J B Investments Pty Ltd v The ValuerGeneral
[2004] WASCA 307
•22 DECEMBER 2004
J B INVESTMENTS PTY LTD -v- THE VALUERGENERAL [2004] WASCA 307
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASCA 307 | |
| Case No: | SJA:1011/2004 | 30 SEPTEMBER 2004 | |
| Coram: | MASTER NEWNES | 22/12/04 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | J B INVESTMENTS PTY LTD THE VALUERGENERAL |
Catchwords: | Appeal Land Valuation Tribunal Determination of gross rental value of park home estate Whether gross rental value determined by aggregation of rents paid by occupants of estate Whether services provided to homeowners by owner of estate to be deducted in calculating rental value Turns on own facts |
Legislation: | Land Valuation Tribunals Act 1978 (WA), s 35 Valuation of Land Act 1978 (WA), s 18, s 24(1)(a) |
Case References: | Bell Property Trust Ltd v Hampstead [1940] 2 KB 543 Garton v Hunter (Valuation Officer) [1969] 1 All ER 451 London County Council v Erith Churchwardens [1891] All ER 577 R v Paddington (Valuation Officer); Ex parte Peachey Property Corporation Ltd [1965] 2 All ER 836 Shell Co of Australia Ltd & Anor v City of Melbourne [1997] 2 VR 615 Anderson v Valuer General (2001) 26 SR (WA) 376 Australian Gas Light Co v Valuer General (1940) 40 SR (NSW) 126 Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322 City of Rockingham v PMR Quarries Pty Ltd [2001] WASCA 317 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 Cozens v Brutus [1973] AC 854 Fremantle Sailing Club v Valuer General, unreported; Land Valuation Tribunal of Western Australia; No 5 of 2001; 31 January 2003 Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47 Hope v Bathurst City Council (1980) 144 CLR 1 Jedko Game Co Pty Ltd v Collector of Customs (NSW) (1987) 12 ALD 491 Ladies Hosiery and Underwear Ltd v West Middlesex Assessment Committee [1932] 2 KB 679 Lombardo v Federal Commissioner of Taxation (1979) 28 ALR 574 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 R v Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301 Ruhamah Property Co Ltd v Federal Commissioner of Taxation (1928) 41 CLR 148 Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 Temwood Holdings Pty Ltd v Western Australian Planning Commission [2001] WASCA 199 TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 Vanu Pty Ltd v Valuer General (1993) 11 SR (WA) 80 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
and
Appeal No 29 of 20022003 in the Land Valuation Tribunal
- Appellant
AND
THE VALUERGENERAL
Respondent
(Page 2)
ON APPEAL FROM:
For File No : SJA 1011 of 2004
Jurisdiction : LAND VALUATION TRIBUNAL OF WESTERN AUSTRALIA
Coram : MR P McGOWAN (CHAIRMAN), MR J PRIEST (MEMBER), DR P A ADDISON (MEMBER)
Citation : J B INVESTMENTS PTY LTD -v- THE VALUER-GENERAL
Result : Appeal dismissed
Catchwords:
Appeal - Land Valuation Tribunal - Determination of gross rental value of park home estate - Whether gross rental value determined by aggregation of rents paid by occupants of estate - Whether services provided to homeowners by owner of estate to be deducted in calculating rental value - Turns on own facts
Legislation:
Land Valuation Tribunals Act 1978 (WA), s 35
Valuation of Land Act 1978 (WA), s 18, s 24(1)(a)
Result:
Appeal allowed
Category: B
(Page 3)
Representation:
Counsel:
Appellant : Mr J D Allanson
Respondent : Mr A J Sefton
Solicitors:
Appellant : Michael Whyte & Co
Respondent : State Solicitor
Case(s) referred to in judgment(s):
Bell Property Trust Ltd v Hampstead [1940] 2 KB 543
Garton v Hunter (Valuation Officer) [1969] 1 All ER 451
London County Council v Erith Churchwardens [1891] All ER 577
R v Paddington (Valuation Officer); Ex parte Peachey Property Corporation Ltd [1965] 2 All ER 836
Shell Co of Australia Ltd & Anor v City of Melbourne [1997] 2 VR 615
Case(s) also cited:
Anderson v Valuer General (2001) 26 SR (WA) 376
Australian Gas Light Co v Valuer General (1940) 40 SR (NSW) 126
Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322
City of Rockingham v PMR Quarries Pty Ltd [2001] WASCA 317
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194
Cozens v Brutus [1973] AC 854
Fremantle Sailing Club v Valuer General, unreported; Land Valuation Tribunal of Western Australia; No 5 of 2001; 31 January 2003
Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47
Hope v Bathurst City Council (1980) 144 CLR 1
Jedko Game Co Pty Ltd v Collector of Customs (NSW) (1987) 12 ALD 491
Ladies Hosiery and Underwear Ltd v West Middlesex Assessment Committee [1932] 2 KB 679
Lombardo v Federal Commissioner of Taxation (1979) 28 ALR 574
(Page 4)
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
R v Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301
Ruhamah Property Co Ltd v Federal Commissioner of Taxation (1928) 41 CLR 148
Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373
Temwood Holdings Pty Ltd v Western Australian Planning Commission [2001] WASCA 199
TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175
Vanu Pty Ltd v Valuer General (1993) 11 SR (WA) 80
(Page 5)
1 MASTER NEWNES: This is an appeal under s 35 of the Land Valuation Tribunals Act 1978 (WA) ("the Act") against a decision of the Land Valuation Tribunal of 10 November 2003 dismissing the appellant's appeal against a valuation of its property by the Valuer-General.
2 The property in question is known as Mandurah Gardens Estate. It is a park home estate, designed to provide moderate-cost housing for retirees over the age of 55. Residents on the estate live in specifically designed transportable homes which they own. A person who seeks to reside on the estate must select and purchase a park home from a designated range of homes and must enter into a "Residential Site Agreement" with the appellant. Under the Agreement, the specified residents of the park home are entitled to the exclusive right to occupy the portion of the land on which the home is located and to use the facilities on the estate for the lifetime of the last surviving of those residents, to a maximum term of 99 years. A resident can terminate the Agreement and remove their home, or can sell their home in situ provided the purchaser is approved by the appellant. It is evident that, whilst such a home can be moved, it is not readily moveable.
3 Under the Agreement the homeowner must pay to the appellant a monthly amount, described in the agreement as "rent". At the time of the valuation, the rent was $79 per week. Although the sites vary in size from 160 to 260 square metres, the same rent is payable in respect of each. The rent is subject to annual review and each year may be increased by the greater of 5 per cent or the amount of the increase in the Consumer Price Index.
4 The estate has a total area of 6.7612 hectares and has frontage onto Pinjarra Road near Mandurah. It comprises 158 home park sites, one of which is occupied by a manager/caretaker provided by the appellant. Each home is equipped with a 24-hour medical/emergency call button. There are various facilities erected on the land for use by the residents. They include a community hall, which is equipped with a library, a sitting room and an open-plan function hall with attached kitchen and associated facilities. Immediately to the north of the community hall there is an artificial turf bowling rink with floodlighting. To the west of the community hall there is a concrete below-ground swimming pool with adjacent paved and lawn areas which serve as a communal barbecue facility. There is also an extensive barbecue and recreation area centrally located in the estate for the use of residents.
(Page 6)
5 The estate has some 20 paved lockable enclosures to accommodate caravans, boats and trailers owned by residents. A fee of $5 per week is payable by residents who use these facilities. There is also a workshop for use by residents.
6 The estate itself has a comprehensive bitumen paved and curbed internal road system with low height street lights placed intermittently throughout the estate.
7 The cost of operating and maintaining the facilities and services on the estate is met by the appellant from the rent received from homeowners. The services and facilities concerned include the provision of a manager/caretaker, the operation and maintenance of the communal facilities, maintenance of the roads, verges and communal lawn areas, and services such as tree lopping, rubbish collection and power and water distribution.
8 Prior to the valuation in question, the estate had been valued for rating purposes on the basis of the gross rental value of the whole of the land as a single entity. The gross rental value for the financial year 2001/2002 was assessed at $97,760. The rates payable to the City of Mandurah, based on that valuation, were $13,070.45.
9 The valuation for the financial year 2002/2003 was made by the respondent on a different basis. In essence, it was made by attributing to each site within the estate a separate rental value related to the rent payable by the homeowner under the Agreement and aggregating those separate rental values. The gross rental value, so assessed, was an amount of $520,000. Based on that valuation, the rates payable to the City of Mandurah for the financial year 2002/2003 were $39,393.35.
10 It is convenient, first, to turn to the statutory framework within which the valuation fell to be conducted. Section 18 of the Act provides, so far as relevant:
"For the purposes of a general valuation, the Valuer-General shall determine, or cause to be determined, with respect to rateable land, the gross rental value or the unimproved value, as the case requires … "
11 In s 4 of the Act, "gross rental value" of land is defined to mean:
" … the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year upon
(Page 7)
- 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 … "
12 "Assessed value" of land means such percentage of the capital value as may from time to time be prescribed. The "capital value" of land is separately defined.
13 Section 24 of the Act provides:
"… the Valuer-General may, in his discretion, assign to any land to be valued a valuation obtained –
(a) by aggregating the valuations he would have assigned to any parts of which the land is comprised had he been separately valuing each such parts; …
but nothing in this section limits the means by which the Valuer General may otherwise make a valuation of the land."
14 In this case, in valuing the estate the respondent's valuer, Mr Dumas, had applied the methodology in s 24, as required by an internal policy of the respondent known as Policy 3.108. That policy relevantly provides:
"For the determination of [gross rental value] for caravan parks, each site capable of occupation on a year to year basis (long stay and park home sites) shall be valued separately and the total of those aggregated with the [gross rental value] of the balance of the caravan park determined on a head tenancy basis".
15 Another internal policy, known as Policy 3.124, reproduces Policy 3.108 and provides certain guidelines for determining, in particular, what constitutes fixtures and what are chattels.
16 The Tribunal found that the method required by Policy 3.108 (which was described as "the aggregation method") was not appropriate. It said (at 13 - 17):
(Page 8)
- "13. Mr Dumas pointed out that aggregation is a method which is often used in relation to the valuation of flats or shops in a shopping centre.
14. One can readily appreciate why on the one hand that is so, and why on the other it is inappropriate in relation to the subject property.
15. In the case of flats or shops in a shopping centre one can readily appreciate that there are substantial and sufficient differences to require each to be valued and then the result to be aggregated.
16. Where here, however, we have 155 park home sites, which for the purpose of a legal arrangement between the owner and each of the occupants arrangements are identical, it serves no purpose in logic or philosophy to contemplate that this approach should be on the basis of an aggregation method. Rather this seems to be an instance where the policies referred to above have been literally and directly applied without consideration of whether in relation to the particular property this is the most appropriate method of approaching valuation.
17. It seems to us undoubtedly that it is not appropriate in these circumstances. The application of the policy in that unquestioned fashion in this case was inappropriate."
17 I should say that in evidence Mr Dumas said that, had he not felt constrained to do so by the policy, he would not have approached the valuation in the way he did, but would have conducted it on a head tenancy basis.
18 The Tribunal also considered that, in any event, the respondent had not properly applied the aggregation method. In its view, the respondent's policy required a separate valuation of each of the sites in the estate in order to apply the aggregation method. There was no evidence that such separate valuations had been done. The Tribunal concluded that, on the evidence, the approach taken by the respondent's valuer had not complied with the respondent's policies or with s 24 of the Act. Rather what had been done was "a desk comparison of certain figures [of other park homes and caravan parks] and to strike a figure which seemed 'about right'". Accordingly, it considered that no regard could be had to the approach taken by the respondent's valuer or the determination he had made.
(Page 9)
19 The Tribunal also rejected the evidence of the appellant's valuer, Mr Cameron of Christie Whyte Moore. It considered that Mr Cameron's instructions, and therefore the approach he adopted, were not consistent with the applicable definitions in the Act. In particular, the Tribunal rejected the conclusion of Mr Cameron that the gross rental value must be determined by the assessed value.
20 In his valuation report, which was admitted into evidence before the Tribunal, and in his evidence, Mr Cameron said that he considered there were no comparable properties where the owner leased the whole estate to an independent lessee, so the gross rental value of the estate could not be established on a head tenancy basis. He also gave evidence that he considered the aggregation of the rent paid by residents of the estate was not an appropriate method because it failed to differentiate between the proportion of the rent attributable to the services and facilities provided by the appellant and the proportion attributable to the occupation of the land. Mr Cameron said he considered that, on the market information available, there was in fact no proper basis upon which those separate components could be determined. Although he had calculated that, of the "rent" of $79 per week paid by each homeowner, an amount of some $25.50 to $29.75 was attributable to payment for the right to occupy the site (as opposed to payment for services and facilities), Mr Cameron said that he had, in effect, calculated that by assessing what he thought a lessee was likely to be willing to pay for a head lease of the estate and apportioning that amount among the homeowners.
21 But in the absence of any comparable properties subject to a head lease of the whole and in the absence of any proper basis for determining the actual amount paid by homeowners which was attributable to rent, Mr Cameron considered that the only appropriate course was to determine the gross rental value under s 4(a); that is, by the assessed value.
22 In the view of the Tribunal, Mr Cameron's approach was misconceived. The Tribunal considered that the arrangement at the estate, where the homeowners paid rent on a long-term basis and were not directly liable for rates, taxes and similar charges, or other outgoings necessary to maintain the value of the land, corresponded closely with the hypothetical arrangement in the definition of "gross rental value" in s 4. In those circumstances there would need to be a good reason to depart from the definition. The Tribunal considered there was none. It considered that the total amount of rent payable annually by the homeowners was the gross annual rental within the meaning of s 4 of the
(Page 10)
- Act. It abated that amount by a figure in the order of 10 per cent to take into account periods of less than full occupancy.
23 On such a calculation, the Tribunal observed, the gross rental value was actually higher than that determined by the respondent. For the purposes of the appeal, the Tribunal accepted, however, the figure of $520,000 determined by the respondent and it therefore dismissed the appeal.
24 On this appeal the appellant and the respondent were in agreement that the Tribunal was in error in the approach it took but disagreed on what the error was.
25 The appellant contended that the Tribunal erred in that, having correctly concluded that the aggregation method of valuation pursuant to s 24 of the Act was inappropriate, the Tribunal had in effect employed the same method under a different name by simply aggregating the rent payments made by the homeowners to determine the gross rental value of the estate. The Tribunal had failed to consider whether the rent received by the appellant was a true indication of the value of the land and had simply taken it as establishing the value. The result was that the Tribunal found, in effect, that the gross rental value of the estate was the amount of the total income obtained by the owner from the property. That result, it was submitted, defied logic as it would mean that it would simply be impossible for a lessee to operate a business of the sort run by the appellant. No prudent lessee would enter into a lease of the estate at a rental equivalent to the total income derived from the estate.
26 The appellant argued that the gross rental value could not be determined by the aggregation of the rent payments made by the homeowners but had to be determined on the basis of a single tenancy of the whole or, alternatively, on the basis of the assessed value of the land.
27 The respondent, by a notice of contention, contended that the Tribunal erred in rejecting the aggregation method of valuation. The respondent submitted that, in rejecting the aggregation method, the Tribunal took into account an irrelevant consideration, namely, that all of the park home sites at the Mandurah Gardens Estate were the subject of identical legal arrangements between the owner and each of the homeowners. The respondent said that the Tribunal had nevertheless adopted a method of valuation of "gross rental value" which involved, in substance, the application of the aggregation method of valuation under s 24(1)(a) of the Act. The respondent noted that the method of valuation
(Page 11)
- which the Tribunal had adopted, and the aggregation method which the Tribunal had criticised the respondent for adopting, resulted in essentially the same gross rental value figure.
28 Turning first to the appellant's contention, it was submitted on behalf of the appellant that in the present case the Tribunal had not given consideration to whether the amount designated as rent under the Agreement, and paid by the homeowners, was a true indication of the true annual value of the land. The appellant submitted that in treating the total amount paid by way of rent by the homeowners as the gross rental value of the land the Tribunal was in error in that it failed to have regard to, and to exclude, the component of the rent payments which was for services and facilities provided and maintained by the appellant. The appellant submitted that, in the circumstances of this case, the aggregation of the total rent paid by the homeowners was an inappropriate and impermissible method of valuation.
29 In support of the submission that the Tribunal erred in failing to take into account that part of the rent was a payment for services, counsel for the appellant relied on Bell Property Trust Ltd v Hampstead [1940] 2 KB 543. In that case, the appellant owned a block of flats containing some 123 flats, which were let to tenants. Each of the tenants entered into a tenancy agreement under which they paid an amount described as "rent" for the occupation of a flat and the benefit of the services provided by the appellant. Those services included constant hot water, central heating and other services commonly provided to flats of comparable standard. The question was whether under the Valuation (Metropolis) Act 1869 (UK) the cost of providing the services and amenities was deductible from the gross payments made by the tenants in order to arrive at the "gross value" or whether the whole amount paid by the tenant must be treated as the "gross value". Section 4 of that Act defined "gross value" to mean:
"… the annual rent which a tenant might reasonably be expected, taking one year with another, to pay for an hereditament, if the tenant undertook to pay all usual tenants rates and taxes and tithe computation rent charges, if any, and if the landlord undertook to bear the costs of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent."
(Page 12)
30 The Court of Appeal said [at 554 - 5]:
"Here we have a gross sum paid by the tenant not only for the occupation of the flat, but also for the various services and amenities provided. We can see no difference in principle between such a case as this and the letting of a furnished flat. In the latter case the law is well settled that you must ascertain how much is paid in respect of the furniture and the things in no way forming part of the rateable premises, such as rates, which are usually paid by a landlord who lets furnished, and the remainder represents the rent of the house itself, for which it is rateable: Reg v Lee … Exactly to the same effect is Lord Fleming's opinion in M'Ewan v Glasgow Assessor … where the question for decision was much the same as in the present case. He said: 'The yearly rent or value of a flat … was the proportion of the gross rent paid to the owner which could fairly be attributed to the occupation of the heritable subject.' Having then pointed out that the gross rent, by which he means the actual sum paid by the tenant, includes various services, he continues: 'The tenants periodically pay a lump sum for the personal services and for the use of the heritable subject, and the problem, accordingly, is to ascertain the proportion of the cumulo payment which effeirs to the heritable subject'."
31 The Court of Appeal expressed its agreement with the cases to which it had referred and held that the cost to the appellant of providing the services was to be deducted from the gross payments to arrive at the "gross value" and that such deduction might properly include an allowance for a reasonable profit for the appellant on the provision of such services and the cost of repairs and maintenance of the common areas of the building.
32 The appellant submitted that, equally, in this case the cost to the appellant of providing the various services and facilities on the estate must be deducted from the rent payments made by the home owners in order to arrive at the amount attributable to the right to occupy the land.
33 The respondent relied on the decision in The Shell Co of Australia Ltd & Anor v City of Melbourne [1997] 2 VR 615 for the proposition that rent payments made by home owners could only properly be regarded as other than payment for occupation of the land if they were for personal services unconnected with the realty.
(Page 13)
34 In that case, the relevant question was what was the "estimated annual value" of a multi-storey office building under the Local Government Act (Vic). Under the Act, "estimated annual value" was defined as:
"The rent at which the property might reasonably be expected to be let from year to year, free of all usual tenants' rates and taxes and deducting therefrom the probable annual average cost of insurance and other expenses (if any) necessary to maintain such a property in a state that demands such rent."
35 A 28-level office tower known as Shell House and five basement levels of car parking were constructed on the land. Services by way of lighting, air-conditioning, fire services, a security system, pest control, telephones, background music, signs, two sets of lists and a loading facility in the basement were provided. The issue, so far as relevant for present purposes, was whether, in calculating the estimated annual value, a deduction should be made for, among other things, profit on services. In particular, the question was whether a deduction should be made for the profit the landlord would expect to make if the managing agent arranged the supply of services. It was found as a fact that all office buildings of similar standard were provided with similar services and the amount paid by the tenant included payment for those services.
36 It was not in issue that the cost of the services should be deducted from the gross rental value; the question was whether the profit on the services should also be deducted. Batt J concluded that they should not. His Honour distinguished Bell Property Trust Ltd on, among others, the ground that in that case the services were provided by the landlord.
37 His Honour went on at 666 - 7:
"But there is, in my view, another reason why the appellants claim for profit on the services must fail. The services provided in the Scots and English cases were of a rudimentary nature and, as I have already indicated, were at least for the most part purely personal, unconnected with the realty or heritable subject. But here, however, reference to the so-called services … shows that, with the possible exception of cleaning and pest control, such of the so-called services as can be identified - and, wherever the overall onus in a rating appeal may lie, it was for the persons putting forward a particular deduction (the appellants) to identify the services - are in fact concerned with
(Page 14)
- the running or maintenance of systems integral to the building itself, such as air-conditioning, lifts, fire protection and security (the nature of both of which appears from their description earlier), telephone and background music. It may also be that much of the energy is used in running those systems. It seems to me, therefore, that the so-called services are scarcely services of the kind contemplated by the Scots and English decisions but can only be called services in the sense that mechanical services and similar services are so called."
38 The respondent argued that, in the present case, what were provided to the homeowners were not services of a nature unconnected with the realty. Accordingly, there was no requirement for any deduction to be made from the actual rent paid by the homeowners when determining gross rental value of the property. The respondent argued that it was open to the Tribunal to find, as it did, that the amount actually paid by the homeowners fell within the definition of gross annual rental and that that amount was appropriate to use in determining the gross rental value of the land.
39 I do not agree. In my view, in the present case at least a number of the services and communal facilities provided and maintained by the appellant are not integral to the occupation of the sites by the homeowners but constituted benefits separate from the right of occupation. It is unnecessary for present purposes to attempt to list all of the services and facilities that fall within the category but, for instance, the swimming pool, the bowling rink and the community hall I would consider to be plain examples. I therefore consider that the Tribunal erred in failing to take into account that a proportion of the rent paid by each homeowner was not for the occupation of the site on which that homeowner's park home stood but in respect of services and facilities provided by the appellant. Accordingly, in my view, the Tribunal erred in simply treating the aggregate of the rent paid by the homeowners under the Agreement as the gross rental value of the land.
40 The second question was whether the Tribunal erred in rejecting the aggregation method under s 24 used by the respondent to determine the gross rental value of the property.
41 It was submitted on behalf of the appellant that such a valuation must proceed from a valuation of each of the parts of the land. It was not sufficient simply to assume that the amount paid by each homeowner was the rental value of the portion of the land occupied by that homeowner.
(Page 15)
42 It was also submitted that s 24 did not permit the exercise of the discretion to use the aggregation method without consideration first being given to whether the application of it would in fact determine the gross rental value of the land and the conclusion being reached that in the circumstances it was in fact an appropriate method.
43 It was common ground that, in assessing the gross rental value of land, the land is to be assessed at what a hypothetical tenant might reasonably be expected pay to a hypothetical landlord for a tenancy on the hypothesis that both parties are reasonable, the landlord not being extortionate and the tenant not being under any pressures, and the premises being available to be let: R v Paddington (Valuation Officer); Ex parte Peachey Property Corporation Ltd [1965] 2 All ER 836 at 848. The rental actually paid by an occupier does not necessarily indicate the rent that a tenant ought reasonably be expected to pay: London County Council v Erith Churchwardens [1891] All ER 577 at 585. While the amount paid may be persuasive evidence of the rental value, it is not decisive and it is only evidence of value: Garton v Hunter (Valuation Officer) [1969] 1 All ER 451; Halsbury's Laws of England, 3rd ed, vol 32, 76 [107].
44 The appellant argued that it was clear the aggregation method did not, and would not, provide a proper valuation of the land and it was not a proper exercise of the discretion under s 24 to employ that method. Section 24 required that there be valuations of each of the sites on the estate. It was those valuations that were to be aggregated. The rental value of each site could not simply be assumed to be the rent payable under the Agreement. The rental value of each site must be properly determined. The Tribunal had found that Mr Dumas, the respondent's valuer, had not carried out any assessment of the rental value of each site. The evidence of the appellant's valuer, Mr Cameron, was that that there was no way of properly assessing what proportion of the rent payable by each homeowner was attributable to occupation of the land (as opposed to payment for services), with the result that the requirements of s 24 could not be met. That is, it was not possible to assign to each of the various sites a separate rental value. That evidence was not controverted.
45 It was argued by the appellant that the fact the methodology was flawed was evident from the level of rental so assessed by the Tribunal (and previously by the respondent), as the gross rental value would not permit a lessee of the estate to derive any profit from the operation so that no prudent, commercially minded lessee would enter into a lease arrangement at that level of rent.
(Page 16)
46 The respondent argued that in the circumstances, including the arm's length nature of the lease transactions and the fact that the payments were described as "rent" in the Agreement, it was open to the Tribunal to find as a fact that the amounts paid by the homeowners were the rental value of the land. The Tribunal was not required to make comparisons to a comparable market before doing so. The amount paid by the homeowners was also consistent with the definition of gross rental value in s 4 of the Act.
47 The respondent argued that the determination of the gross rental value of the land using the aggregation method did not result in a value that was obviously not the gross rental value of the land. Adoption of it may well result in a greater value being determined than if the value had been assessed based on a consideration of the gross rent a single hypothetical lessee of the entire land might have been expected to pay. That, however, does not support a contention that there has not been a proper exercise of the discretion under s 24 of the Act. The aggregation method has been used in relation to comparable circumstances such as flats, shopping centres and retirement home estates.
48 In my view, the Tribunal was correct in its conclusion that the gross rental value of the estate could not appropriately be determined under s 24. As accepted by the Tribunal, s 24 requires a valuation of each of the constituent parts and the aggregation of those values. It was necessary therefore in order to apply the methodology in s 24 to assess the value of the individual sites. The rent actually paid by the individual homeowners was not decisive as to that.
49 On the evidence, part of the rent payable by a homeowner was in respect of separate services and facilities provided by the appellant, rather than for occupation of the site of the park home. The evidence of Mr Dawson was that there was no basis upon which a proper assessment could be made of the respective amounts of such rent to be attributed to occupation of the site, and to the services and facilities. Certainly, there was no evidence of any basis upon which such an assessment could properly be made. There was therefore no basis upon which the Tribunal could determine the value of each site so as to apply the methodology specified in s 24.
50 I would therefore conclude, albeit for different reasons, that the Tribunal was correct in finding that it was not appropriate to value the estate under s 24 of the Act.
(Page 17)
51 I would uphold the appeal, set aside the order of the Tribunal of 10 November 2003 and remit the matter to the Tribunal to be determined in accordance with law.
4
16
2