submissions at [116]
[48] Exhibit A5; transcript of proceedings on 5 September 2019 page 80; applicant’s closing submissions at [107]; see also respondent’s closing submissions at [4]
Mr Swinbourne was asked in cross-examination if this was a valuation method which he used often and he said:[49]
No, it's not but for the benefit of the tribunal, I was trying to present a simpler - a simplified - more step by step, only three steps in it…. [It is simpler than] the method 3 [the full hypothetical development method], which is the customary method.
… it's a static - static approach, it doesn't involve a cash flow and - and if someone's not comfortable with cash flows then this would be a fair indicator and buy the - buy the land and service it and resell it and you take off - it's a calculation of more the hard costs when you're doing work for financiers or others, have regard to the hard costs and these are the hard costs of the development, except for the profit margin in the middle.
[49] Transcript of proceedings 5 September 2019 pages 128-9
Then asked whether the comparable sales method would be more appropriate, he said:
If we had really good evidence but we don't have a really good evidence in this case.
… I don't regard the evidence generally as being comparable to the property, without significant adjustment. And this hybrid approach makes that adjustment.
The applicant’s closing submissions described this approach as based on the hypothesis of a developer purchasing the subject site, planning an estate, servicing the land to a development ready stage, and then on-selling the vacant land to a third party to undertake the construction and sale of the planned dwellings. It was said that the approach was to use sales of development ready sites to ascribe values to each of the prescribed uses, then to calculate a gross realisation figure, and then deduct the amount which it would cost the developer to undertake the civil works required to make the subject site development ready.[50]
Comparable sales method is preferable
[50] Applicant’s closing submissions at [114]
The appropriateness of this approach was a key remaining dispute in this case, so it is necessary to address a number of issues in relation to it. First, it is not a pure comparable sales approach. It is clear that such a comparable sales approach is the preferred method of valuation. (see paragraphs [81]-[83] below). Mr Swinbourne admitted this (see paragraph [40] above). Mr Swinbourne made some efforts to implement such an approach (see paragraphs [84]-[86] below). The respondent attempted to take this approach (see paragraphs [99]-[110] below). Of course if this approach is not possible, then other approaches must be investigated. But in our view some assessment needs to be made as to whether the comparable sales method is possible. The Tribunal makes further comments in relation to how this could be done below at paragraphs [118]-[155].
Rule in Toohey’s case
Second, the respondent argued that the hybrid approach was prohibited by the rule in Toohey’s, Ltd v Valuer-General[51] (Toohey’s case). It is necessary to spend some time discussing what that rule is, and whether it applies here.
[51] [1925] AC 439
The principle in Toohey’s case appears to be that it is not appropriate when working out the unimproved value of a subject property to ascertain what the improved value of the subject property is, and then deduct the cost of improving it, to get the unimproved value. In Toohey’s case the valuer took a figure for the subject land which included the bare land, the buildings on it and a licence to sell liquor. The valuer subtracted the value of the buildings but not that of the licence.
The Privy Council said that improvements are to be left entirely out of view when determining the unimproved value as required in that case; they are to be taken, not only as non-existent, but as if they never existed. It was then said:
It is, therefore, to approach the question from a completely wrong point of view to begin with a valuation which takes in the improvements and then proceed by means of subtraction of a sum arrived at by an independent valuation in order to find the required figure. What the Act requires is really quite simple. Here is a plot of land; assume that there is nothing on it in the way of improvement; what would it fetch in the market?[52]
It was said that the valuation should be of the land itself “without any buildings upon it, and without any consideration of the value of the subject as including de facto licensed premises.”[53]
[52] At 443
[53] At 445
The respondent argued that this principle was breached by the hybrid approach taken by Mr Swinbourne. Further, it said that its position was also supported by Valuer-General v Fenton Nominees Pty Ltd (Fenton Nominees).[54] In that case, the High Court said that it was well settled that in establishing what the unimproved value was it is:
…necessary to inquire what the hypothetical purchaser would pay for the land in a notional condition shorn of its improvements and that it is not permissible to arrive at the figure by identifying the value of the site in its improved state and then subtracting the value of the improvements… [55]
But Toohey’s case did not resolve the issue in Fenton Nominees. In that case there were two competing approaches to the valuation of comparable sales, not the subject land which was being valued. But the decision made clear that the principle in Toohey’s case does not speak to comparable sales, because it focuses on the subject land; it does not deny that sales of improved property in the vicinity may be relevant for the purposes of valuing the subject land.[56]
[54] (1982) 150 CLR 160
[55] At [10], citing Toohey’s case at 443
[56] At [15]
The respondent also said that its position was supported by Maurici v Chief Commissioner of State Revenue (Maurici).[57] In that case it was necessary to arrive at the unimproved value of a developed site. The Commissioner fixed this value on the basis of only sales of scarce unimproved parcels of land in the same locality. The High Court said that this was wrong. Rather the valuer, as the appellant had argued:
… should have had regard to all the relevant facts including the scarcity of vacant land, the possibility of a particular and limited class of persons in the market for it, the scarcity or otherwise of improved land, the added value of improvements to comparable lands, and in particular, truly comparable sales, which ideally would include like land similarly improved to the subject land.[58]
[57] (2003) 212 CLR 111
[58] At 122, [21]
This decision confirms the primacy of comparable sales. It confirms the need to look at a range of relevant facts, and use comparable sales of developed land to obtain a figure for the undeveloped subject site. The case supports using the improved value of comparable sites to determine the unimproved value of a subject site. It does not support calculating the unimproved value of a subject site by working out the improved value of that site, and deducting the value of the improvements.
This issue was further considered in detail by the NSW Court of Appeal in Commonwealth Custodial Services Pty Ltd v Valuer-General (Commonwealth Custodial Services).[59] This case concerned a particular statutory provision which was an amended version of the one considered in Toohey’s case, in that it required the valuation on the basis that improvements, other than land improvements, had not been made, but specifically provided that it shall be assumed that land may be used for any purpose for which it is being used, and improvements may be continued or made on the land to enable that use.
[59] (2007) 156 LGERA 186
Chief Justice Spigelman emphasised the importance of the terms of the relevant statutory scheme (see [4]-[6]), and noted he found Toohey’s case unconvincing (at [7]). He stated at [11] that in Maurici, the High Court seemed to affirm that “long practice accepts that it is perfectly rational to value unimproved land by valuing a site in its improved state and deducting the value of the improvements”. However, he stated, on the authority of Toohey’s case, that:
… [T]his rational method for valuing comparable sales is impermissible for valuing the land in issue. … there is a distinction between the two situations because in one case there have been actual sales.[60]
He thought the issue was determined by the emphatic manner in which the High Court expressed its approval of Toohey’s case in Fenton Nominees.[61]
[60] At 190, [11]-[12]
[61] At 191, [15]
Santow JA seemed to agree that the subject land could not be valued on an unimproved basis by deducting the value of improvements from the improved value. However, he does seem to accept that it is possible to assume that the land is unimproved, and then theoretically build on it an imaginary building in order to arrive at a valuation.[62]
[62] At 192, [21]-[22], quoting Estate of James v Valuer-General (1942) 15 LGR (NSW) 110, at 112
Tobias JA provided the most detailed judgment. The case involved the valuation on an unimproved basis of the heritage-listed Commonwealth Bank Building in Martin Place, Sydney. In simple terms, one valuer, Mr Jackson, determined the improved value of the property with its existing heritage listed improvements, and then deducted the added value of those improvements. The other valuer, Mr Hill, derived a land value of the property unaffected by heritage restrictions based on comparable sales of similar unaffected properties. He adjusted that figure to take account of the heritage restrictions and design and layout inefficiencies. Tobias JA accepted Mr Hill’s approach but rejected Mr Jackson’s. His Honour said at 213, [115]:
…in my view there is nothing anomalous in permitting the use of comparable sales of improved land to be used for the purpose of deducing therefrom an unimproved value of the same land which is then applied, with or without adjustments, to the land to be valued but outlawing the use of that method with respect to the land to be valued by valuing it in its improved state and then deducting, in order to obtain its land value, the added value of its existing improvements where the statute as a matter of construction mandates that result. [Emphasis added]
The reasons given for this are that the legislation required that improvements are to be out of view, and that there has been no actual sale of the subject site, as distinct from the comparable sites where there has.[63]
[63] Referring to the decision of Biscoe J in Krisgay Pty Ltd v Valuer-General [2007] NSWLEC 600 at [30]
As the respondent pointed out, these principles have also been set out in Nap Nap Station Pty Ltd v Valuer-General (Nap Nap Station).[64] Further, the comparable sales approach makes the relevant adjustments to the comparable sales, not to the calculated improved value of the subject site.[65]
[64] (1989) 72 LGRA 275, 280
[65] Respondent’s closing submissions at [34]-[36]
The applicant argued that the hybrid model was a rational approach, which should be allowed. In this regard it is true that Callinan J observed in Boland v Yates Property Corporation Pty Ltd[66] that there is no legal principle that purports to, or could close for all times, the categories of methods of valuation which might be acceptable to a particular case. But the cases noted above grapple with this very issue, and all find that the limitation in Toohey’s case should be applied. It is true that some of the judgments discussed above raise issues with Toohey’s case, but all in the end follow it.[67]
[66] (1999) 74 ALJR 209 at [280]; quoted by Tobias JA in Commonwealth Custodial Services at 195, [37]
[67] See also Alan A Hyam, The Law Affecting Valuation of Land in Australia (4th ed, 2014) pages 92-94
The decision in Estate ofJames v Valuer-General (James)[68] did take a contrary view. There Roper J stated that in certain circumstances there is no error involved in a valuer forming his opinion as to the unimproved value of the land by deducting the value of the improvements from the improved value. This is quoted in Nap Nap Station but not followed. There Justice Stein said that he accepted that it was permissible to deduct the estimated value of improvements from the actual sale of a comparable improved property to establish a deduced land value, but he did not consider, since he did not need to, whether this could be done in relation to the subject property. This judgment is another, which confirms that the comparable sale method is the preferable course.[69]
[68] (1942) 15 LGR (NSW) 110
[69] ( (1989) 72 LGRA 275
But in Commonwealth Custodial Services Santow JA and Tobias JA specifically and expressly reject James on the basis of the High Court authorities. Spigelman CJ stated that he finds the reasoning in James to be entirely convincing as to the validity of the mechanism of valuation in issue, albeit Justice Roper’s attempt to distinguish Toohey’s case was difficult to sustain. Spigelman CJ indicated that he was bound by the High Court authorities to follow Toohey’s case.[70] In our view this Tribunal is in the same position.
[70] Spigelman CJ at 191, [13]-[18]; Santow J at 192, [21]-[22]; Tobias J at 201-204, [58]-[72]
The respondent also referred to comments by Gobbo J in Waalt Homes Pty Ltd v Road Construction Authority.[71] As the respondent conceded in its submissions in reply at footnote 2 (to [16]), these seem to be comments about adjustments to a comparable sale. The respondent said that these comments should apply in the same way to the subject site. But the principle in Toohey’s case as applied by the High Court and NSW Court of Appeal and noted above prevents this very approach to the subject site.
Does the rule in Toohey’s case apply to the hybrid method?
[71] (1987) 64 LGRA 346 at 352-3
The applicant argued that this case ultimately turns on its own facts.[72] That is true, but there is clearly a relevant principle here; it is not applied by simply saying the facts are different; it is necessary to ask does the principle apply to these facts.
[72] Applicant’s submissions in reply at [12]
Applying this principle in this case is a matter of some difficulty. As discussed, it seems that Mr Swinbourne did, albeit in a very broad-brush manner, look at comparable sales of what he regarded as partly improved, that is development ready, land to assess the value of the subject site. This seems to be consistent with the rule in Toohey’s case, as discussed in the cases noted above. But Mr Swinbourne then deducted from this assessed value of the partly improved, that is development ready, subject site the cost of civil works to get it to this condition. This seems at least to some extent to be inconsistent with the rule in Toohey’s case. That is it is taking a partly developed value for the subject site and then deducting from this the cost of that development on the subject site. Tobias JA suggested in Commonwealth Custodial Services, as set out in paragraph [65] above, that this is an inappropriate method, that is valuing the subject site in at least a partly improved state, and then deducting, in order to obtain its land value, the cost of the improvements. This seems particularly problematic because these deductions are not calculated on the basis of any actual land sales.
It is true as the applicant argued that it is not trying to include irrelevant improvements into the assessment.[73] It seems to be true that it is only once services are run to the edge of the relevant block that the Territory will issue Crown leases. It is also true that the applicant is by this method attempting to ensure a like for like comparison between the comparable sales and the subject site.[74] The problem is that the applicant used comparable sales to develop a part improved value for the subject site, and then used the cost of those improvements on the subject site to reach the unimproved value. It seems on the basis of Toohey’s case, and the applicant’s position in relation to the need for an assessment without the civil works, that what should have occurred was that the comparable sales themselves should have been adjusted. The respondent said that this approach was not reasonable or necessary, but we have gone to some lengths in this decision to show that this is probably not correct. We do not need to base our decision wholly on this conclusion however, since there are other issues in relation to the hybrid approach.
Other issues with the application of the hybrid method
[73] Applicant’s closing submissions at [124]; applicant’s submissions in reply at [23]
[74] Applicant’s closing submissions at [124]-[126]
There are other concerns we have about the hybrid approach as used by Mr Swinbourne. One is, as we have noted, that he used a very broad-brush approach to the comparable sales. He sets out 45 sales, but provides few details or analysis in relation to them. This provides a general and somewhat shaky basis for his hybrid approach. In particular Mr Swinbourne conceded that some of the properties were not development ready.[75] Further, as the respondent noted, while some of the sales were of small properties, some were of large properties, comparable to the subject site. Further, there was not much clarity in relation to what being development ready meant for the 45 comparable sale sites. There was certainly no assessment provided to the Tribunal that they had all the civil works, which were taken into account for the subject site.[76]
[75] Transcript of proceedings 5 September 2019 pages 137and 141
[76] Respondent’s closing submissions at [30]
When he came to actually apply a comparable sales approach, Mr Swinbourne focused on the details of some specific sales, which in our view was the more appropriate and reliable approach.[77]
[77] Exhibit A1 pages 41-42 (32-33) and 47-48 (38-39)
The second concern follows from this, and is that we are not convinced that the approach of looking at comparable sales and appropriately adjusting these was not available. The comparable sales approach undertaken by Mr Swinbourne and noted below shows this was possible. This approach has the benefit that it relies on arm’s length comparable sales, that is what a purchaser actually paid for the comparable properties.
Third, as the respondent argued, if there is to be an estimate of costs, it should be at the date of the valuation, 31 October 2017. This seems correct, and was apparently accepted by the applicant.[78] Further, Mr Osenton’s first costs summary was prepared in November 2016,[79] at which time he said that the relevant costs were about $1,551,000, similar to that assessed in the MMJ report.[80] But Mr Osenton then updated these costs in July 2019 to $10,237,000, which were then revised down to $9,379,000 to take out demolition costs.[81] This was not only done from an inappropriate date, but this was also a major increase from 2017 to 2019 of over 600%, for which little explanation was given. It was said to be based on recent actually incurred costs, which it was conceded might have involved overestimation,[82] and there was little other explanation for such a significant increase.
[78] Applicant’s submissions in reply at [35]
[79] Exhibit A10 page 7
[80] Transcript of proceedings on 6 September 2019 pages 23 and 28; exhibit T1 page T302; respondent’s closing submissions at [42] and [43]
[81] Exhibit A10; respondent’s closing submissions at [6(e)], [40]-[51]
[82] Transcript of proceedings 6 September 2019 pages 24-25 and 28
The fourth issue is that the applicants purchased one lease, block 2 section 64, Watson (original parcel), in April 2016. This block was subsequently divided into 16 blocks resulting in seven leases (subdivided parcels).[83] The assessment by Mr Swinbourne appears to be based on the proposition that the original parcel is developable in its own right (similar to what he says is the position with the comparable sale properties), but that there are costs relating to the servicing of the subdivided parcels that must be brought to account for the comparable sales evidence to be correctly applied to them. Certainly all the works, which are costed and then deducted, apparently took place within the original parcel, not outside it. However, all the relevant valuation calculations used by Mr Swinbourne, and everyone else, are of the original parcel. They are not of the subdivided parcels, which are the units which were said not to be development ready. If it is the cost of getting the subdivided parcels development ready that is relevant, then this should be applied to the value of each of the parcels, not the value of the whole parcel. Mr Swinbourne did discuss that the site area for the development is 26,014 square metres, 58.9% of the total original site area.[84] However, this does not flow into the relevant calculations.
[83] Exhibit T1, page T101 and ff.
[84] Exhibit A1 pages 43-45(34-36)
Lastly, the applicant put forward no evidence of the general acceptance of this hybrid method. Mr Swinbourne himself admitted that this was not a valuation method which he used often.[85] Indeed there was no evidence he had ever used it before in a formal valuation process, or that anyone else had ever used it. This is not to say that this may not be a useful and rational approach. The question is should it be the principal approach adopted by the Tribunal in this case.
[85] Transcript of proceedings 5 September 2019 pages 128-9
Therefore, we have concerns about the use of the hybrid method as the principal valuation method, based on the principle in Toohey’s case and its adoption by Australian courts, and concerns about the application of the hybrid approach in this case. At very least, we do not think it is an appropriate principal valuation method here. In our view this should be the generally accepted comparable sales method.
Applicant’s method 2 – comparable sales method
The High Court said in Maurici:[86]
16 … The traditional, and usually unexceptionable [valuation] method is to seek out relatively contemporaneous sales of comparable properties between parties at arm's length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yardstick for the valuation of the relevant land.
[86] (2003) 212 CLR 111 at 120, [16]
Justice Sheahan stated in Marroun v Roads and Maritime Services[87] that “it is well established that, if comparable sales are available, their direct comparison should provide the conventional method of valuation”.
[87] [2012] NSWLEC 199 at [196]
It is accepted that in applying this method some sales are highly comparable, others less so. There is a spectrum of possible comparisons.[88] Adjustments may need to be made to the sale prices to account for relevant differences. This approach was used to some extent by both parties, and accepted by them as appropriate. The dispute was as to the outcome of its use.
[88] ISPT Pty Ltd and City of Melbourne [2007] VCAT 652 at [51]-[59]
As we have discussed, Mr Swinbourne submitted in his report at table 4 a list of 45 vacant land sales.[89] In evidence and under cross-examination he suggested that the sale of the bigger blocks were most comparable, and he discussed these in his cross-examination.[90] We agree that the sales of larger blocks are the most comparable to the subject site, so we have focussed on these from Mr Swinbourne’s table 4 list. We give these sales a number for the purposes of this decision, summarise the details here (and further at table 1 paragraph [88] below) and discuss some of them further below:
[89] Exhibit A1, pages 40-41 (31-32)
[90] Transcript of proceedings 4 September 2019 page 54; transcript of proceedings 5 September 2019 pages 137-144, see especially page 141, line 10, which it seems should say “require more work”, that is are closer to the subject site
(a)A.1: 1/38 Wright sold on 6/12/17 for $10,250,000. 15,770 square metres site. 158 dwelling potential.
Reflects $64,873/dwelling; 100 square metres land area per dwelling; $650 per square metre.
(b)A.2: 4/28 Greenway sold on 28/02/18 for $18,000,000. 29,260 square metres site. 240 dwelling potential.
Reflects $75,000/dwelling; 122 square metres land area per dwelling; $615 per square metre.
(c)A.3: 4/64 Wright sold on 18/04/18 for $7,100,000. 10,750 square metres site. 107 dwelling potential.
Reflects $66,355/dwelling; 100 square metres land area per dwelling; $660 per square metre.
(d)A.4: 1/11 Coombs sold on 26/09/18 for $7,060,000. 9,831 square metres site. 98 dwelling potential.
Reflects $72,041/dwelling; 100 square metres land area per dwelling; $718 per square metre.
(e)A.5: 1/70 Lyons sold on 29/03/19 for $16,400,000. 23,289 square metres site. 492 dwelling potential.
Reflects $33,333/unit; 47 square metres land area per dwelling; $704 per square metre.
Mr Swinbourne also relied on more detailed information and discussion of the comparable sales at table 5 of his report.[91] These were as follows:
(a)A.6: 9/64 Watson sold on 28/3/14 for $7,300,000. 29,914 square metres site. The site had potential for development with 110 dwellings (21 separate title dwellings along Negus Crescent and 89 townhouses on three rear blocks).
Reflects a value of $66,364/dwelling; 272 square metres /dwelling; $244 per square metre.
This land required off-site civil works and an extension of Negus Crescent at an estimated cost of $3,200,000. When this was added to the purchase price a dwelling rate of $95,455 results; and a value of $350 per square metre is suggested.[92]
(b)A.7: 36/64 Watson sold in March 2017 for $13,750,000. 23,346 square metres site. This block is a consolidation of the three rear blocks and had the potential for development with 89 townhouses. This site was fully serviced and had water sewer and stormwater mains laid. There had also been extensive land filling and levelling of the site as well as the construction of retaining walls. These had been completed at the vendor’s cost under the conditions of a holding lease. Apart from noting that the sale required adjusting down to take account of the works undertaken by the vendor, no further analysis was completed by Mr Swinbourne.[93] Such further analysis would have been very helpful.
Reflects a value of $154,494/dwelling; 262 square metres/dwelling; $589 per square metre.
(c)A.8: 1/82 Weston sold on 23/11/2017 for $32,210,000. 58,596 square metres site, proposed a development of 245 units. However Mr Swinbourne considered this sale to be ‘out of line’ in the face of other sales and so unreliable.[94]
Reflects a value of $131,469/dwelling; 239 square metres/dwelling; $550 per square metre.
[91] Exhibit A1 pages 41-42 (32-33)
[92] Exhibit A1 page 47(38)
[93] Exhibit A1 page 47(38)
[94] Exhibit A1 page 48(39)
There are no further calculations shown as to how Mr Swinbourne gets to his assessed value on a direct comparison basis of $11,400,000.[95] It is very difficult to see how he arrived at this figure. This represents $258 per square metre of site area and $35,625/dwelling. Nothing in the information provided by, or the discussion of, Mr Swinbourne, directly supports this figure. Figures which seem to emerge from the details of the sales provided by Mr Swinbourne are $350 per square metre, which gives a total figure of $15,475,000. Using $450 per square metre gives a total figure of $19,897,000.
[95] Exhibit A1 page 50(41)
In its closing submissions the applicant seemed to move away from this comparative sales valuation, and focussed on block 36 section 64 Watson (sale A7 above). As discussed, this sold for $13,750,000 in March 2017. The applicant said that the parties agreed that the sale of this site was the most important in terms of assessing the after value, which suggests that for them it was the most important comparable site.[96] Much evidence was taken in relation to this site, in particular to show that the vendor was liable to carry out civil works on the site. In its closing submissions the applicant stated that while it agreed that the site is important for the after value (V1), that an adjustment to take into account the fact that it was sold with servicing in place was necessary. It was said that: “When so analysed, the sale … supports the V1 assessment of the Subject Site by Mr Swinbourne, particularly the results obtained from his hybrid method”.[97] As noted Mr Swinbourne’s hybrid model gave a value of $19,350,000. It is not at all clear how this sale (A7) supports this value for the subject site. We analyse this sale further below at paragraphs [143]-[145].
[96] Applicant’s closing submissions at [129] and [138]
[97] Applicant’s closing submissions at [129]-[138] especially [129] and [138], and [142]
The details of these sales are summarised in the table below:
Table 1: Applicant’s main comparative sales
| 1 Location/ date of sale | 2 Area | 3 Value | 4 Dwelling potential | 5 Price per dwelling | 6 Land per dwelling | 7 Price per sqm | 8 Comments | ||
| A1 | 1/38 Wright 6/12/17 | 15,770 sqm | $10,250,000 | 158 | $64,873 | 100 sqm | $650 | ||
| A2 (& R1 see below) | 4/28 Greenway 28/2/18 | 29,260 sqm | $18,000,000 | 240 units | $75,000 | 122 sqm | $615 | Original approval for 240 units changed to 150 townhouses. | |
| A3 | 4/64 Wright 18/4/18 | 10,750 sqm | $7,100,000 | 107 | $66,355 | 100 sqm | $660 | ||
| A4 | 1/11 Coombs 26/9/18 | 9,831 sqm | $7,060,000 | 98 | $72,041 | 100 sqm | $718 | ||
| A5 | 1/70 Lyons 29/3/19 | 23,289 sqm | $16,400,000 | 492 | $33,333 | 47 sqm | $704 | ||
| A6 (& R5 see below) | 9/64 Watson 28/3/14 | 29,914 sqm | $7,300,000; plus offsite works said to be $3,200,000; total $10,500,000 | 110 | $66,364 with offsite works: $95,455 | 272 sqm | $244, with offsite works $350 | Mr McInerney had the offsite works at $3,500,000 | |
| A7 (&R6 see below) | 36/64 Watson 3/17 | 23,346 sqm | $13,750,000 | 89 | $154,494 | 262 sqm | $589 | Mr Swinbourne thought this needed to be adjusted down. | |
| A8 | 1/82 Weston 23/11/17 | 58,596 sqm | $32,210,000 | 245 | $131,469 | 239 sqm | $550 | Mr Swinbourne thought this ‘out of line’. | |
Applicant’s method 3 - full hypothetical development method
Mr Swinbourne also undertook a full hypothetical development study for the site. This involved applying likely end sale prices to the completed units/townhouses to derive a gross realisation upon completion of $156,211,800. After allowances for developer’s profit and risk (20%) and all other costs including holding charges he derived a residual land value of $17,800,000.[98] Following clarification of costs by Mr Osenton this value was reduced by a significant amount to $12,700,000.[99] The applicant said that this supported the after sale value (V1) of $18,000,000,[100] but there is a significant difference between the two figures.
[98] Exhibit A1 page 50(41)
[99] Applicant’s closing submissions at [119]-[120] and annexure A
[100] Applicant’s closing submissions at [120]
Mr Swinbourne placed reliance on this approach as a check method only. Even so, we have significant concerns about this method. First, it has been questioned by a range of tribunals and courts. McLure J stated in Western Australian Planning Commission v Arcus Shopfitters Pty Ltd[101] that the full hypothetical development method is “a less reliable method because of the number and nature of the assumptions that have to be made”.
[101] [2003] WASCA 295 at [65]
This statement is demonstrated by the use of the method by Mr Swinbourne in this case. The starting point is a projected gross realisation upon completion from all sales of $156,211,800. In Mr Swinbourne’s report, there is no information about how this sum is calculated. It is said in the report that it is “deduced from analysis of the proposed development and the sales potential of the dwellings”; no analysis was provided in the report, and no specific sales were provided.[102] Mr Swinbourne provided a spreadsheet of his calculations, which set out potential sale prices, but no basis for these prices; again no specific sales were provided. It was said that this was a culmination of a number of documents. It was said that these came from an analysis of a number of sales. But no information in relation to these sales was provided.[103] Mr Swinbourne conceded that this method was “alive with variables” where the smallest change on one could make a substantial change in the end result.[104]
[102] Exhibit A1 pages 48-50 (39-41)
[103] Exhibit A6; transcript of proceedings 5 September 2019 pages 157-58
[104] Transcript of proceedings 6 September 2019 page 4
FILE NUMBER: | AT 33/2019 |
PARTIES, APPLICANT: | HTI Watson Pty Limited |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | Mr P Walker SC Mr M Hassall |
COUNSEL APPEARING, RESPONDENT | Ms P Bindon |
SOLICITORS FOR APPLICANT | Minter Ellison |
SOLICITORS FOR RESPONDENT | ACT Government Solicitor |
TRIBUNAL MEMBERS: | Senior Member R Orr QC, Senior Member D Lovell |
DATES OF HEARING: | 4, 5, 6, 16, 17 September, 12, 28 November 2019 |
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