Liat Nominees Pty Ltd v Chief Executive, Department of Lands
[1996] QLC 160
•17 December 1996
|
BRISBANE
17 December 1996
Re: Appeal against Annual Valuation -
Valuation of Land Act 1944 -
Shire of Emerald.
(AV95-728).
Liat Nominees Pty Ltd
v.
Chief Executive, Department of Lands(Hearing at Emerald)
D E C I S I O N
Liat Nominees Pty Ltd is the owner of land described as Lot 1 on Registered Plan 619608, Parish of Selma, County of Denison, containing an area of 1.8222 hectares. Under the provisions of the Valuation of Land Act 1944, the Chief Executive, Department of Lands, determined the unimproved value of that land as at 1 January 1995, at $3,000,000. Following an unsuccessful objection against that valuation, the owner appealed to the Land Court against the respondent's decision upon its objection, advising that its estimate of the unimproved value was $2,000,000.
The subject land is situated at 51-57 Hospital Road, Emerald, approximately one kilometre north-west of the Emerald Post Office. Hospital Road is part of the Gregory Highway and is a double lane bitumen carriageway with kerbing and channelling, providing good access to the property. Entry to the property is obtained from Scant Street and Curt Street, which are also full width bitumen carriageways with kerbing and channelling. Electricity, water, gas and telephone services are connected to the property.
The subject land is the site for an enclosed, fully airconditioned shopping centre with a gross lettable area of 5,654 square metres, which was opened in 1980 and refurbished in 1986. Woolworths is the major tenant with 3,251 square metres, with many other specialty shops. Kentucky Fried Chicken operates on the site in a separate building on the Curt Street corner. The property is known as the Emerald Village Shopping Centre Complex and has carparking for 275 cars.
The subject land is of irregular shape, having been aggregated by the acquisition of a number of allotments and the partial closure of Scant Street. Further expansion of the carparking has been undertaken by the acquisition of two allotments to the north of the subject land and an area of land resulting from the partial closure of Curt Street. However, that expansion area was the subject of a separate valuation and is discussed under the heading "Site Amalgamation A".
The subject land has a frontage of 99.697 metres to Hospital Road on the east, in addition to frontages to Curt Street on the north and to Scant Street towards the south. The rear boundary is 167.15 metres long, with depth ranging from 56.828 metres in the south to 152.988 metres in the north. The land falls from Hospital Road with an east-west crossfall, to lower lands to the west which were reclaimed from a lagoon area. Some fill was required to level the land at the rear. It has been cleared of its original forest timber and has grey/brown clay loam soils.
The land is zoned "Commercial" under the Emerald Shire Council Town Planning Scheme gazetted 20 November 1979.
At the hearing the appellant company was represented by registered valuer, Mr P Turner, who also gave evidence, while the respondent was represented by Mr R Paterson of Counsel, and valuation evidence was given by registered valuer, Mr D Jones.
The Case for the Appellant
Mr Turner contended that there was no evidence to justify an increase in the valuation to $3,000,000 as at 1 January 1995, from the previous valuation of $1,000,000, determined by the respondent as at 30 June 1993. In his opinion the valuation was out of line with the smaller sales of commercial land in the immediate area.
Mr Turner referred to the purchase by the appellant company of 3,060 square metres to the north of the subject land in November 1993, for $420,000, or $137 per square metre, which is part of the land which was described by Mr Jones as "Site Amalgamation A". Mr Turner pointed out that the sale occurred over a year before the date of valuation and was purchased for purposes of a carpark to allow for further expansion of the shopping centre complex on the existing carpark area of the subject land. He was of the opinion that the sale was slightly above the market level. He said it had inferior exposure to Hospital Road, but was significantly smaller than the subject land and should therefore reflect a higher rate per square metre.
Mr Turner also referred to the sale of a triangular shaped piece of land situated in Esmond Street, with an area of 1,985 square metres, which sold in November 1995, for $300,000, or $151 per square metre. He pointed out that the sale was approximately one year after the date of valuation, with reasonable exposure to Hospital Road for south-bound traffic. He said that the sale was far smaller than the subject land and that it also should reflect a higher rate per square metre.
In addition, Mr Turner referred to two sales which were also referred to by Mr Jones, the valuer for the respondent. The first of these has an area of 2,030 square metres, is situated in Brief Street, and sold in July 1994, for $305,000, or $153 per square metre. The sale comprised one vacant lot and one which had a dwelling house on it at the time of sale, to which Mr Turner attributed a demolition value of $5,000. He described it as being in close proximity to the shopping centre, although it had inferior exposure to Hospital Road. As the property was much smaller than the subject land, he was of the opinion that it should reflect a higher rate per square metre.
Mr Turner's other sale has an area of 1,640 square metres and is situated fronting Hospital Road, closer to the established centre of Emerald. It sold in November 1994, for $306,000, or $187 per square metre. Mr Turner said the property had previously sold some nine months earlier for $240,000, with improvements, which was approximately $150 per square metre. The resale showed an increase in the value of that land of just over 25% between early 1994 and late 1994. Mr Turner felt that such increase was in contrast with the increase in value applied by the respondent to the subject land of some 200% between mid-1993 and January 1995.
Mr Turner also drew attention to the valuations applied by the respondent to shopping centre sites in a number of provincial cities and towns, including Gladstone and Rockhampton. Mr Turner reasoned that the developers of shopping centres pay prices for the land, no matter where located, which reflect their earning potential. However, I did not find that evidence to be relevant in this case.
In Mr Turner's opinion, the best evidence of value was the purchase by Consolidated Properties of 2.06 hectares of land situated at the eastern end of the main street, Clermont Street, which is the part of the Capricorn Highway which runs through the centre of Emerald. That property was under contract at the date of hearing for $2,100,000, or $102 per square metre. The land is presently the site of the Karinya Caravan Park and is of irregular shape with frontages to Opal Street and Egerton Street, in addition to its Clermont Street frontage.
Mr Turner admitted that the land had been the subject of previous contracts, which had not come to fruition. He said that the present contract was on the basis of intended development of a shopping centre, with rezoning and all approvals in place. As it was situated on the main road into Emerald, closer to the main centre of retail and commercial activities, with all development approvals in place and pre-committed to Coles, Mr Turner considered it to be comparable or even superior to the subject land. If an amount of $30,000 was allowed for demolition, the sale analysed to show an unimproved value of $103 per square metre.
The Case for the Respondent
The Approach adopted by Mr Jones
Mr Jones valued the subject land at $3,000,000, or $165 per square metre. His calculations were as follows:
Commercial site (18,222m2) comprising
6029m2 highway frontage land @ $180/m2 = $1,085,220
12,193m2 rear land @ $140/m2 = $1,707,020
$2,792,240
Plus 10% corners and side access = 279,224
$3,071,464
or $168.56/m2
Adopt $165 per square metre or $3,000,000.
As the basis for his valuation, Mr Jones' report stated as follows:
"The site has been valued on the summation of sales approach as this is the only way that a site of this size can be put together in the Emerald market as demonstrated by the Woolworths carpark extension and the Birch amalgamation. It is therefore evident that no discount for size is applicable in the current circumstances. There has been significant interest in the market in establishing a site for an alternative major drive-in shopping centre and endeavours to place it outside the major town area have been successfully defended by the Emerald Shire Council in the Town Planning Appeals Court. This valuation approach is fully in line with the principles of the High Court Decision 'The Valuer-General v. Fenton Nominees Pty Ltd'. As a check valuation the seven (7) original parcels that have been amalgamated to form the subject parcel is shown and valued from the sales relativity. "
Mr Jones' Check Valuation
Before proceeding further, it is instructive to examine the method by which Mr Jones checked his valuation. His calculations are set out below:
Site amalgamation of the subject land as at 1.1.95
Original Allotment Area m2 Rate per m2 Allotment Rounded
Value Value
Allot 2 Sec 93 2,023 $160 $323,680 Say $324,000
Allot 3 Sec 1 2,201 $150 $300,150 Say $300,000
Allot 4 Sec 1 2,023 $170 $343,910 Say $344,000
Allot 5 Sec 1 2,023 $200 $404,600 Say $405,000
($180/m2 plus 10% corner)
Allot 1 Sec 1 4070 $200 $814,000 Say $814,000
($180/m2 plus 10% corner)
Allot 2 Sec 1 4047 $140 $566,580 Say $567,000
Scant St Road Close 2035 $160 $325,600 Say $326,000
TOTAL 18222 $169.03 $3,080,000
As a basis for the rates per square metre in this unusual calculation, Mr Jones referred to the amalgamations of two sites.
"Site Amalgamation A"
What Mr Jones called "Site Amalgamation A Liat Nominees", is the acquisition by the appellant company of two sites, one of which was also referred to by Mr Turner. They were purchased from different vendors in November 1993, with areas of .0979 hectares and .3060 hectares, for $120,000 and $420,000 respectively, showing rates per square metre of $122.57 and $137.25 respectively. Mr Jones added that there would be extra costs for rezoning to "Commercial" in respect of Lot 1 and the demolition of a dry-cleaners premises in respect of Lot 2.
To these figures he has added the cost of closing and acquiring part of Curt Street, with an area of .2137 hectares, for $268,000, or $127.62 per square metre, in March 1995. The extra costs in respect of that piece of land were noted as the costs of survey, rezoning to "Commercial", easement registration and development application.
Therefore, the total acquisition of .6176 hectares was for $808,000, or $130.83 per square metre.
Mr Jones noted that the purchase of the extra land for carparking was to allow for further building to proceed on the subject land. He described the amalgamated site as rear land only, with no highway exposure, with a falling slope to the west and affected by an easement.
Mr Jones felt it was appropriate to add holding costs for 2½ years at 9½ percent on $540,000 from the time of purchase of Lot 1 and Lot 2 and for 1¼ years on $268,000, from the time of the acquisition of the closed road. For some reason he calculated those holding costs to 21 June 1996, rather than to the date of valuation, 1 January 1995. That amounted to a further $160,075, making a total of $968,075, or $156.70 per square metre. To that, he said, must be added profit and risk for rezoning, etc.
"Site Amalgamation B"
What Mr Jones called "Site Amalgamation B - Birch" is in respect of an aggregation of land on the opposite side of Hospital Road to the subject land, comprising six sites purchased by interests associated with a Mr Birch, with a total area of 9731 square metres, for a total price of $1,168,000, or $120.03 per square metre. To these prices, Mr Jones said, must be added the extra cost of rezoning and removal of existing improvements, but he had not undertaken those calculations.
Mr Jones went on to say that the purchase of the site aggregation was to attract a large supermarket (preferably Coles). The holding period from the earliest purchase to the date of valuation was in excess of two years and additional land had been acquired by Mr Birch as late as February 1996, without attracting the interest of a large supermarket at the date of hearing. The aggregation comprises land with highway exposure and rear land, with a gentle slope to the west. It was all zoned "Residential A" originally and still requires further rezoning. The only side access is from Esmond Street, but with no direct southern highway access into that street. The new Strategic Plan for the Emerald Shire indicates that the land could be rezoned "Commercial".
Once again, Mr Jones has added holding costs, this time from the date of acquisition of each site up until 1 January 1995, the date of valuation. That amounted to $96,383, making a total acquisition cost of $1,264,383, or $129.93 per square metre. To that, he said, must be added profit and risk for rezoning, etc., which he did not calculate.
Since the date of valuation, part of the land, the triangular shaped parcel referred to by Mr Turner, with an area of 1,985 square metres, was sold from the Birch aggregation for $300,000, after having been rezoned to "Commercial". In addition, the Birch aggregation was extended by the acquisition in February 1996, of a parcel of 4,047 square metres adjoining it to the south for $650,000, or $160.61 per square metre.
Mr Jones recalculated the total cost of acquiring the Birch aggregation at $1,818,000 for 1.3778 hectares, a cost equalling $131.95 per square metre, which he noted excluded rezoning, demolition, holding costs and profit and risk. However, that did not exclude the sale from the aggregation of the 1985 square metre parcel for $300,000 in November 1995.
In addition, Mr Jones produced a schedule of four sales of smaller sites, including the two referred to by Mr Turner. The other two sales (his sales Nos. 2 and 4) were of a site of 1902 square metres, which sold in May 1994, for $350,000, or $184 per square metre. That property is one of the six sites in the Birch aggregation, situated in Hospital Road opposite the subject land. Mr Jones commented that it is located towards the northern end of the Gregory Highway commercial area, opposite Woolworths, zoned "Residential A", occupied by an old house with removal value only. He described it as a sound block, further removed from the commercial centre of town, with inferior highway access, as it has no direct access from the south.
His Sale No. 4 is situated in Curt Street, has an area of 1,012 square metres, and sold in February 1994, for $178,000, or $175.89 per square metre. Mr Jones noted that the sale is opposite the subject land, but with no highway frontage. It was acquired by the adjoining owner for the purpose of carparking. At the time of sale it was zoned "Residential B" and occupied by a house, which was since removed and the land rezoned to "Commercial". He said that the main attraction of that site was its proximity to Woolworths and not its highway exposure.
The Basis for Mr Jones' Assessment of Value
Somehow from this confusion of sales evidence, Mr Jones came to the conclusion that 6,029 square metres of the subject land with highway frontage should be valued at $180 per square metre and 12,193 square metres of rear land should be valued at $140 per square metre. He then added an additional 10 percent for corners and side access. Just how he arrived at those apportionments and those values was not fully explained, but it is clear that he relied for his approach to the valuation on the judgment of the High Court in Valuer-General v. Fenton Nominees Pty Ltd (1982) 47 LGRA 95.
Before proceeding further, it is necessary to examine that case to determine whether or not Mr Jones had any sound basis in law for the approach that he took.
The Principle in the Fenton Nominees Case
The Fenton Nominees' case concerned an appeal against the determination of the South Australian Valuer-General of the unimproved value as at 11 June 1979, of a parcel of land in the commercial area of Mount Gambier with an area of some 12000 square metres. The site was developed as a Target Variety Store, with provision made for carparking and landscaping. The land had at an earlier time consisted of separate parcels which were acquired for commercial redevelopment, resulting in the erection of the Target store and associated facilities, the separate titles being consolidated into a single title.
In 1977 and 1978, developers assembled a three parcel site, three city blocks west of that land, upon which a Coles supermarket was established. The Coles site comprised 13 separate parcels of land, the subject of 13 negotiated contracts, between the months of December 1977 and May 1978.
Between July and November 1979, developers also assembled a large site comprising no less than 18 separate parcels of land which were the subject of twelve separate contracts, upon which a Woolworths supermarket was developed.
Some of the allotments making up the Woolworths' site were purchased with improvements on them and all of the allotments comprising the Coles' site had substantial improvements. It was undisputed that the improvements were of no use to the developers and were demolished, the developers being interested only in obtaining the bare land. However, the valuers for the parties adopted very different approaches in the way that they used this sales evidence.
The valuer for the Valuer-General treated the price paid for the land, the price paid for the improvements and the cost of demolition, as together representing the cost to the developer of obtaining the bare land. The valuer for the appellant valued the improvements on each parcel and subtracted that value from the sale price to arrive at an unimproved value.
The valuer for the appellant reasoned that although the improvements were worth nothing to the developer, they had value to the vendor in excess of the bare land value and, as the vendors were unwilling sellers, the resulting prices were above normal market levels. He also reasoned that when a developer was assembling land for large-scale commercial development, he was more susceptible to exorbitant demands and became an anxious buyer, with the resulting price raised accordingly.
The Judgment of Wells J. (1981) 47 L.G.R.A. 71
When the matter came before Wells J. at first instance in the Land and Valuation Division of the Supreme Court of South Australia, he found that the appellant's argument must fail. He found that the potential seller is not entirely free to follow his own inclinations and will know that the developer does not have unlimited funds and is likely to have set himself a maximum outlay on land beyond which he will be unable to go if the planned project is to succeed.
Wells J. found that there was a further and fundamental reason why the appellant's argument must fail. He went on to say:
"... the particular circumstances and considerations that induced the respective parties to come together at the several prices agreed upon are regarded as immaterial, unless, in a given case, they are such as to plainly take a sale out of the ordinary run of transactions that together constitute the relevant market. Where the circumstances and considerations have such an effect, valuers are wont to say that the alleged comparable sale must be excluded because it was affected by 'special circumstances'. ...
In the instant case, the market with which the valuers are concerned is more circumscribed than the sort of market that would be denoted by the simple expression 'the real estate market', or even 'the urban real estate market'. It is, in truth, a market well recognised, but limited: it comprises those entrepreneurs of development who, within metropolitan - more particularly, inner city - limits search for, or strive to assemble, large areas of vacant land for commercial - trading, or other business - purposes. In such a market, it seems to me that the circumstances and considerations referred to by Mr Jarvis, and analysed by him, represent no more than the ordinary forces operating within that market, and cannot be classified as special circumstances that render the sales other than the ordinary product of the market. " (p.79).
Wells J. went on to find that the method adopted by the Valuer-General's valuer was correct. He said that the price that is relevant for the purpose of using the comparable sales method can only be the amount the purchaser found it necessary to outlay in order to acquire what he wanted and that it followed that the price paid by the developer must include his demolition costs.
On the other hand, the valuer for the appellant analysed the individual transactions making up the package deals, selecting for preference those sales that were least complicated, that is, vacant land sales, or sales of land with minimal improvements. His two principal sales were from the group that made up the Woolworths' site and were of areas of 6,531 square metres and 5,088 square metres respectively.
The appellant's valuer raised three further criticisms of the Valuer-General's method:
•First, he said it introduced an averaging factor which was not in conformity with valuation principle.
•Second, the prices paid for the constituent parcels would tend to rise as the potential vendors came to realise that the developer was travelling nearer and nearer to his commercial goal of capturing enough sites to enable his venture to proceed. That would tend to artificially raise the price of the whole.
•Third, from the second purchase onward, each succeeding purchase would be by the adjoining owner.
However, Wells J. rejected each of those criticisms. His Honour found that the averaging was proper in these circumstances, because there was a series of purchases, each of which was viewed and treated by the purchaser as an integral part of the one operation of assembling a commercial site. Therefore, it could be assumed that the developer would have viewed each purchase, not in isolation, but as part of that operation.
Wells J. did not accept the reasoning in the second criticism. He thought that no developer would commit himself from the outset to unconditional sales that would leave him with the burden of unwanted capital assets if he failed to secure a sufficiently large site for his venture.
In respect of the third criticism, Wells J. was of the opinion that a purchase by an adjoining owner becomes suspect only where the purchaser is induced or forced to acquire the land by unconditional contract, to gain some obvious commercial advantage, or to escape some threatened commercial disadvantage. In such a case, the special hope or threat turns him into an "anxious" purchaser. His Honour found the case before him to be different, because the developer attached an importance to each succeeding purchase because it represented an advance towards an ultimate goal. It was only of incidental importance that the allotment purchased happened to adjoin another allotment previously purchased by the same developer. He said that there is nothing about one parcel that made the second especially important to it. What made each important was its contribution, in conjunction with others, to an ultimate goal.
Wells J. criticised the principal method adopted by the valuer for the appellant, first because the areas of the sales that he relied upon were substantially less than the area of the subject land, which introduced to the comparable sales method a subjective element of judgment which depended upon the valuer's intuition and tended to beget serious differences of opinion. Second, His Honour said, the evidence disclosed that the developers found it worthwhile to pay for land and improvements in order to acquire suitable vacant land, but the proportion of the price they might have notionally attributed to the improvements might well have been different from what "might legitimately have been attributed to the several improvements in their own particular character". (p.81).
The Appeal to the Full Court (1982) 47 L.G.R.A. 83
On appeal, the Full Court came to a different conclusion. King C.J., with whom Mohr J. agreed, said that the Valuer-General's method postulated that the aggregate of the prices paid for the land acquired in assembling the sites was no more than the developer would be prepared to pay to acquire the land from willing, although not anxious, sellers if the land had been unimproved. That reasoning indicated that they would have been prepared to pay the same prices for vacant land and was a sound indication of the unimproved value of the land. His Honour thought that there were serious objections to the postulate that the aggregate of prices in assembling each site was not influenced by the fact that the land acquired was improved land, nor by the reluctance to sell on the part of the vendors.
While King C.J. agreed that the developer had no use for the improvements and they were a hindrance and an expense, that did not mean that they had no influence on the price. He thought it reasonable to assume that most owners had no thought of selling until approached by the developer and had no reason to sell except the inducement of a premium price. He reasoned that many would have been most reluctant sellers, likely to be very aware of the value of their homes or business premises. Such vendors would have been seeking the full value of the land and buildings, together with a premium to make the transaction worthwhile. He thought that in most cases the value of the buildings would have played a large part in the determination of that asking price. His Honour went on to say that the developer would have been aware he was dealing with reluctant vendors and realised that in order to induce them to sell, he would have to pay the value of the land and buildings together with a premium. He did not think it followed that the developer would have been prepared to pay the same price per square metre for vacant land.
King C.J. found that the method used by the Valuer-General's valuer was not appropriate. He said at p.88: "To aggregate and average the prices paid to reluctant vendors of ... improved land cannot be an acceptable method of ascertaining the price that a willing, though not anxious, seller of unimproved land might be expected to obtain from a developer seeking the land as a supermarket site". His Honour found in favour of the method adopted by the valuer for the appellant.
The other member of the Full Court, Jacobs J., concluded that sales of heavily improved parcels of land ought not to be regarded as comparable sales, or as reliable indicators of the unimproved value of the appellant's land. He reasoned that the developers could not be described as willing but not anxious purchasers and there was abundant evidence that many of the vendors were reluctant vendors. He said that the evidence left little doubt that the developers were prepared to pay well in excess of established market values.
Jacobs J. thought that there was a more fundamental objection to the approach taken by the Valuer-General. It blurred the statutory distinction between unimproved value, and capital or annual value, which took into account the value of the land in its improved state. He found it would be wrong in principle to treat the value of the improvements as part of the unimproved value of the land; Tooheys Ltd v. Valuer-General [1925] AC 439.
The Appeal to the High Court (1982) 47 L.G.R.A. 95.
On appeal, the High Court unanimously rejected the reasoning of the Full Court and found that the approach of Wells J. was correct in resolving the conflict of expert evidence. The Court reasoned that there was at the time a demand in the commercial area of Mount Gambier for vacant land for development for shopping centres. The Coles' site had been assembled in the year before, and the Woolworths' site assembled in the year after, the date of valuation, 11 June 1979. At p.98 the Court said:
"It was natural then that the unimproved value ... should be assessed by reference to the amount that a hypothetical purchaser intending to develop it in this way would be willing to pay for it. It was natural too that ... the appellant would look to the prices which were paid by developers in order to acquire the other commercial sites which had been assembled in the vicinity.
The importance of these sales is that they tended to establish the price which a developer would be prepared to pay for vacant land suitable for the appropriate development. Although the developers acquired parcels of improved land ... they were acquiring improved land in order to convert it into unimproved land as part of a consolidated site which they could then develop. The improvements ... had no value to them. Consequently no part of the purchase price reflected a value placed by them on those improvements. "
The Court held that the price that the respondent paid was the largest element in the cost of acquiring a site consisting of vacant land suitable for development. The other elements were the costs of demolition and earthworks. The Court went on to say at p.99:
"It is only by adding these costs that one can establish the price that the developers were prepared to pay for a suitable site with no improvements upon it. It follows that the approach adopted by (the Valuer-General's valuer) was correct and that the primary judge was right in accepting his approach.
...
It matters not that, viewed from the standpoint of the vendors of the separate parcels of land, the price which they obtained reflected the value to them of the existing improvements and their reluctance to move to other premises. This is no way derogates from the value which the evidence has in establishing the price which commercial developers were prepared to pay for suitable vacant land similar in kind to the respondent's land in its unimproved state. "
The High Court agreed with Wells J. when he said that the particular circumstances and considerations that induced the respective parties to come together at the several prices agreed upon are regarded as immaterial, unless, in a given case, they are such as plainly to take the sale out of the ordinary run of transactions that together constitute the relevant market.
The Court did not accept the argument that the manner in which the sites were assembled by purchasers of separate parcels led to the developers paying a special price:"In this respect it is of paramount importance that the evidence assists in establishing what commercial developers were prepared to pay for the vacant land comprised in the overall sites which they assembled. " (47 L.G.R.A. 99).
The Court went on to find that Wells J. was correct in rejecting the approach taken by the valuer for the appellant in placing special emphasis on the prices paid for two parcels of land included in the Woolworths' site with areas of 6,531 square metres and 5,088 square metres respectively. The Court pointed out that the purchaser acquired those parcels as an element in putting together an overall site having an area of 19,150 square metres. The Court found that the price paid for the two parcels was but an element in the total consideration which the purchaser was willing to outlay in acquiring the total site and had no independent significance in establishing the price which commercial developers were prepared to pay. Significantly for the present case, the Court went on to say, that the area of each of the two parcels was substantially less than that of the subject land and that provided a further ground of distinction.
The Application of the Fenton Nominees Principle
How then can the principle in the Fenton Nominees case be applied to the present matter?
It seems to me that the principle determined by the High Court in that case can be stated simply and is to the effect that: where a developer aggregates a number of improved parcels of land for the purposes of developing a site for a shopping centre, then the aggregate of the prices paid for those sites, together with the cost of demolition of the existing improvements and the cost of the earthworks necessary to restore the site, is indicative of the price that a developer would be prepared to pay for vacant land. Such evidence can be used as a basis for the valuation of another shopping centre site, making the appropriate allowances for the differences between the basic and the subject lands.
In the present case Mr Jones relied upon the above stated principle, but has also attempted to extend that principle much further than is warranted. In the Fenton Nominees case, the Coles' site had been assembled in the year prior to the date of valuation, while the Woolworths' site had been assembled in the year after the date of valuation. The sales were therefore quite recent and could be applied directly, making allowance for differences in the sites.
However, in the present case Mr Jones attempted to adjust the sale prices by adding holding costs to 21 June 1996 in the case of "Site Amalgamation A", and to the date of valuation in the case of "Site Amalgamation B", to make allowance for the earlier dates of the sales. He also suggested that further adjustment should be made for the cost and risk of rezoning.
In my opinion, the Fenton Nominees case is not authority for the making of such adjustments to sale prices. It is well established that a valuer must accept the actual sale price of a property which he intends to use as the basis for the valuation of another property.
As Pike J. of the NSW Land and Valuation Court said in re Collins (1936) Vol IV The Valuer 156:
"You cannot take a sale at a price, and say, 'That was the sale price, but in my opinion it is not the correct price; I am going to alter the price paid by this particular purchaser'. If that is done in the analysis of sales, one might just as well reject the whole of those sales, and simply say what is the witnesses' opinion of the land to be valued. "
According to the evidence, "Site Amalgamation A" was acquired for carparking to allow for an extension of the shopping centre on the subject site. It was not, as in the case of the Coles' and Woolworths' sites in the Fenton Nominees case, an aggregation of sites from the beginning. There is, therefore, a likelihood that the transactions in "Site Amalgamation A" are affected by the adjacency of the shopping centre on the subject land.
In respect of "Site Amalgamation B", the evidence indicates that the developer commenced to assemble the site in November 1992, and that by late 1996, no development had occurred. Mr Turner was of the opinion that the project had failed. He thought that it was speculative, as it did not have a pre-committed major tenant and the site had been accumulated in the hope of attracting one.
The evidence lends support to the proposition that the Birch project may have been speculative. The triangular 1985 square metre parcel (Mr Turner's Sale No. 2), had been sold from the Birch aggregation for development of a cinema, while the crucial 4047 square metre parcel to the south of the aggregation, was acquired only in February 1996.
Further evidence that "Site Amalgamation B" may have been speculative is provided by Mr Jones. He said that, when approached about the prospect of becoming a tenant of development upon the Birch land, Coles was not interested. Furthermore, he said that the site amalgamation was not complete at the date of valuation, nor were the rezonings and a major tenant had not been secured. He thought "... it was still a speculative exercise at that stage". (Transcript p.31).
The Fenton Nominees decision provides no authority for the check method of valuation which Mr Jones applied to the subject land. This method involved notionally subdividing the subject land into its original parcels and applying to each of those parcels values derived from sales of other land and adding the total to arrive at the unimproved value of the site. Such a method of valuation is without foundation.
No assistance can be gained from the sales of the smaller areas of commercial lands which both valuers have included. The High Court in Fenton Nominees rejected the use of such small sales to value larger areas, even where such sales are part of the aggregation. They are "but an element in the total consideration" and have "no independent significance in establishing the price which commercial developers were prepared to pay". (47 L.G.R.A. 99).
On the other hand, I cannot place any weight on the contract price for the Karinya Caravan Park land which forms Mr Turner's primary basis of valuation. The evidence is hearsay. Mr Turner had not sighted the contract, he had obtained the information about the price and details from a director of Consolidated Properties. In any case, the transaction described by Mr Turner was not a sale, but a contract which was conditional upon finance and possibly other considerations. It may or may not be sold for that amount but, even if the contract price and other details could be proved, until the transaction becomes a concluded sale, it is not evidence which can be used as a basis for the determination of the value of the subject land.
That then leaves the two site amalgamations as the only indicators of the price that a developer would have paid for the subject land if it was unimproved at the date of valuation. Although neither of them is ideal as a basis of valuation, they are the best evidence that was available.
The aggregate area in "Site Amalgamation A" is 6176 square metres for an aggregate purchase price of $808,000, or $130.83 per square metre
If the seven transactions involved in "Amalgamation B" are considered, the area of the accumulated site is 13,778 square metres for an aggregate price of $1,818,000, or $131.95 per square metre.
In endeavouring to compare those transactions with the subject land, I have had regard to the much smaller area of "Site Amalgamation A", its adjacency to the existing shopping centre and the special purpose for which it was acquired. With "Site Amalgamation B", I am conscious that there was an element of speculation in the prices paid. In both cases, I have had due regard to the dates that the sites were acquired and the relative merits of each of the amalgamated sites.
Doing the best that I can with that evidence, I have come to the conclusion that a rate of $140 per square metre would be appropriate for the unimproved value of the subject land as at 1 January 1995. This amounts to a rounded figure of $2,550,000.
Accordingly, the appeal is allowed, the valuation of the respondent is set aside and the unimproved value of the subject land as at 1 January 1995, is determined at Two million, five hundred and fifty thousand dollars ($2,550,000).
(JJ Trickett)
President of the Land Court
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