PETCHELL and SHIRE OF WILLIAMS
[2011] WASAT 61
•12 APRIL 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: DEVELOPMENT & RESOURCES
ACT: LAND ADMINISTRATION ACT 1997 (WA)
CITATION: PETCHELL and SHIRE OF WILLIAMS [2011] WASAT 61
MEMBER: MR P McNAB (MEMBER)
MR D MOORE (SENIOR SESSIONAL MEMBER)
HEARD: 13 OCTOBER 2010
29 NOVEMBER 2010
DELIVERED : 12 APRIL 2011
FILE NO/S: DR 12 of 2010
BETWEEN: ROBERT NORMAN PETCHELL
Applicant
AND
SHIRE OF WILLIAMS
Respondent
Catchwords:
Resumption or acquisition of land - Compulsory acquisition - Compensation - Valuation of land taken - Valuation methodology - Telecommunications tower site - Rural land - Tower used mainly for non-commercial police and emergency transmissions - Whether comparable sales or lease information available - Adjacent sites used for commercial telecommunications purposes with a higher return - Extent to which assumptions could be made as to hypothetical commercial telecommunications use for site taken - Whether income capitalisation method appropriate - Use of commercial leases to ascertain elements of income capitalisation formula - Whether onus on applicant to rebut opinions of respondent's valuer - No probative evidence produced to justify applicant's assertions - Tribunal rejecting applicant's assertions as to potential commercial use - Discussion of the concept of the 'valuer's art' - Land component of taking fixed at $100,000 and balance of claims remitted for mediation
Legislation:
Land Administration Act 1997 (WA), s 170, s 178(1)(b)(ii), s 178(1)(c), s 211, s 217, s 221(1)(b), s 241
Result:
Land component taken determined at $100,000; balance of claims remitted for mediation
Category: B
Representation:
Counsel:
Applicant: Mr J Skinner
Respondent: Mr P Whittkuhn
Solicitors:
Applicant: Jackson McDonald
Respondent: McLeods
Case(s) referred to in decision(s):
Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174
Clifford and Shire of Busselton [2007] WASAT 89; (2007) 51 SR (WA) 62
Duffy v Minister for Planning [2003] WASCA 294
Lake Karrinyup Country Club Inc v Valuer General (unreported, Supreme Court of WA, Parker J, Library No 960515, 13 September 1996)
Mercer v Western Australian Planning Commission [2008] WASC 124
River Bank Pty Ltd v Commonwealth (1974) 48 ALJR 483
Shannon Luka v Lake Macquarie City Council [1997] NSWLEC 47
Wines and The Valuer General [2005] WASAT 263
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Mr Robert Petchell applied to the Tribunal for the determination of his claim for compensation following on from the compulsory taking from his farmland of a small parcel of land for the purposes of a telecommunications tower, access thereto and associated facilities.
The tower had been leased by the former owner of the farm to the Shire of Williams for the main purpose of police, fire and emergency services radio communication. The parties were unable to reach agreement on the terms of the renewal or extension of the lease and eventually a taking order was registered in May 2009.
The lease expired in 2007 and the Shire of Williams remained in occupation. The lease forfeited the tower and the other assets to Mr Petchell, and those assets were also acquired back by the Shire of Williams.
An adjacent site featured commercial telecommunications towers which returned a generally higher rate than non-commercial users.
The main point of difference between the parties eventually boiled down to the extent to which for the purposes of determining the highest and best use of the land for valuation purposes assumptions could be made, as Mr Petchell's valuers did, that as at the date of the taking, a commercial use of the land was evident.
The Tribunal rejected that approach and instead adopted the valuation offered by the Shire of Williams' valuer. The Tribunal concluded that there was no relevant evidence of any substantive or probative value supporting this aspect of the applicant's case.
A hypothesised use of the site by a non-commercial user was appropriate in the circumstances and the income capitalisation method was a justified approach in determining fair compensation.
Compensation of the land component was therefore fixed at $100,000 with the balance of the claims being remitted for further mediation.
Introduction
This is an action to determine the proper amount of compensation payable under statute to the applicant (Mr Robert Petchell) as at May 2009 in respect of the taking of certain land for a telecommunications tower (including access thereto and associated ground facilities) in the Shire of Williams (Shire).
The subject land is located less than 10 kilometres west of the Williams townsite. The tower and its associated facilities are surrounded by rural land which is used mainly for grazing purposes.
The site was previously leased to the Shire (by a lease dated 26 May 1997, for 10 years) for the purposes of a telecommunications tower. The compulsory acquisition, effected by way of a taking order, followed the failure of the parties to reach agreement upon the terms of an extension or renewal of the lease.
The applicant originally acquired the land taken (as part of a parent lot) in May 2002. That purchase was made subject to the lease.
The tower is used mainly for public service and community radio transmissions (mostly police, fire and emergency services), and not by any major telecommunications user (telco). After the expiry of the lease, the Shire has continued in the occupation and in the use of the site, but has not paid any rent to the applicant.
As will appear with more particularity below, the taking also led to a claim for compensation for the actual tower and associated facilities themselves; these public assets being vested by operation of the lease in the owner of the land (the applicant) at the expiry of the lease.
The respondent accepts that it must now compensate the applicant for the value of the tower and the associated facilities.
The date fixed for valuation purposes, by operation of law, is 11 May 2009, namely the date of the registration of the statutory taking order.
The applicant's claim also extends to claims for various amounts representing injurious affection and/or severance; associated costs (professional fees); and solatium and interest.
Description of the subject land
The subject land is formally described as Lot 500 on Deposited Plan 59026, comprised in a Record of Certificate of Crown Land Title, Volume LR3157, Folio 220. That title is subject to a taking order (registered on 11 May 2009) and an associated reserve and management order. The parent lot was Lot 12026 and the balance of the title has become Lot 1.
Lot 1, that is, the remaining land, is approximately 148 hectares in size; the acquired land (now Lot 500) is approximately 1.5 hectares and includes land for an access road.
According to the Shire's valuer, the site presents as 'a triangular section located on top of a hill with an irregular shaped battleaxe access leg'.
The taking order and the title arrangements just mentioned are the manifestation of the compulsory acquisition which has led to this determination of the compensation to be paid for the taking of the land and the tower. Such title arrangements would not have occurred but for the taking. Accordingly, the title arrangements are not subdivisional in nature.
It is convenient to mention at this point that an adjoining site (Location 13061) has longterm leases (comprising two towers) for both Telstra (since 1996) and Optus (from 1999). The specialist communication infrastructure manager, Crown Castle, took, it appears, approximately 12 months prior to the valuation date, an 88 or 99 year lease of one of the towers (with a sub-lease back to Optus). That lease will commence operation, it appears, in 2019. These arrangements seemed to be information in the public realm and, in the end, they significantly influenced all of the valuers engaged in the proceeding.
There was, however, some uncertainty about the precise character, term and value of these Crown Castle lease arrangements but having regard to the ultimate conclusions reached by the Tribunal and the approach adopted by it (see below) it is unnecessary to finally resolve such matters.
History of the taking order, and the formal claims and counter offers
On 28 April 2009, the Minister for Lands executed a 'Taking Order of Land for Public Works' under s 178(1)(b)(ii) and (c) of the Land Administration Act 1997 (WA) (LA Act) in respect of the subject land, identified as Lot 500. The taking order identified the land as 'freehold land'.
Earlier, on 28 June 2007, a delegate of the former Minister for Lands had issued, pursuant to s 170 of the LA Act, a 'Notice of Intention to Take Interests for a Public Work' in respect of the same land, then described in terms as part of the original parent lot.
Under s 211 of the LA Act, the applicant submitted a written claim, dated 21 June 2009, for compensation in the sum of $200,000 (including compensation for the tower). This sum has been amended from time to time but now stands at somewhere between $425,000 and $431,000, depending upon which of the applicant's valuers' evidence is to be preferred. These sums include all claims, but not interest which accrues from the date of the registration of the taking order. However, a higher figure ultimately emerged from the evidence received in the hearing of the matter.
Proceedings were commenced in this Tribunal by the applicant on 15 January 2010. Those proceedings represent action to 'refer the claim for the compensation to the State Administrative Tribunal' under s 221(1)(b) of the LA Act.
The original respondent was named as the Minister for Lands but, by consent, the Shire, as the acquiring authority, was eventually named as the proper and only respondent to the review. The Tribunal has been constituted so as to include a sessional member appointed for their valuation expertise, with that sessional member replacing, with the consent of the parties, another sessional member who had become temporarily incapacitated during the course of the hearing.
A formal written offer of compensation under s 217 of the LA Act, dated 13 August 2010, was made by the respondent in the sum of $140,000 (including compensation for the tower), together with interest at the rate of 6% from 11 May 2009. This total sum was, in effect, amended to an offer of $184,250.
Despite substantial attempts to settle the matter through mediation in the Tribunal, no satisfactory resolution could be reached on the amount of compensation to be paid to the applicant and the review has therefore proceeded to a final hearing.
Statutory provisions
The amount of compensation to be paid to the applicant is be determined having regard to the provisions, so far as are they may be relevant, to be found in s 241 of the LA Act.
The parties otherwise accept that the position as regards compensation under this statutory regime is, in effect, governed by the same principles set out by Barker J in this Tribunal in Clifford and Shire of Busselton [2007] WASAT 89; (2007) 51 SR (WA) 62. There, His Honour noted as follows, at [22] - [26]:
In determining the amount of compensation (if any) to be offered, paid or awarded for an interest in land taken under Part 9 of the [LA] Act, regard is to be had solely to the matters referred to in s 241: s 241(1).
The primary matter for which regard must be had is the 'value of the land' with any improvements, or the interest of the claimant in the land, assessed, in a case such as the present, at the date of taking, and discounting any increase or decrease in value attributable to the proposed public work for which the interest was taken: s 241(2).
Section 241 otherwise sets out other requirements concerning the determination of the amount of compensation (if any) to be assessed.
The parties accept, through the licensed valuers … that the value of the [site acquired] for the purposes of s 241(2)(c) of the Act is its market value, defined as:
'The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.'
This definition of market value is set out in the Australian Property Institute (Inc), Code of Professional Practice, Deakin [ACT], 2002, at 26. It takes into account the concept of market value as defined in Spencer v Commonwealth (1907) 5 CLR 418, but bears in mind that the value of the land to the owner may, in some cases, also be relevant, as explained in Pastoral Finance Association Ltd v Minister [1914] AC 1083.
Valuation principles
Valuation is derived by way of market comparison, the determination of 'the value of a property from transactions of similar comparable properties': Australian Property Institute, Valuation Principles and Practice (2nd ed, 2007) (hereafter 'API'), at page 2. Importantly, the 'income capitalisation' method of valuation - also used in this case - is a different form of, or incorporates, the market comparison method: API, at page 2. Income capitalisation can be used '[w]here properties return an income (and thus appeal to the investment market) [and] provides a method of comparison between properties sold in a given market and the property being valued': API, at page 4. The methodology of the income capitalisation approach is discussed in API, at page 21.
As regards the relevant principles, see also the passages from Lake Karrinyup Country Club Inc v Valuer General (unreported, Supreme Court of WA, Parker J, Library No 960515, 13 September 1996) and Duffy v Minister for Planning[2003] WASCA 294 (Duffy) reproduced at [22] of Wines and The Valuer General [2005] WASAT 263 (Wines).
The extracts of Duffy ([26] - [33]) continue, at [22] of Wines, as follows (emphasis deleted):
The Evidence of an Expert Valuer
The general principles relating to the admissibility of and weight to be given to expert evidence are not in dispute. The basic principle is that an expert must either prove by admissible means the facts on which the opinion is based or explicitly state the assumptions as to fact on which the opinion is based: Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370; Pollock v Wellington (1996) 15 WAR 1; Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705.
Further, the process of inference that leads to the opinions of the valuer must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about their reliability. If not, the opinion can carry no weight: Pollock v Wellington (supra) at 4 per Anderson J; Makita (Australia) Pty Ltd v Sprowles (supra) at 741.
The expert must fully expose the reasoning relied on in reaching his or her opinion and the opinion must be rationally based: Maurici v Chief Commissioner of State Revenue [[2003] HCA 8; (2003) 212 CLR 111 at [18]].
However, those principles have to be applied in the context of the valuers 'art'. The established principles were stated in Spencer v Commonwealth (supra) where Isaacs J quoted with approval the following passage in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391:
'It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at.'
An illustration of the practical application of the principles is seen in Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409. In that case the subject land to be valued was a container terminal site. It was common ground that that was the best and highest use for the land. Notwithstanding that there was no sales evidence of container terminals, one expert used the comparable sales method and the basic sale he relied on was of industrial land with no water frontage. The valuer added between $100,000 - $120,000 per hectare as an adjustment for the subject land's water frontage. It was common cause that the expert did not have any sales evidence on which to rely for his quantification of the water frontage adjustment and he said it was fixed as a matter of judgment. The appellant in that case submitted that while judgment based on experience is a permissible method of making adjustments in the course of valuing, the selection of a figure based on nothing could not alter its character as in essence a guess or an arbitrary figure. The Court held that the need to make adjustments to values to arrive at the true valuation of subject land does not preclude the valuer or the Court who has the task of valuing the land from making adjustments which may be nothing more than the best guess that can be made in the circumstances. The Court also rejected an argument that a judgment of that nature was not valid unless there was evidence to establish the upper and lower limits within which the judgment must operate.
An opinion that is not based on sales or other empirical evidence is often referred to as a judgment, usually said to be based on skill and experience. Sometimes it may be difficult to draw the line between judgment and mere speculation. A rule of thumb is that a judgment formed without some disclosed rational basis will be speculation to which little, if any, weight should be given. However, generalised statements of principle are best avoided because whether and if so what weight should be accorded to a valuer's opinion will depend on the facts and circumstances of each case.
As to what is required disclosure, the appellant relies on a statement by Pullin J in [Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174] (at [78]) that:
'It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method, to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.'
The first sentence is uncontentious. The second sentence is not. Insofar as it is contended that the second sentence states an absolute requirement with automatic consequences as to weight, that cannot be so. The formation of an opinion on value has been likened, correctly in my view, to the exercise of judicial discretion. Rules affecting weight must be sufficiently generalised to allow for different methodologies and circumstances.
In Mercer v Western Australian Planning Commission [2008] WASC 124 (Mercer) Jenkins J said, at [121] - [124]:
Highest and best use
In order to arrive at the value of the subject land as at the date of taking it is necessary to consider the price which the plaintiffs would have fixed upon with a purchaser, presuming the parties to be aware of all 'circumstances which might affect its value': Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441 (Isaacs J).
These circumstances include a knowledge of matters then known as being likely to affect the value of the subject land, including the development potential of the land.
The prospective uses and development potential of a piece of land are known as its highest and best use. The highest and best use of a piece of land is to be determined by what the parties knew and believed about the land, the market and the economy as at the date of taking; not any earlier or later date. This is because what is ultimately to be determined is the value of the subject land at the date of taking, taking into account the future prospects of the land: Kenny & Good v MGICA (1999) 199 CLR 413 [51] (McHugh J).
Development potential is not the only circumstance which will affect the highest and best use of the land and the value of the land, either advantageously or prejudicially. Other matters which might affect its value include, as Isaacs J said in Spencer (441):
'… its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reasons soever in the amount which one would otherwise be willing to fix as the value of the property.'
Summary of the valuers' positions
Mr Mark Houlahan was engaged by the Shire, and his valuation and expert opinion was as follows.
He valued the land and improvements at $140,000, comprising a land value of $100,000 and some $40,000 for the tower. In his further evidence, Mr Houlahan stated that a 72 metre tower (higher than first thought) would be worth around $85,000 to replace and hence amended his opinion of the tower's value to $42,500 after depreciation.
He would allow an additional $27,500 for severance and injurious affection bringing the total of the fair compensation to be paid to the applicant to a sum of around $170,000.
Mr Houlahan adopted a primary valuation method of capitalising rental to assess the land value and adding to that the depreciated replacement cost of the tower. As regards the land component, his preferred approach was to obtain evidence 'of ground rentals for tower sites which reflected a higher value than farming land'. Mr Houlahan's opinion was that:
[T]he two major players in the [telecommunications] industry have been taken out of the equation [because of the arrangements on the adjoining site]. As a result, I conclude that the subject property could only cater for secondary carriers only, such as [Fire and Emergency Services Authority (FESA)], St John Ambulance and the Shire etc.
He went on to say:
Nevertheless, the [adjacent] Crown Castle site provides a useful basis for establishing a capitalisation rate which could be applied in respect to a fair market rent for [a] secondary [that is, non-commercial] tower.
His inquiries thus led him to calculate a rate of return of 6.52% (revised to 5.82%) based upon an 88 year lease, with an upfront payment of approximately $175,000 (revised to approximately $195,000) and annual rental income from one carrier at approximately $11,500 per annum.
His application of this data to the subject land is set out below.
On the other hand, Mr Robert Ferguson, who was engaged by the applicant as an expert valuer, initially assessed the value of the land as a residential lifestyle lot and added the depreciated value of the tower.
Mr Glen Miller, who was also engaged as an expert valuer by the applicant, assessed the value of the entire site of some 149 hectares (including the tower site) on an unaffected and affected basis.
In the result, both Mr Ferguson and Mr Miller moved towards a common approach to the effect that the valuation was to be derived by reference to 'comparable sales evidence and market data relating to a highest and best possible use as a commercial telecommunications site'.
Mr Miller's assessment assumed that Mr Petchell could have entered into a 99 year ground lease of the tower site (based on a commercial telecommunications use) and thereafter he could have on-sold that asset. As will appear below, the Tribunal did not accept this approach as there was no relevant evidence (that is, no evidence of any substance or probative value) led by the applicant as to the likelihood of this specific opportunity for Mr Petchell as at the taking date.
Mr Ferguson's final package sum of compensation (not including interest and costs, if any) was $431,000 (including $230,000 for the land component); Mr Miller's was $425,098 (including $270,000 for the land component).
Notwithstanding the significant time spent in joint conferral and in the giving of evidence concurrently, the valuers did not alter the fundamental or critical assumptions underlying each of their respective opinions.
The Tribunal also took evidence from Mr Petchell; Mr Ryan Duff, the CEO of the Shire; and Mr Leonard Davies, an engineer specialising in telecommunications infrastructure, all of whom provided background or factual evidence to both the valuers and the Tribunal.
Rejection of the applicant's experts' methodology
It was common ground as between the experts that the highest and best use of the site was as a communications tower with related facilities (communications tower), and not, say, as any 'rural' use.
The main difference between the parties essentially turned upon the issue of what class of hypothetical communications tower, in terms of its income generating capacity or potential, was to be assumed in respect of the valuation process in this case.
The critical difference between the parties was that the applicant's two experts hypothetically valued the site as a communications tower used or occupied by or on behalf of a major telecommunications user (telco) with rents paid at, in effect, premium rates. 'Premium', when used in this context, indicates the likely higher commercial rent paid by a major private telco, such as Telstra or Optus, in comparison with smaller rents derived from public or community users.
We do not see that there could be any serious challenge made to the proposition that if it were to be established that either a telco wished to relocate to the site, or if a telco otherwise commenced using the site, then higher returns would be had at some point, and the value of the land to the hypothetical purchaser would increase.
Counsel for the applicant, Mr Skinner, thus summarised and confirmed the approach of his experts, as follows:
… Mr Ferguson and Mr Miller have correctly valued the land as at May 2009 by reference to comparable sales evidence and market data relating to a highest and best possible use as a commercial telecommunications site.
Importantly, the applicant's expert witnesses have also viewed and rejected Mr Houlahan's competing evidence through this prism.
It follows that if the Tribunal finds that the applicant's experts' assumptions as to highest and best use are flawed, then the foundations of the applicant's case must fall away and a fortiori the attack of Mr Houlahan is very much diminished.
We must remind ourselves that the first task is to determine the highest and best use of the land as at May 2009 where the 'circumstances include a knowledge of matters then known as being likely to affect the value of the subject land, including the development potential of the land' (Mercer at [122]).
The applicant bears the practical onus of 'proving' to the Tribunal's satisfaction what those 'circumstances' are likely to have been.
Although here there was a great deal of assertion, speculation and consequent hypothesising by both of the applicant's experts, the short point is that there was, to adapt the words of Bignold J in Shannon Luka v Lake Macquarie City Council [1997] NSWLEC 47, 'not a jot or title of valuation evidence' presented to us to demonstrate that any telco was, as at May 2009, in actual point of fact likely to have been relevantly interested in either relocating to or establishing on the subject land.
Whatever their wide experience, neither of the valuers called by the applicant were relevant experts also in, say, the telecommunications business or planning field. The authorities cited above make it clear that the 'valuer's art' does not extend to permitting such speculation in substitution for the valid expression of valuation opinion, even if a wide berth is given in the exercise of valuation judgment and the sources informing that task.
This position does not change simply because the Tribunal is not bound by the rules of evidence.
Such speculation cannot, for example, rebut the established fact that, at the relevant time, the two largest telcos were ensconced at the nearby Crown Castle location. And, importantly, the mere existence of these nearby telcos does not mean that somehow their lease arrangements become, as it were, automatic and direct comparators for the subject land. The existence of these nearby telcos is of course relevant information for the issues to be decided here, but they do not control the outcome of this case in the way that the applicant suggests.
So far as the respondent's valuer has offered an opinion based upon secondary sources and his own experience, that opinion reflects a different order of things. In short, it is a much more certain scenario, namely that the major carriers, having been established for some time on Location 13061 (an uncontested fact), leads properly to the conclusion that on balance 'it is unlikely that there will be further demand from another major telco for tower space in the Williams locality'.
This position should, however, be regarded as provisional in that the applicant thereafter bears the onus of demonstrating that the conclusion so reached is likely to be incorrect. As we said, this rebuttal cannot be achieved by mere assertion. Some evidence of substance by, on behalf of, or otherwise from the telecommunications industry (or an equivalent source) must be produced to the tribunal.
That did not occur here.
The respondent's approach
Mr Houlahan's approach, on the other hand, was to look at a wide range of sites 'for communication towers/antennas situated throughout the Perth metropolitan area and country localities'. He collected various figures for annual rents with details of the lessee carrier, where available. The figures for rural leases' annual rents were significantly lower than for the metropolitan area because, he said, '[r]ural locations have [a] substantially smaller client catchment and, therefore, communication companies pay substantially less for these locations'.
In the result, he hypothesised '4 carriers' (users) of the site with a discount for those three co-located with the primary carrier. The four carriers are based upon use by FESA, St John Ambulance, the Shire and the WA Police. The total rent per annum, resembling the rural communications lease data he had collected, but discounted because the carriers were not major telcos, was therefore estimated at $6,500. Thereafter, applying a capitalisation rate of 6.5% derived from the Crown Castle arrangement and other transactions, and capitalising this per annum rental sum 'in perpetuity' led him to conclude that a fair sum representing compensation for the taking of the land component was, when rounded off, $100,000.
Mr Houlahan's approach, assumptions and reasoning strike us as relatively orthodox, and justified by the facts and circumstances of the case. The applicant's attack on his valuation methodology was substantially weakened because of the matters that we have discussed above. The applicant has not put forward any factual evidence based on the assumptions of Mr Houlahan, assumptions which we have generally accepted. And, even allowing for any matters which qualified any of Mr Houlahan's assumptions or data, taken overall, there is insufficient doubt attaching to his general opinion to warrant disregarding it. His evidence therefore ought to be accepted. This is so even allowing for, say, any variation in the capitalisation rate (if any) caused by the emergence of new data, perhaps leading to new and more precise calculations. Relevantly, as was once remarked by Stephen J in River Bank Pty Ltd v Commonwealth (1974) 48 ALJR 483 at 484 (emphasis added):
There are, of course, aspects of the Commonwealth's method of valuation which may lead to error … But all this is the stuff of valuation, the reason why it is an art, not a science, and, once recognized, it nevertheless does not detract from the character of this method of valuation as a proper one for use in determining, for the purposes of [the Act], 'the value of the land at the date of acquisition'.
Therefore, there will be an order determining compensation for the land component taken as at 11 May 2009 fixed in the sum of $100,000.
Other claims
On the question of the value of the tower, the parties' experts divided as follows.
Mr Houlahan's added value of the tower structure was $42,500 and was based upon a depreciated replacement cost method. Mr Ferguson agreed with the methodology but not the calculations. He reached a figure of approximately $67,000. Mr Ferguson relied upon a WA Police statement to the effect that the tower replacement cost would be much higher. Mr Miller reached a figure of some $72,000. He did not apply a depreciated replacement cost method but used a five year present value method. Both Mr Houlahan and Mr Ferguson disagreed with this methodology.
Mr Davies, the telecommunications engineer, amended his costing to have regard to a higher tower and, consequently, Mr Houlahan amended his figures. Mr Miller and Mr Ferguson have both adopted replacement cost estimates for the tower apparently beyond that of the expert (Mr Davies) and this may possibly have led to an overstatement of the added tower value. For the moment, however, we make no finding on this point.
In the result, the difference in valuation between the highest and the lowest figures for the tower is about $30,000.
In our view, there is no reason why, if the parties act rationally, sensibly and commercially, all of the remaining claims (including the added value of the tower), should not be capable of being settled by way of discussion and negotiation. Both parties have experienced counsel in the matter and experts well versed in such negotiations, and between them they ought to be able to bring in consent orders reflecting the land component that we have determined, together with agreement on all of the other outstanding subsidiary matters. Preferably this should be in the form of final sums, also covering any tax issues (if any, and if that needs to be referred to) and interest components. The original mediators in this Tribunal will be available to assist in this process, if necessary. The Tribunal will also make available its facilities so that discussions may take place between the parties on neutral ground. The parties will therefore be directed to negotiate in good faith on such matters.
To assist the parties we indicate that we would allow solatium at 10%, if that matter has to return to us for final determination.
Conclusions and final orders
For the reasons set out above, we order that:
1.The land component of the taking is fixed at $100,000.
2.As to the remaining claims, the parties are directed to negotiate with each other in good faith with a view to bringing in a draft of final orders, being orders not inconsistent with these reasons, within 28 days or such other time as the Tribunal allows.
3.If necessary or convenient the matter will be referred to mediation with the original mediators with a view to assisting the finalisation of the proceeding.
4.Liberty to apply is reserved to the parties.
5.The matter is otherwise to be listed for directions on 13 June 2011 at 2.15 pm.
I certify that this and the preceding [77] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR P McNAB, MEMBER
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