Justin John Enterprises Pty Ltd v Valuer-General

[1999] NSWLEC 208

Land and Environment Court

of New South Wales

CITATION:

Justin John Enterprises Pty Ltd v Valuer-General [1999] NSWLEC 208

PARTIES

APPLICANT
Justin John Enterprises Pty Ltd

RESPONDENT
Valuer-General

NUMBER:

30360 of 1998

CORAM:

Cowdroy J

KEY ISSUES:

Question of Law :- Meaning of "improvements" in s 6A of the Valuation of Land Act 1916 - whether fire damaged structures are to be regarded as "improvements" as defined - improvements as defined in the said Act includes anything erected on the land other than improvements as defined in s 4 - whether applicant entitled to separate valuations held in the same ownership where buildings are erected on one parcel of land - no buildings erected on the remaining parcel

LEGISLATION CITED:

Valuation of Land Act 1916 s 6A(1), s 26

DATES OF HEARING:

09/01/1999

DATE OF JUDGMENT DELIVERY:

09/10/1999

LEGAL REPRESENTATIVES:

APPLICANT
Mr N Hemmings QC (Solicitor)

SOLICITORS
Allen Allen & Hemsley

RESPONDENT
Ms J Blackman (Barrister)

SOLICITORS
Crown Solicitor

JUDGMENT:

Background

1. By application class three Justin John Enterprises Pty Ltd (“the applicant”) appealed against the respondent’s valuation made pursuant to the Valuation of Land Act 1916 No 2 (“the Act”) in respect of two parcels of land known as lot 1 in DP 100529 being premises 248 - 250 George Street (“the vacant lot”) and lot 1 in DP 81420 known as 252 George Street Sydney (“252 George Street”). Collectively the said lots are referred to as “the subject lands”. Two preliminary points of law have been raised as follows:-

1. Whether structures erected on land which reduce rather than enhance the value of the land are comprehended by and included in the word “ improvements ” in section 6A of the Valuation of Land Act 1916.

2. Whether the two lots the subject of the valuation in dispute should have been separately valued under section 26 of the Act as at the relevant Base Date of 1 July 1997.

2. The subject lands are included in the Central Sydney Local Environmental Plan 1996 and in the Development Control Plan 1996 (Amendment No 2) (“DCP 1996”) which imposes planning controls specifically relating to certain fire damaged buildings (“the fire damaged structures”) at 252 George Street Sydney. In addition, the Central Sydney Local Environmental Plan 1992 - Conservation of Heritage Items imposes planning controls applicable to the subject lands. In accordance with the principles established in Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610, the respondent has taken into consideration the effect of DCP 1996 in relation to the subject lands and other restrictions.

3. The parties have agreed upon the salient facts. Pursuant to s 14A of the Act the date at which the valuation is to be determined (“the base date”) of the subject lands was the 1 July 1997 and at that date such lands were held in common ownership. The vacant lot previously had a shop building erected upon it which had been demolished at the base date. It is agreed by the parties that the fire damaged structures do not enhance the value of the subject lands.

4. It is also agreed that the valuation of the subject lands at the base date is $14,400,000 if the fire damaged structures are defined as “ improvements ” for the purpose of s 6A and $8,000,000 if they are not “ improvements ” for the purposes of the Act.

5. If s 26 of the Act requires separate valuations of each lot the value of the vacant lot would be $2,200,000. The value of 252 George St would be $9,500,000 if the fire damaged structures are “ improvements ” and $5,500,000 if they are not “ improvements ”.

Are the fire damaged structures improvements?

6. Section 6A(1) of the Act provides:-

(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.

The term “ land improvements ” is defined in s 4 of the Act. The definition pertains to matters unrelated to the subject land, namely matters directed to the state of the land itself such as clearing of timber, vegetation and vegetable growth, improvement of soil fertility, filling, grading and levelling. The term “ improvements ” is not defined.

7. The respondent submits that since the fire damaged structures remaining on the subject land do not enhance its value, they are not “ improvements ”. It relies upon the decision of the High Court of Australia in Brisbane City Council v Valuer-Generalin the State of Queensland (1978) 140 CLR 41. In that decision, the High Court was required to construe the effect of s 11(1) of the Valuation of Land Act 1944 (Qld). Such Act contains a definition of the word “ improvements ” and of the phrase “ the value of the improvements ”. Gibbs J, sitting alone determined that the inundation of water over the land was not an improvement because it did not enhance the value of the lands. He adopted the approach of the High Court in Morrison v The Federal Commissioner of Land Tax (1914) 17 CLR 498 at 503 where Griffith CJ said:-

Any operation of man on land which has the effect of enhancing its value comes within the definition of “improvement”.

In Morrison the court was required to construe the provisions of the Land Tax Assessment Act 1910 - 1912 (Cth). Contained in that Act was a definition of the term “ value of improvements ” being the added value which the improvements gave to the land at the date of the valuation irrespective of the cost thereof. Griffiths CJ observed at 503:-

It seems plain enough that that means that the value of improvements is the present enhancement of the value of the land attributable to the operations of man upon the land the benefit of which still continues…

8. In Morrison and Brisbane City Council the court was required to determine whether there had been an enhancement in value by the improvements in accordance with the statutory definitions. In Goode v The Valuer General (1979) 22 S.A.S.R. 247, referred to by the applicant, Wells J in construing s 5 of the Valuation Land Act 1971 - 1976 (S.A.) at 257 considered that there may be circumstances in which man-made structures could not be said to be “ improvements ” but instead could constitute a positive detriment or waste. However since the legislation before him contained a definition of “ improvements ” the decision provides little assistance.

9. The Act does not suggest that enhancement of value plays any part in the process of assessment of value. The valuer is required, by provisions of s 6A(1) thereof to ignore the “ improvements ”. In Toohey’s Ltd v The Valuer General [1925] A.C. 439 the Privy Council interpreted s 6 of the Act which was similar to the existing provisions of s 6A(1). Lord Dunedin delivering their Lordship’s judgment said at 43:-

Now , what he has to consider is what the land would fetch as at the date of the valuation if the improvements made had not been made. Words could scarcely be clearer to show that the improvements were to be left entirely out of view. They are to be taken, not only as non-existent, but as if they never had existed.

He continued:-

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? It will be observed that the value is not what has been sometimes designated by the expression “prairie value.” The land must be taken as it exists at the date of the valuation.

In Tetzner v Colonial Sugar Refining Co Ltd [1958] A.C. 50 the Privy Council at 58 sought to explain the words used in their previous decision in Toohey’s Ltd “ as if they had never existed ” as meaning “ had not been made ”. Delivering the judgment of their Lordships, Lord Keith of Avonholm at 56 said of the Local Government Towns Ordinance (1947) (as amended) (Fiji) which was in similar terms to the provisions of s 6A of the Act:-

The section draws a clear distinction between the land and the improvements on or appertaining to the land. And the improvements have to be made or acquired by the owner or his predecessor in title. The improvements pointed to, are, in their Lordships’ opinion, clearly physical improvements of one kind or another and not an improvement, or increase, in the value of the bare land. It is these physical improvements and any value directly attributable to and inhering in them that have to be excluded from valuation.

10. Their Lordships thus confirmed that it was irrelevant to consider whether the physical improvements on the land resulted in an increase in the value of the land. The approach was consistent with the Privy Council in Toohey’s namely that improvements made at the owners expense to the land were to be excluded (see Tetzner at 55 - 56). Tetzner was applied in Randwick Municipal Council v Valuer-General; In re Kensington Golf Links Ltd [1960] NSWR 778; (1960) 5 LGRA 387 by Sugerman J and Toohey’s was applied by him in Peelmont Pty Ltd v Valuer-General (No 1) 1963 80 W.N. 1545; 1962 NSWR 376. Toohey’s was also applied in Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50.

11. The fact that any structure may require demolition and may affect the price payable for the land was considered by the High Court of Australia in Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160 at 166 where the joint judgment states:-

The principle enunciated in Toohey’s Ltd. v. The Valuer-General (10) does not speak to this situation. It tells us that it is the subject land in its unimproved state that is to be valued. It does not deny that sales of improved property in the vicinity may be relevant material for the purpose of valuing the subject land in its unimproved state when the improved property has been acquired so that its higher potential as vacant land may be realized, the costs of demolition of improvements being an additional element in what the purchaser is prepared to pay in order to acquire vacant land.

12. The fire damaged structures do not enhance the value of the subject land. However, that is an immaterial consideration when applying s 6A of the Act. Buildings are man-made structures which may, or may not have value. For example an owner may erect on his lands a structure having no value whatsoever such as a folly or a building which is entirely inappropriate for the use of the land. Consistent with authority the correct approach is to exclude any such structures from the valuation. The word “ improvements ” in s 6A(1) is to be interpreted as man-made works, other than those defined in s 4 of the Act. It must follow that it does not matter if the improvements add value to the land or detract from such value for the purpose of s 6A(1). In either case their existence is to be ignored.

13. The above conclusion has been reached independently of the reasoning of Talbot J in Vanadi Pty Ltd v The Valuer General (NSWLEC 30009 of 1995, 17 October 1995) wherein His Honour found that it would be erroneous “ to take in the improvements where they contribute a negative value ”. Whilst the applicant submits that His Honour’s decision is wrong, I do not agree. As Talbot J said in Vanadi :-

To approach the construction of s 6A(1) on the basis that only those works and buildings that add value to the land are to be treated as if they had not been made would be to determine the value of one parcel on an alternative basis to another. The object of the section is to, as far as practicable, place all parcels of land on an equal footing for the purpose of the valuation. For that purpose the land is to be stripped of all its structures beyond those defined as land improvements in s 4. It is as if nothing has ever been built on the land.

The conclusion I have reached accords with His Honour’s reasoning and conclusion. For these reasons the fire damaged structures on 252 George St are to be excluded from the valuation.

Joint valuation

14. The applicant contends that the vacant lot should be separately valued for rating purposes from 252 George Street Sydney. The applicant relies upon the provisions of s 26(1) which provide:-

26 Where lands are to be included in one valuation
(1) Where several parcels of land adjoin, are owned by the same person, and where no part is leased, they shall be included in one valuation, unless the Valuer-General otherwise directs: Provided that any such parcels of land shall be valued separately if buildings are erected thereon which are obviously adapted to separate occupation.

The applicant contends that at the date of valuation, there was no means of access between the subject lands and historically the vacant lot had a separate building erected thereon. Each of these considerations is irrelevant.

15. The words of 26(1) of the Act “ if buildings are erected thereon ” refers to “ such parcels of land ”. A building or buildings upon one parcel does not satisfy the requirement that there be buildings on each of the parcels of land held in common ownership and adapted to separate occupation. The fact that no building exists on the vacant land at the base date disqualifies the applicant’s entitlement to rely upon the proviso.

Orders

16. The questions asked of the Court are to be answered as follows:-

1. Structures erected on land which reduce rather than enhance the value of land are “improvements” for the purpose of the definition contained in s 6A of the Valuation of Land Act 1916.

2. The two lots the subject land of the valuation in dispute should not have been separately valued as at the relevant base date of 1 July 1997.