St Landco No 1 Pty Ltd ACN 614 636 805 v Commissioner for Act Revenue (Administrative Review) - [2020] ACAT 81

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

ST LANDCO NO 1 PTY LTD ACN 614 636 805 v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2020] ACAT 81

AT 73/2019
Catchwords: ADMINISTRATIVE REVIEW – Lease Variation Charge (LVC) – disputed ‘before’ and ‘after’ values of the subject property – valuation approach to determine the ‘before’ and ‘after’ value of the subject property – whether GST should be included in sale price for valuation purposes – effect of purpose clause on valuation – analysis of sales evidence – Crown lessee disputes the amount of remission to be applied to the LVC – whether the Tribunal has jurisdiction to determine the type and amount of remission

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 68

Planning and Development Act 2007 ss 276, 276D, 277, 277A, 277B, 277E, 278, Schedule 1
Valuation of Land Act 1916 (NSW) s 6A

Cases cited:Brewarrana Pty Ltd v Commissioner of Highways (No 1) (1973) 32 LGRA 170
Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184
City Hill Pty Ltd (ACN 064 633 558) v ACT Planning and Land Authority and Anor [2015] ACTSC 40
CSR Ltd v Hornsby Shire Council [2004] NSWSC 946
Doherty v Commissioner of Highways (1974) 7 SASR 57
Fryar & Commissioner for ACT Revenue [2012] ACAT 73
Georgalis v ACT Planning and Land Authority [2012] ACAT 1
Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275
Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96
HTI Watson Pty Limited v Commissioner for ACT Revenue [2020] ACAT 30
ISPT Pty Ltd and City of Melbourne [2007] VCAT 652
Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32
Marroun v Roads and Maritime Services [2012] NSW LEC 199
Maurici v Chief Commissioner of State Revenue [2003] HCA 8
Perpetual Trustee Co Ltd v Valuer-General (2007) 95 SASR 338
Spencer v The Commonwealth (1907) 5 CLR 418
Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137
Tomago Aluminium Company Pty Limited v Valuer General [2010] NSWLEC 4
3 Property Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67

List of

Texts/Papers cited: Alan Hyam, The Law Affecting Valuation of Land in Australia

Tribunal: President G Neate AM

Senior Member D Lovell

Date of Orders:  9 October 2020
Date of Reasons for Decision:         9 October 2020
AUSTRALIAN CAPITAL TERRITORY
CIVIL & ADMINISTRATIVE TRIBUNAL           AT 73/2019

BETWEEN:
ST LANDCO NO 1 PTY LTD ACN 614 636 805

Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent

TRIBUNAL: President G Neate AM
Senior Member D Lovell

DATE:9 October 2020

ORDER

The Tribunal orders that:

The reconsideration determination of the Commissioner for ACT Revenue made on 2 August 2019 in relation to the Lease Variation Charge (LVC) for Blocks 4 and 5 Section 225 Gungahlin (the subject property) be set aside.
The matter be remitted to the Commissioner for ACT Revenue to reconsider the LVC in relation to the subject property on the basis that the before value (V2) of the subject property is $2,350,000 and the after value (V1) of the subject property is $6,750,000.
The Commissioner for ACT Revenue issue a new Notice of Assessment pursuant to section 276D(1) of the Planning and Development Act 2007.

………………………………..
President G Neate AM
For and on behalf of the Tribunal

REASONS FOR DECISION

Introduction

This case concerns an application to review a decision of the Commissioner for ACT Revenue (the Commissioner) about the amount to be paid by a Crown lessee for a Lease Variation Charge (LVC) in relation to a Crown lease.
St Landco No 1 Pty Ltd ACN 614 636 805 (St Landco) purchased the Crown lease of Blocks 4 and 5 Section 225 Gungahlin in the ACT (the subject property) on 8 September 2016 for $2,900,000 plus GST.
On 10 October 2017, St Landco lodged a development application (DA 201732666) with the ACT Planning and Land Authority (ACTPLA) seeking, among other things, a variation to the Crown lease purpose clause 3(b) and a deletion of the Crown lease Gross Floor Area (GFA) clause 3(c).
On 5 September 2018, ACTPLA issued a notice of decision approving DA 201732666, including the chargeable variation. That is the date on which the LVC is to be worked out.[1]
[1] See Planning and Development Act 2007 section 276D(2)
A Notice of Assessment dated 6 June 2019 determined the LVC to be $3,892,500. An energy efficiency remission of $973,125 was applied to the LVC component, so that the total amount payable was reduced to $2,919,375. St Landco applied for a reconsideration of the determination.
The determination of the reconsideration was made on 2 August 2019. That determination was that the LVC was $4,095,000 with a remission of $1,023,750 to be applied to the LVC component (by reference to DI 2018-89 – NatHERS rating of 7.5), making the total payable $3,071,250.
St Landco applied to the ACT Civil and Administrative Tribunal (the Tribunal) for a review of that determination. In its application for review dated 23 August 2019, St Landco contended that:
(a)the correct LVC before remissions is $2,805,000;
(b)the energy efficiency remission ought to be $701,250;
(c)the Commissioner failed to apply an economic stimulus remission of 25% of the LVC, in the amount of $701,250; and
(d)the correct LVC payable is $1,402,500.
Consequently, St Landco sought orders to the following effect:
1.That the determination on the application for reconsideration be set aside.
2.That the LVC be determined in the amount of $2,805,000.
3.That LVC component is subject to remissions in the amount of $1,402,500.
4.That the total payable by way of LVC is $1,402,500.
The outline of submissions for St Landco filed in the Tribunal on 11 November 2019 contended that the ‘before value’ of the subject property was $3,600,000 and the ‘after value’ was $5,400,000. On that basis the LVC would be 75% of the difference, namely $1,350,000 (before any remissions).
St Landco also submitted that it was entitled to substantial remissions under two disallowable instruments – DI2016-28 (which provided for a flat economic stimulus of 25% and an environmental building incentive) and DI2018-89 (which retained the building incentive but removed the economic stimulus remission). There was an issue about whether the Tribunal has jurisdiction to decide whether either or both remissions applied in this case. That jurisdictional issue is dealt with in the final section of these reasons for decision.
By written submissions filed on 18 December 2019, the Commissioner submitted that the ‘before value’ was $2,000,000 and the ‘after value’ was $7,320,000. The LVC would be 75% of the difference, namely $3,990,000 (before any remissions).

The issues

Broadly speaking, this case appeared to raise two main issues:
(a)What is the correct amount of the LVC?
(b)What amount should be allowed by way of remission(s)?
As will become apparent, the Tribunal needs to decide:
(a)the value of the subject property taking into account the Crown lease purpose clause applying immediately before 5 September 2018 (the before value);
(b)the value of the subject property taking into account the Crown lease purpose clause applying immediately after the variation on 5 September 2018 (the after value);
(c)whether the Tribunal has jurisdiction to review the determination in relation to the amount allowed for remission; and
(d)if the Tribunal has jurisdiction to review that determination, what amount (or amounts) should be allowed for the applicable remission (or remissions).
Those issues are to be resolved by reference to the relevant sections of the Planning and Development Act 2007 (P&D Act), primarily sections 277, 277B and 278.
The Tribunal’s role when reviewing a decision of an entity is provided for in section 68(2) of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) which states “The tribunal may exercise any function given by an Act to the entity for making the decision.”
Section 68(3) provides that when reviewing an administrative decision, the Tribunal must:
(a)confirm the decision;
(b)vary the decision; or
(c)set aside the decision; and
(i) make a substitute decision; or
(ii) remit the matter for reconsideration by the decision-maker.
As has been observed previously,[2] the Tribunal can make its own decision based on the evidence before it. On an appeal to the Supreme Court, Refshauge ACJ in GiusidaPty Ltd v Commissioner for ACT Revenue[3] adopted comments by Zelling J who said in Doherty v Commissioner of Highways:[4]
Judges do not have to accept the valuations of the valuers of either side and frequently arrive at a figure or figures, which constitute a modification or modifications of the figures submitted by one or more valuers. … They are guided in coming to the conclusion by the evidence of the valuers together with the other evidence in the case.
[2] HTI Watson Pty Limited v Commissioner for ACT Revenue [2020] ACAT 30 at [25]
[3] [2016] ACTSC 275 at [154]-[157]
[4] (1974) 7 SASR 57 at 83
That statement also applies to the Tribunal.

The subject property and the restrictions on its use

The subject property is a fairly flat irregularly shaped corner block with frontages to Gundaroo Drive, Gozzard Street and Swain Street, Gungahlin. The land is slightly above road level from Swain Street. There are views to the countryside to the west, and views across streets and buildings, some under construction, in other directions. It is about 400 metres from the light rail in Gungahlin.
Block 4 has an area of 1,492m² and Block 5 has an area of 1,841m².[5] The total area of the subject property is 3,333m².
[5] T documents pages 76-77
Clause 3(b) of the Crown lease for each block provides:[6]
To use the premises for the purpose of non retail commercial use AND IN ADDITION the premises may also be used for one or more of the following:
(i)      car park;
(ii)     community use LIMITED TO child care centre and health facility;
(iii)   drink establishment;
(iv)    indoor recreation facility;
(v)     restaurant; and
(vi)    shop LIMITED TO a maximum of 200 square metres per shop.
[6] T documents pages 83, 93
The Crown lease for Block 4 also contains a combined GFA requirement of not less than 300m² for all buildings erected on the land. The Crown lease for Block 5 has a minimum GFA requirement of not less than 2,495m² for all buildings erected on the land.[7] The combined minimum GFA for the subject property was 2,795m²
[7] T documents pages 83, 93
In DA 201732666, St Landco sought approval for a development proposal for the subject property involving:
(a)construction of a mixed use development comprising residential units, ground floor commercial space, basement car parking, landscaping and associated works;
(b)consolidation and re-subdivision of the subject property into four leases containing various strata parcels;
(c)a variation to the Crown lease purpose clause (clause 3(b)) to add residential use limited to multi unit housing of not more than 270 dwellings;
(d)deletion of the Crown lease GFA clause (clause 3(c)) containing the restriction on GFA of the buildings (that is, the deletion of the minimum GFA requirement); and
(e)altering the access and waste easement arrangements shown on the lease plan.[8]
[8] Notice of Decision for DA 201732666 T documents page 196
The notice of decision approving DA 201732666 dated 5 September 2018 included the proposed purpose clause in the draft consolidated Crown leases:
To use the premises for the purpose of non retail commercial use AND IN ADDITION the premises may also be used for one or more of the following:
(i)      car park;
(ii)     community use LIMITED TO child care centre and health facility;
(iii)   drink establishment;
(iv)    indoor recreation facility;
(v)     minor use;
(vi)    residential use LIMITED TO multi-unit housing of not more than two hundred and seventy (270) dwellings;
(vii)     restaurant; and
(viii)   shop LIMITED TO a maximum of 200 square metres per shop.[9] (emphasis added)
[9] T documents page 222
The uses marked in bold are the additional approved uses of the premises on the subject property.

Before value

The before value (or V2) is assessed in accordance with section 277 of the P&D Act. Section 277(2) defines V2, for the circumstances that apply in this case, to mean:
the capital sum that the lease might be expected to realise if—
(i) the lease were not varied during the remainder of its term; and
(ii) the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions that a genuine seller would require; and
(iii) the rent payable throughout the term of the lease, or lease to be surrendered, were a nominal rent.
That definition requires the assumption that the existing Crown Lease purpose clause will never be changed. This assumption can create a difficulty for a valuer because either there is often not comparable sales evidence on which to rely, or much of the evidence is about land that is tainted with “potential.”
In this case, the valuer must assume that the purpose clause and all other clauses in the lease cannot change for the remainder of the lease term (90 years). That assumption does not reflect commercial reality (in the sense that the market value of leased land might change according to changes or prospective changes that are permissible, commercial and achievable). But it is what section 277(1)(a) of the P&D Act requires.[10] Consequently, that section seems to require adjustments to market sales evidence because (in that respect) directly comparable sales would be difficult, if not impossible, to find.
[10] See 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [73,] [75]
As the Tribunal observed in 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue[11] (3 Properties Group), the phrase ‘market value’ must be used with care, at least to the extent that the market will value land according to those facts and circumstances that bear upon what might be physically, legally and financially permissible and achievable on the land if the terms of the Crown lease were changed. In a particular case, the market value might reflect an expectation that such changes will probably be approved, as well as an estimate of how long it might take to effect the change (including dealing with any objections or other delays), the costs of achieving the change (including payment of the LVC), and the development opportunities that would arise from the change.
[11] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [77]-[80]
In some circumstances, the effect of the assumption in section 277(1)(a) in relation to the real value of the land or lease can be very significant.[12]
[12] See 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [85], citing City Hill Pty Ltd (ACN 064 633 558) v ACT Planning and Land Authority and Anor [2015] ACTSC 40
However, where the Crown lease permits what is (or is perceived to be) the highest and best use of the land at the relevant date and for the remaining period of the lease, the requirement of section 277(1)(a) would make no material difference to the capital value of the lease.[13]
[13] See 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [81]
Both valuers in this case sought to use sales of lands with similar, but not identical, purpose clauses where there was little chance of the lease being varied.
As noted earlier, the relevant date for the before value is 5 September 2018.
Evidence
St Landco purchased the subject property in an “off market” transaction on 8 September 2016 for $2,900,000 (excluding GST). The purpose clause at the date of sale provided for mandatory non retail commercial uses and subsequent additional uses with a minimum GFA of 2,795m².
The before values proposed by the parties, at 5 September 2018, are:
(a)St Landco: $3,600,000;
(b)the Commissioner: $2,000,000.
St Landco relied on a valuation report prepared by Mr Ian Robertson of Jones Lang Lasalle[14] in support of their contention. The Commissioner relied on a witness statement prepared by Mr Mirek Pilat from the ACT Valuation Office.[15] Each valuer has relevant qualifications and experience to qualify him to give expert valuation evidence in this case.
Mr Robertson’s valuation evidence
[14] Exhibit A1. See also his witness statement in reply Exhibit A2
[15] Exhibit R6
The key sales on which Mr Robertson relied for the before value were:

Sale Division Section Block Date Price

1 Amaroo 114 3 Jun-19 $450,000

2 Franklin 31 4 & 5 Jun-16 $2,510,000 (ex GST)

3 Coombs 17 1 Mar-15 $4,000,000

4 Gungahlin 88 4 Apr-16 $4,050,000

5 Gungahlin 246 4 Feb-19 $3,750,000

Sales 1, 2, 3 and 5 were for vacant land whilst Sale 4 was for a developed property.
The approach taken by Mr Robertson was to analyse each sale to derive a unit rate of value based on the development potential of each using the developable GFA as a unit of comparison. Of the sales, only sale 2 has a prescribed limitation on the allowable GFA. The GFA for the other sale properties appears to have been estimated from actual development (sales 3 and 4), a percentage of site area (sale 1) or not at all (sale 5). It is not clear if they are GFA minimums or maximums. There is nothing in the sales analyses or commentary to support a finding that the level of likely GFA was a key consideration in each purchaser’s mind at the date of each sale.

Sale Division Site Area $/m² site GFA (m²) $/m² GFA

1 Amaroo 440 $1,023 260 $1,730

2 Franklin 3,558 $705 1,064 (community)
401 (medical)
$998

$3,715

3 Coombs 8.844 $450 1,137 (community)
4,429 (commercial)
$897

$1,598

4 Gungahlin 1,078 $1,576 (unimproved) 995 $1,708

5 Gungahlin 2,705 $1,386

Mr Robertson’s analysis provides the following range of GFA values: Commercial Use $1,598/m² (sale 3) to $3,715/m² (sale 2) of GFA, and Community Use $897/m² - $998/m². Sale 5 shows $1,386/m² of site area and is considered superior to the subject. Sale 5 is also impacted insofar as it was purchased by an adjoining owner and has a potential for 46 townhouses to be erected on it.
Mr Robertson also considered the sale of the subject property in September 2016 for $2,900,000 ($1,038/m² GFA). He advised that he interviewed the purchaser who confirmed that it was not a “related parties’ sale” but was at arm’s length and was a cash transaction. He also stated that it involved a “motivated vendor” and was at a below market sale price.
After consideration of all of the evidence referred to above, Mr Robertson adopted a unit rate of $1,300/m² of GFA for the subject property. As the site has no prescribed maximum GFA, he adopted the minimum requirement of 2,795m² of GFA for Commercial Use. He then derived a value of $3,663,500 which he rounded to $3,600,000.
At the request of the Tribunal, Mr Robertson undertook further analysis of sales 2 and 3. The purpose of the exercise was to derive appropriate unit rates for the childcare components within each and then apply those values to ascertain the appropriate unit values for the commercial components in each sale.
Supplementary analyses were supplied and attached to Exhibit A1. Unfortunately, Mr Robertson had applied an earlier 2014 sale price of $2,200,000 to sale 2 instead of the 2016 price of $2,510,000 which rendered the resultant calculations to it and sale 3 redundant. He did however correct the GFA applicable to sale 3 to 3,981m² which accords with Mr Pilat’s analysis.
The Tribunal has therefore recalculated the analysis using the same methodology employed by Mr Robertson but with the correct initial sale price and revised GFA.

When the correct sale price of $2,510,000 is applied to sale 2 and the commercial component sale of $855,000 ($2,127/m² of GFA) is deducted, the residual value of the 120 place childcare centre is $1,655,000 ($13,792/child).
By undertaking the same calculations as Mr Robertson:
(a)applying the childcare value of $1,655,000, to the 120 place childcare centre (1,137m² GFA) in sale 3; and
(b)adopting the sale price of $4,000,000 (plus off site works),
a residual value to the 2,844m² of commercial GFA of $2,345,000 ($825/m² GFA) is derived. There still needs to be a minor adjustment to this sale overall for “offsite works” although Mr Robertson did not specify what they were. Mr Pilat, using the same sale, included them at $76,450 which would add around $19/m² of commercial GFA giving a total value of $844/m² GFA.
In addition to the 120 place Childcare Centre, this site includes a mandatory requirement for a 300m² Community Activity Centre before additional uses can be activated. That is a much more prescriptive requirement than the requirement in the purpose clause of the Crown lease for the subject property.
Mr Pilat’s valuation evidence
Mr Pilat noted the sale of the subject property for $2,900,000 in September 2016 and observed that both the vendor and the purchaser were represented by Mr Tomislav Simunic. The suggestion was that the sale was not at arms-length. The exact circumstances of the sale were not put to the Tribunal but it is clear that the subject property was never placed in the open market, and more than likely that the sale price would not meet the Spencer test of market value.[16]
[16] See Spencer v The Commonwealth (1907) 5 CLR 418
Mr Pilat initially supplied two tables of sales within Gungahlin[17] which he considered to be comparable. The sales occurred in the period from June 2008 to May 2010 and so were dated for the purpose of calculating the value of the subject property on 5 September 2018. They were, however, sales of vacant sites with similar purpose clauses to the subject which increased their comparability. The sales indicated a range of values of between $165/m² and $502/m² of site area.
[17] Exhibit R6 pages 12, 13
Mr Pilat preferred the site area as a unit of comparison between sites.
Mr Pilat also provided a table of six more contemporary sales on which he relied in assessing the before value [18] summarised in the table below:
[18] Exhibit R6 page 24

Sale Division Section Block Date Price

1 Amaroo 114 3 Jun-19 $450,000

2 Red Hill 14 26 Mar-18 $1,800,000

3 Franklin 31 4 Nov-17 $855,000

4 Franklin 31 3 Jun-16 $2,510,000

5 Gungahlin 88 2&3 Mar-15 $1,509,000

6 Coombs 17 1 Mar-15 $4,076,450

Sales 1, 3 and 6 were common with Mr Robertson’s sales 1, 2, and 3. Overall the sales indicated a range of values of between $461/m² and $1,023/m² of site area. The table also included GFA values for four of the six sales which reflected values ranging from $1,024/m² to $2,127/m² of GFA for sites with lower densities than the subject. The GFA for sale 2 was added during proceedings and it reflected a value of $2,027/m².
Mr Pilat placed the most reliance on sales 2, 4 and 5 which indicated the values in the table below:

Sale Division Site area $/m² site GFA (m²) $/m² GFA

2 Red Hill 1,991 $904 888 $2,027

4 Franklin 3,558 $705 1,481 $1,694

5 Gungahlin 2,278 $662 1,420 $1,063

After considering the sales, Mr Pilat adopted a value of $700/m² of site area for the subject property. He then applied a 15% discount to the adopted value to allow for the adverse impact of the Crown lease purpose clause which requires the use of part of the property for “non retail commercial uses” before other potential uses can be applied. This resulted in a final value of $2,000,000 (rounded) which represented $600/m² of site and $716/m² of GFA.
Mr Pilat said that the application of this deduction was based on historic sales evidence which indicated a 50% discount between blocks with and without the ‘restrictive’ clause. Mr Pilat also stated that his enquiries with EPSDD[19] suggested that there was no prescriptive answer to what amount of the GFA had to be put to the non-retail commercial uses, but that the amount had to be reasonable.[20]
[19] Environment, Planning and Sustainable Development Directorate
[20] Transcript of proceedings 31 January 2020 pages 186-187, 195-196
The evidence for the 50% discount was examined at some length. Mr Pilat referred to his initial table of six sales[21] with varying purpose clauses which he said showed a discount of approximately 50% for blocks with mandatory non retail commercial clauses from the values of sites without the requirement.[22] Under cross-examination, the further reduction of this 50% figure to 15% was accepted by Mr Pilat as being an educated guess.[23]
[21] Exhibit R6 page 12
[22] Exhibit R6 paragraph 35
[23] Transcript of proceedings 30 January 2020 page 176
Examination of the sales indicates that the ‘mandatory’ requirement was but one of a number of differences between the blocks. Others included size (sales 5 and 6 were respectively twice and six times the size of sales 1-4), developable GFA and additional uses. Mr Pilat also gave evidence that “non retail commercial users” pay market rents.
Under cross-examination, a number of scenarios were put to Mr Pilat around ascribing different values to the non retail commercial uses and the additional uses. Non retail commercial uses were identified as business agencies (such as computer service, health insurance agency, real estate agency, travel agency), financial establishments (such as banks), offices, and public agencies such as the Defence Housing Authority. He agreed that market rents would be payable for this space but confirmed that this had not been his approach.[24]
[24] Transcript of proceedings 30 January 2020 pages 177-179, 203-204. See also Exhibit A2 paragraph 7 and the definition of non retail commercial use in the Crown leases at T documents pages 81, 91, 127
It was suggested that if 1,000m² was considered reasonable for non retail commercial use and was so allocated, the residual 1,795m² of GFA would have a value closer to that disclosed by sale 5 of $1,000/m² or $1,800,000 rounded. At the adopted value of $2,000,000 this would leave the balance of 1,000m² having a value of only $200/m². Mr Pilat disagreed with the conclusion.[25]
Issues in relation to before value and parties’ submissions
[25] Transcript of proceedings 31 January 2020 pages 203-204
In their submissions in relation to the before value of the subject property, the parties addressed the following issues:
(a)whether the appropriate methodology for ascertaining the before value was to analyse sales by reference to GFA or site value;
(b)the implications of the purpose clause of the Crown lease (particularly the requirement for non retail commercial use) for ascertaining the value of the subject property;
(c)the impact of the easement on Block 4 and Block 5 on the value of the subject property;
(d)the distinguishing features of the sale properties that made them more, or less, comparable to the subject property for valuation purposes.
GFA v site value: Although there was no dispute between the parties that the GFA methodology and site area methodology are recognised means of estimating the unimproved value of land,[26] the parties disagreed about which methodology was appropriate for ascertaining the before value and after value of the subject property. That divergence was apparent from the written and oral valuation evidence provided by:
(a)Mr Robinson, called by St Landco, who adopted a GFA approach; and
(b)Mr Pilat, called by the Commissioner, who adopted a site area approach.
[26] See for example transcript of proceedings 31 January 2020 page 264
Counsel for St Landco submitted that the correct methodology to determine the before value of the subject property was to adopt a GFA rate for that block because that method would reflect the highest and best use of the small subject site. In his submission, the essence of value of such a site is found in its GFA, so that an otherwise equivalent site with greater GFA rights will be more valuable than an otherwise equivalent site with fewer GFA rights. A valuation made using that method could be checked using other methods to see whether the ascribed value for the property was within an appropriate range. Counsel criticised Mr Pilat’s approach to the before value for ascribing the value on a site area basis but not a GFA basis, even as a means of checking whether the value adopted on the site area basis was too low. In his submission, all the comparable sales indicated a GFA rate per square metre that is significantly higher than the site area rate which Mr Pilat adopted. Further, he submitted:
(a)Mr Pilat’s valuation failed to recognise the minimum 84% site ratio in the ‘before’ scenario; and
(b)Mr Pilat had not attempted to check whether the GFA rate reflected the GFA rate in other sales.[27]
[27] Transcript of proceedings 31 January 2020 pages 264-265, citing 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67
Counsel for the Commissioner submitted that, although much was made in these proceedings about whether the proper approach to the assessment of the before value was to apply a GFA or a site area analysis, it was not the case that only one method should be applied. Indeed, neither method provided a crystal ball or sole solution. Rather, in his submission, the difficulty in adopting a GFA methodology in this case was that:
(a)the sales on which St Landco relied all related to properties with different purpose clauses, none of which had the burden of the non retail commercial use as the mandatory principal use (a matter discussed below); and
(b)some sale properties had a minimum GFA but no maximum GFA, so it was not possible to say how large the development on that land would be.[28]
[28] Transcript of proceedings 31 January 2020 pages 285-286
For those reasons, it was not possible to transpose the GFA from the sale properties to the subject property. In his submission, Mr Pilat was the only valuer in this case to have considered that the lease purpose clause was a burden imposed on the property.[29]
[29] Transcript of proceedings 31 January 2020 page 286
In 3 Properties Group, a differently constituted Tribunal considered the utility of assessing value by reference to GFA. In that case, the valuer for the Commissioner calculated a value per square metre by reference to the GFA limit (rather than by reference to a value per square metre for the whole site) because the total floor area of any or all buildings could not exceed the GFA limit under the existing Crown lease and the lease could not be changed during the remainder of its term. In his view, the remainder of the subject block did not have any commercial value because there was no right to build on it.[30]
[30] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [56]
The Tribunal in 3 Properties Group noted that, in comparing sales, it was the similar GFA in the comparable sale blocks that mattered, not the overall size of the block. The Tribunal also accepted that the Crown lessee was constrained by the GFA limitation and would want to use the whole of the permissible GFA area for its highest and best use.[31] The Tribunal agreed that an assessment of V2 requires a valuation of the whole block (that is, the capital sum of the lease) and that requires consideration of anything in the Crown lease, not just the GFA. But the GFA is a consideration.[32] However, GFA is meaningful only when it is a reflection of the highest and best use of land that is legally permissible.[33]
[31] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [103]
[32] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [109]
[33] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [112]-[113]
In the 3 Properties Group case, the Crown lease set the maximum GFA that was legally permissible on the subject block, and the GFA limit was “reflective” of the highest and best use of the block.[34] The Tribunal accepted that, because it would not be possible to use the subject block in that case for “offices or store” other than by means of a building constructed for either or both of those uses, the value of the land for those uses was determined by the maximum GFA. It followed that the balance of the subject block did not have commercial value because there was no right to build on it.[35] However, the Tribunal “struggled” with the valuer’s opinion that the balance of the subject block had no value under the existing Crown lease, possibly for purposes ancillary to offices and store. In the absence of any evidence about any ancillary permissible uses or the value, the Tribunal was not prepared to speculate as to what that value might be.[36]
[34] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [113]-[114]
[35] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [115]
[36] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [118]
For the purpose of deciding this case, we proceed on the basis that neither GFA nor site value analysis provides the single most reliable guide to the value of the subject property. We do so because the sales evidence provided by each party does not include sufficient numbers of substantially comparable properties that would compel the Tribunal to adopt one approach over the other, or make each method a sound check in the analysis of each sale using the preferred method.
Significantly for this case, each Crown lease contains a minimum GFA requirement, not a maximum GFA requirement. Consequently, the extent of development on the subject property is not constrained by that aspect of the Crown lease in the way that operated in the 3 Properties Group case. It is not possible to say, by reference to the minimum GFA requirement, how large the development on the subject property might be.
The purpose clause: As noted earlier, the purpose clauses for the Crown leases of Block 4 and Block 5 (clause 3(b)) commenced “To use the premises for the purpose of non retail commercial use AND IN ADDITION the premises may also be used for one or more of the following” listed uses. ‘Non retail commercial use’ was defined to mean ‘the use of the land for business agency, financial establishment, office, and/or public agency.’ The Crown lease also included definitions of ‘business agency’, ‘financial establishment’, ‘office’ and ‘public agency’ (clause 1).
Although the parties accepted that the operation of non retail commercial use was necessary before the land could be used for any of the additional uses, they disagreed about both the proportion of each Block that had to be devoted to non retail commercial use, and the effect of that required use on the market value of the leases.
Counsel for the Commissioner adopted and relied on the following passages from the reasons for decision of the Tribunal in 3 Property Group concerning the unimproved value of land.
[65] In Perpetual Trustee Co Ltd v Valuer-General (Perpetual Trustee),[37] the Supreme Court of South Australia, per Debelle J, said:
[W]hen land is subject to a lease, the valuer determining the capital value of the land must consider whether the lease is a burden to the enjoyment of the estate in fee simple and so impairs the value of the subject land.
[66] In Challenger Property Asset Management Pty Ltd v Stonnington City-Council (Challenger),[38] the Supreme Court of Victoria, per Croft J, made a similar observation:
When determining the value of the fee simple, the valuer will, therefore, have to determine whether the lease is a burden in the sense that it diminishes the value of the estate in fee simple. That is a task which is the very stuff of valuation.
[37] Perpetual Trustee Co Ltd v Valuer-General (2007) 95 SASR 338 at [52]
[38] Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184 at [68]
Significantly for the present case, the Tribunal noted that although Perpetual Trustee and Challenger involved land held in fee simple rather than under a Crown lease, “the principle stated in those cases still applies.”[39] We understand the Commissioner to submit that the purpose clause operated as a burden on the enjoyment of the subject property and hence diminished its value. We note that in Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue[40] (Gungahlin Golf Investments) the Tribunal stated that the terms of the lease “as legal restrictions on the use of the Land, are relevant to the valuation of the Land.”[41] It also stated that “this unimproved value is affected by what can, must and must not be done on the Land.”[42]
[39] 3 Property Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [67]
[40] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96
[41] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [43]. In that case the valuation was for the purpose of the Rates Act 2004.
[42] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [14]
In counsel’s submission, the proper interpretation of the lease purpose clause for the subject property can be made by reference to statements in Gungahlin Golf Investments. In that case, the Tribunal accepted[43] that:
The words of the Lease should be interpreted according to their plain and ordinary meaning, in the context of the rest of the document. As a form of agreement, the Lease should be given the meaning which a reasonable person would attach to the provision. Further, in Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority the Court of Appeal of the ACT Supreme Court stated that the principles for interpretation of dealings with land that are registered under a Torrens system apply to land in the ACT.[44]
[43] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [12]
[44] Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32 at [53]
The Crown lease being considered in that case had a purpose clause which was more prescriptive then the purpose clauses in relation to Blocks 4 and 5 in the present case. That purpose clause required the lessee to use the premises for the purpose of an outdoor recreation facility that “must consist of a golf course with grassed greens and a minimum of eighteen (18) holes that may include practice fairways and putting greens” and provided that in addition only a nominated part of the premises “may also be used for one or more of the following purposes.”
Having considered carefully whether there was an obligation under the lease to construct a golf course on the land and whether the golf course must be built first, the Tribunal concluded:
From this structure it is clear that the additional uses cannot be alternative uses to the use as a golf course. There must be a golf course. Therefore, the requirement of the Lease is that there must be the use as a golf course, but there can also be the additional uses, but there cannot be the additional uses without the use as a golf course. Just as in order for there to be an addition to a number, there needs to be a number; and in order for there to be an addition to a house, there needs to be a house; so in order for there to be an additional use to a golf course, there needs to be a golf course.[45]
[45] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [31], see also [4]-[6]
The Tribunal reinforced these conclusions later in the reasons for decision by reiterating that “there is an obligation on the lessee to use the Land as a golf course. This obligation needs to be met.”[46] The Tribunal continued:
the other permitted uses are additional and ancillary. It is true that there is some discretion as to timetabling as to construction. As noted the additional uses must be in addition to, not alternatives to, the first use as a golf course. … Any valuation should be done principally on the basis that these requirements are met.[47]
[46] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [38], see also [39]
[47] Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96 at [40]-[41]

In summary, counsel for the Commissioner submitted that, in the present case, the primary use of a Crown lease property is mandatory and additional uses are permitted but are not alternatives to the primary use. Further, the Commissioner submitted that, despite the absence of any minimum GFA requirement for non retail commercial use, any development would need to fairly and reasonably provide a significant portion of non retail commercial use. The Commissioner also submitted that the sales evidence demonstrates that there is less demand for, and less value in, Crown leases with a mandatory purpose clause for non retail commercial use.
On the basis that:
(a)the statutory scheme requires lease purpose clauses to be complied with;
(b)the Crown lease states that the lessee covenants to use the premises for the first purpose and allows a discretion for the lessee to use the premises for additional purposes; and
(c)the first purpose is non retail commercial use,
counsel for the Commissioner submitted that there has to be a substantial use of the property for that purpose. In his submission, as a matter of law, that requires at least 50% of the area to be used for non retail commercial purposes. To use a smaller percentage (say, 20%) for that purpose would not be a substantial use of the property for that purpose. A small percentage would be a token amount and would not be consistent with the terms of the lease or the spirit of the legislation relating to Crown leases.[48]
[48] Transcript of proceedings 31 January 2020 page 282
In making that submission based on what he contended was the correct legal interpretation of the lease, counsel acknowledged that Mr Pilat gave expert opinion evidence that 20% might be sufficient.[49]
[49] Transcript of proceedings 31 January 2020 pages 242-243, 283
Having advanced the proposition that the Crown lease obliged using 50% or more of the subject property for non retail commercial use, counsel submitted that the next issue was what interest the market has in properties with that purpose clause, however the market interprets the clause.[50] He acknowledged that there were no recent sales of properties with that particular purpose clause and the only such sales were “dated.” However, he criticised Mr Robertson’s determination of the before value of the subject property by reference to properties with different lease purposes while not considering properties with the same lease purpose because those sales were too old. Counsel for the Commissioner submitted that the dated sales show a distinct lack of interest in properties with that purpose clause and that specific restriction. Counsel noted that Mr Robertson agreed that properties with that restriction had, in at least one instance, delayed sales. Mr Robertson had agreed that those properties had consistent poor returns at the sale stage and one property (Block 6 Section 88 Gungahlin) had been available since 2010. The property remained vacant despite covenants requiring development to be commenced within 24 months and finished within 48 months. Furthermore, neither valuer could point to any recent sales in Gungahlin of solely office space or other non retail commercial property. In his submission, there was absolutely no evidence of any market for that type of property.[51] He conceded that there was no evidence of such properties being put on the market and failing to sell, but referred to evidence that the development requirements had not been complied with. In his submission, that supports an inference that these were not lucrative, highly sought after properties.[52]
[50] Transcript of proceedings 31 January 2020 page 283
[51] Transcript of proceedings 31 January 2020 page 284
[52] Transcript of proceedings 31 January 2020 page 284
In the Commissioner’s written submission, after applying a 15% discount to the rate of $700/m² to allow for the effect of the mandatory purpose clause in the Crown lease, the rate of $595/m² of site area should be adopted.
Counsel for St Landco submitted that there are many reasons why land might be vacant including that the owners lack funds to develop it or they are land banking. The fact that a parcel of land is vacant does not necessarily provide any evidence that there is no market for land of this kind in Gungahlin or no market for non retail commercial uses in Gungahlin.[53]
[53] Transcript of proceedings 31 January 2020 page 296
Rather, counsel for St Landco submitted in relation to the restricted purpose clause:
(a)non retail commercial is valuable (not worthless) given the types of tenants it could attract (such as banks, accountants, professional services and Commonwealth agencies);
(b)although about 20% of the total GFA could be considered ‘reasonable’ for non retail commercial use, that will be around the highest amount for that purpose and (based on the development approval for the subject property) what is ‘reasonable’ could be as little as 2.8% of the total GFA; and
(c)whatever the area used for this purpose, it would unlock the additional, high-value uses of the remainder of the available GFA.[54]
[54] Transcript of proceedings 31 January 2020 pages 265-266
On that basis, counsel criticised Mr Pilat’s failure to explore the piecemeal approach to valuation by calculating for different uses of the GFA and hence unlocking the highest and best value in the ‘before’ scenario. By contrast, Mr Robertson adopted a blended rate which included the additional uses and a GFA component (albeit over a small area) applied to non retail commercial uses. His evidence provided a basis for calculating the before value including the effect of the non retail commercial use on whatever area the Tribunal thought was ‘reasonable.’[55]
[55] Transcript of proceedings 31 January 2020 pages 266-267
Counsel for St Landco also submitted that there is authority for the proposition that it is necessary to interpret these purpose clauses as broadly as possible because of the restrictions they might place upon a person’s ability to use their property. In his submission, the Tribunal should infer that the amount of GFA required for non retail commercial uses should be reasonable, and that Mr Pilat had adopted that approach. Specifically, 20% is not a token amount and there is nothing in the statute which supports the notion that the area needs to be substantial. The Crown lessee needs to be able to unlock all of the uses of the land not just a single use which is prescribed. Once that first purpose is satisfied, the additional uses are open and there is evidence in this case as to what is required by the covenant in terms of minimum GFA in the ‘after’ scenario which has the same restriction. That is all that is required in the ‘after’ scenario and if that was acceptable to the entity that enforces these clauses, that should be sufficient for the purpose of this case.[56]
[56] Transcript of proceedings 31 January 2020 page 296
Having carefully considered the submissions made by both parties and the authorities on which they rely, we have concluded that, although the additional uses listed in the purpose clause of the Crown lease for each of Block 4 and 5 could only operate in addition to the non retail commercial use prescribed by that clause, neither the terms of the Crown lease nor the decisions referred to by counsel require that the majority of the area covered by each Crown lease be used for that purpose. As noted earlier, the Crown lease considered by the Tribunal in the Gungahlin Golf Investments case was very prescriptive as to the type and extent of the golf course and the area in respect of which additional uses might operate. The purpose clauses for Blocks 4 and 5 in this case were expressed in more general terms and did not prescribe the areas or locations for particular uses. They contained minimum GFA requirements for all buildings erected on the land but did not specify that an amount or proportion of those areas must or should be used for a particular purpose. There is neither authority nor evidence to support the Commissioner’s submission that a majority of the area be used for non retail commercial purposes.
In the present case, it is only necessary to conclude that, although the area devoted to non retail commercial use would need to be more than a nominal or token area, it need not be the majority of the area of the subject property. Such evidence as there was, indicates that the EPSDD has been willing to accept that the use of 2.8% of 20,653m² (568m²) of the total GFA for the subject property (including 20,085m² of residential GFA) for the required purpose is sufficient.[57] That evidence supports the conclusion we have reached about the requirement of the purpose clauses.
[57] T documents pages 191-192
The next issue is what impact such a purpose clause has on the market value of the lease. As is clear from the decision in 3 Property Group and the judgments referred to in the reasons for that decision, the uses of land prescribed by a lease are relevant to the valuation of the land (including where they are perceived as a burden on the use of the land) once the highest and best use of that land has been determined.
The purpose clause in the Crown lease requires that some of the subject property be used for non retail commercial use. Such use has significant value and can attract a market rent for that part of the subject property. Although not necessarily the highest and best use of the land, it is compatible with the other uses and unlocks the potential of the land. The limited sales evidence provided to the Tribunal in this case does not suggest that the purpose clause in the Crown lease significantly reduced the market value of the subject property. Further, we note that that the analysis provided by Mr Robertson indicates that a non retail commercial use is likely to provide a greater commercial return then a community tenant, as is indicated in the analysis of sales such as Block 1 Section 17 at Coombs.
The Crown lease did not prescribe the area to be devoted to non retail commercial use (by contrast with the lease conditions considered in the Gungahlin Golf Investments case) and it is apparent that the area would not necessarily have been substantial. The evidence does not support a discount referable to the purpose clause, and we are not satisfied that an allowance should be made for the purpose clause when assessing the value of the subject property.
Further, having considered the evidence as a whole, we have concluded that there is no basis for attaching all of the perceived impact on the sale price to a single item or factor such as the effect of the purpose clause.
Easement: Counsel for St Landco submitted that there is a legal question about the interpretation of the easement in each of the Crown leases in the ‘before’ scenario. There is a necessity element in those clauses. In relation to the subject property, part of the easement was necessary for the use and enjoyment of the adjoining Block 3. The remainder of the easement was for the use and enjoyment of Blocks 4 and 5. In his submission, it is not necessary for that portion of the easement to be accessed by Block 3. Given that there was the same owner for Blocks 4 and 5, the real detriment of the easement in the “before” scenario would be on the western side of the subject property, adjoining Block 3. The easement would not encroach on the prime building zone in the centre of Blocks 4 and 5. A consequence of the minimum GFA clause is that the owner has to build to the 2,795m² of GFA on either of those blocks, working around the easement.[58]
[58] Transcript of proceedings 31 January 2020 pages 269-270
Counsel for the Commissioner submitted that the fact that the two properties happen to have the same owner in the ‘before’ situation was not relevant.[59]
[59] Transcript of proceedings 31 January 2020 page 290
The absence of evidence on the effect of such an access easement on the value of comparable sale properties, together with the fact that the subject property could be used for the purposes prescribed in the Crown lease over an area greater than the minimum GFA, means that this Tribunal has no basis for allocating any significant reduction in the value of the subject property by reference to the easement.
Comparable sales: Counsel for St Landco made the following submissions about some of the sales relied on by Mr Pilat:[60]
(a)Block 26 Section 14 Red Hill is in a suburb that is too different from Gungahlin, which is “nowhere near that character.” One cannot draw a comparison between the suburbs. Further, there was a development application which indicated a GFA figure that could have been used to arrive at a more accurate comparison.
(b)Block 3 Section 31 Franklin and Blocks 2 and 3 Section 88 Gungahlin had GFA rates of $1,694/m2 and $1,063/m2 respectively, which are on either side of Mr Robertson’s rate, indicating that even on Mr Pilat’s analysis, Mr Robertson’s rate is reasonable and supportable on a GFA basis.
[60] Transcript of proceedings 31 January 2020 pages 268-269
Counsel also submitted that the fact that on different properties there were either maximum GFA or minimum GFA did not mean that a comparison could not be made for valuation purposes. Rather, he seemed to contend, one could counteract the effect of minimum GFA versus maximum GFA by acknowledging that one could get something more on a minimum GFA property and the Tribunal could make an allowance for that.[61]
[61] Transcript of proceedings 31 January 2020 page 269
Counsel for St Landco submitted that the discount rate of 15% adopted by Mr Pilat was a guesstimate based on very old sales (some 8 to 10 years before the relevant date) that bore no reflection on the market in 2018. In counsel’s submission, the uplift in the “before” scenario, that is the proper value of the subject property in the “before” scenario, should be significantly greater.[62]
[62] Transcript of proceedings 31 January 2020 pages 267-268
Counsel for St Landco also noted that two of the sales on which Mr Pilat placed great reliance in the ‘before’ scenario were sale 4 (Block 3 Section 31 Franklin) and sale 5 (Blocks 2 and 3 Section 88 Gungahlin) in 2016 and 2015 respectively, and neither of those was said to be outside the date for which he could strike a value for the subject property. Accordingly, one could strike a value for the same purpose based on Mr Robertson’s report.[63]
Consideration and conclusion
[63] Transcript of proceedings 31 January 2020 page 295
Although there are many methods of deriving an opinion about the value of land, the most commonly used method involves the use of comparable sales. That method involves, as the High Court stated in Maurici v Chief Commissioner of State Revenue (Maurici), “seek[ing] out relatively contemporaneous sales of comparative properties between parties at arm’s length, unaffected by special circumstances”.[64]
[64] Maurici v Chief Commissioner of State Revenue [2003] HCA 8 at [16], quoted in City Hill Pty Ltd (ACN 064 633 558) v ACT Planning and Land Authority and Anor [2015] ACTSC 40 at [72]. See generally Alan Hyam, The Law Affecting Valuation of Land in Australia (5^th edition) 2014, at pages 185 - 210
In HTI Watson Pty Limited v Commissioner for ACT Revenue,[65] (Watson) the Tribunal described the comparable sales approach as “the preferred method of valuation” where it is available.[66] In that case the Tribunal quoted the statement of the High Court in Maurici and the statement of Justice Sheahan in Marroun v Roads and Maritime Services[67] that “it is well established that, if comparable sales are available, their direct comparison should provide the conventional method of valuation”.
[65] HTI Watson Pty Limited v Commissioner for ACT Revenue [2020] ACAT 30
[66] HTI Watson Pty Limited v Commissioner for ACT Revenue [2020] ACAT 30 at [55]
[67] [2012] NSWLEC 199 at [196]
What sales are ‘comparable’ is a question of fact.[68] When applying this method, some sales are highly comparable, and others are less so. There is a spectrum of possible comparisons.[69] So, for example, in one case the better comparable sales might be in the same planning zone as the land in question (because the uses under the Crown lease and the zone are the same) but in another case the better comparable sales might be in a different planning zone (because the permissible uses under the Crown lease are materially the same as those permitted in that zone).[70] It might be necessary to make adjustments to the sale prices to account for relevant differences.
[68] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [28] citing Brewarrana Pty Ltd c Commissioner of Highways (No 1) (1973) 32 LGRA 170 at 180
[69] ISPT Pty Ltd and City of Melbourne [2007] VCAT 652 at [51]-[59]
[70] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [102]
As the Tribunal observed in the 3 Properties Group case, the legally permissible use of land in the ACT is determined primarily by the applicable provisions of the Territory Plan and the applicable Crown lease. Those and other factors (for example an easement, a licence to occupy, and a lease by the Crown lessee to a third party) may have a bearing on the value of the land.[71]
[71] 3 Properties Group 5 Pty Ltd v Commissioner for ACT Revenue [2019] ACAT 67 at [63], [64] citing Planet Red Pty Ltd v Commissioner of ACT Revenue [2017] ACAT 18, Gungahlin Golf Investments Pty Ltd v Commissioner for ACT Revenue [2017] ACAT 96
Although some or all of those factors might affect the value of a particular parcel of land, the practical difficulty in the present case was finding sales which were directly or sufficiently comparable with the subject property having regard to their area, date of sale, Crown lease purpose clause, comparable easement and GFA.
Mr Robertson’s most comparable sale is sale 3 in March 2015 (Block 1 Section17 at Coombs) at $844/m² of Commercial GFA provides a large mixed use site with a low site density (0.45). It has a superior purpose clause and is around half the density of the subject property allowing for single level development and on-site carparking. It is superior to the subject property but due to its size reflects a lower unit rate of GFA.
Mr Pilat’s most comparable sale is sale 4 in June 2016 (Block 3 Section 31 at Franklin) at $705/m² of site area and $1,694/m² of GFA. It is a similar size site as the subject but with only 53% of the GFA allowing for single level development of the site and the provision of on-site carparking.
The Red Hill sale in March 2018 provided by Mr Pilat, is the most contemporaneous with the valuation date and indicates values of $904/m² of site area and $2,027/m² of GFA. It has a superior purpose clause and is located is a superior value suburb. It reflects a 28% premium over the site value indicated by the Franklin sale.
The subject property (lots 4 and 5) has a combined area of 3,333m² and has a requirement for a minimum Gross Floor Area of 2,795m². This reflects a floor space ratio of 1:0.84 which compares to the sales evidence of 0.31 – 0.62. It is probable that any development of the site which incorporated on site carparking would need to be multi-level making it less attractive in the market.
We consider that sale 4 at Franklin is the most comparable sale to the subject property because of its proximity to the subject property and its size. This sale provides for a floorspace ratio of 0.42. If that floorspace ratio is applied to the subject property, it derives a potential GFA of 1,400m² in a single level development with on-site car parking (a consequence of which is that the cost of building upper levels is not incurred). If that were the GFA of the subject property, applying the derived GFA from Mr Pilat’s analysis 1,400m² at $1,694/m² gives a value of $2,371,000 (which could be rounded to $2,370,000). That approach on its own does not give a direct comparison, given that the minimum GFA on the subject property is 2,795m². However, as already noted, it is probable that any development of the site which incorporated on-site car parking would need to be multi-level, making it less attractive in the market. Accordingly, the fact that the subject property has a larger minimum GFA does not, in itself, mean that the overall value is increased proportionately.

That outcome can be tested by taking a different approach. If $2,370,000 is divided by the minimum GFA of 2,795m², an amount of $848/m² for the minimum GFA is derived. That figure compares to the $844/m² for Mr Robertson’s best sale at Coombs (a much larger property with some superior features but with similar density to the Franklin sale).
Although arriving at the preferable before value of the subject property is a challenging exercise, we have concluded that it is appropriate to apply Mr Pilat’s analysed site value rate from the sale 4 at Franklin. On that basis, the before value is calculated as follows:
(a)3,333m² x $705/m² = $2,349,765;
(b)rounded to $2,350,000.
This value reflects $841/m² for the 2,795m² of minimum GFA for the subject property.

After value

The after value (or V1) is defined in section 277(2) of the P&D Act to mean:
(a) for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if—
(i)the lease were not varied during the remainder of its term; and
(ii)the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions that a genuine seller would require; and
(iii)the rent payable throughout the term of the lease, or lease to be surrendered, were a nominal rent; or
(b) for a variation that is a consolidation or subdivision, means the capital sum that the lease or leases to be surrendered under the consolidation or subdivision might be expected to realise if—
(i)no consolidation or subdivision were to take place during the remainder of the term of the surrendered lease or leases; and
(ii)the lease or leases were genuinely offered for sale immediately before the consolidation or subdivision on the reasonable terms and conditions that a genuine seller would require; and
(iii)the rent payable throughout the term of the lease or leases to be surrendered were a nominal rent.
In this case, the approval of the development application included:
(a)a variation to the purpose clause to add minor use and residential use;
(b)conditions that require the surrender of the existing Crown leases over Blocks 4 and 5 and acceptance of a new consolidated Crown lease (condition A6) and the surrender of the consolidated Crown Lease and acceptance of four new Crown leases for the subdivided blocks (condition A11).[72]
[72] T documents pages 196, 198, 199 and the attached draft leases at pages 217-263
Section 277 of the P&D Act provides:
(4) If the development approval for the relevant development application relates to 2 or more s 277 chargeable variations, V1 and LVC are worked out as if the s 277 chargeable variations were a single s 277 chargeable variation of the lease.
The “after values” proposed by the parties, at 5 September 2018, are:
(a)St Landco: $5,400,000
(b)The Commissioner: $7,320,000 (includes $156,936 for easement removal)
Mr Robertson’s valuation evidence
The key sales on which Mr Robertson relied for the after value were:

Sale Division Section Block Date Price Site area

6 Greenway 57 4 Mar-14 $4,500,000 9,729

7 Greenway 78 1 Aug-15 $6,000,000 10,960

8 Belconnen 52 34 & 37 Jul-15 $13,150,000 4,800

9 Kingston 60 1 Mar-15 $14,000,000 13,086

10 Dickson 34 31 Feb-14 $12,050,000 7,283

11 Denman Prospect 50 22 Feb-16 $3,500,000 4,160

The sales blocks are larger than the subject property. They were all for multi storied developments which included some level of ground floor commercial component apart from sale 11 in Denman Prospect which is a sale of a purely townhouse site with no commercial component. Given its size and scale it is not considered sufficiently comparable to the subject property.
The sales reflected the following values per dwelling site:

Sale Division Site area Dwellings sqm Dwg $/dwg

6 Greenway 9,729 211 46 $21,327

7 Greenway 10,960 229 47 $26,201

8 Belconnen 4,800 326 15 $40,337

9 Kingston 13,086 240 55 $58,333

10 Dickson 7,283 224 33 $53,795

11 Denman Prospect 4,160 24 173 $145,833

None of the sales utilised featured easements for access similar to that affecting the subject property.
Mr Robertson considered sales 6 and 7 to be the most directly comparable to the subject property. Each comprised a larger block and the resultant lower site density facilitated development to the maximum allowed in relatively low rise buildings. Both sales included a commercial component and were considered to be superior to the subject.
Sale 8 in Belconnen was considered by Mr Robertson to be far superior in terms of location and amenity adjoining a more mature town centre, being close to the University of Canberra and overlooking Lake Ginninderra and surrounding parklands. It is however of a similar scale comprising 326 dwellings plus 1,170m² of commercial and a site area per dwelling of 15m². The development in two buildings of 11 and 22 storeys with ground floor commercial and several levels of carparking mimics that which would be achievable on the subject property. This sale reflects $40,337/dwelling inclusive of the commercial space.[73]
[73] Exhibit A1 page 29
Mr Robertson pointed to a slowing market in Gungahlin for high rise units and an oversupply of stock which would adversely impact on the sale of units developed on the subject property.[74] The sale and resale of a townhouse site at Denman Prospect (sale 6) was also quoted as evidence of a weakening market showing a 30% decline in value.
[74] Exhibit A1 page 34
In summary, Mr Robertson considered the after value to be in the range of $20,000 - $25,000/dwelling inclusive of the commercial component. He finally favoured the lower rate due to the location, yield and higher density of the site (at only 12.3m² of site area per dwelling). On that basis, 270 dwellings at $20,000/dwelling (inclusive of the commercial component) give an after value of $5,400,000 to the subject property.
Mr Pilat’s valuation evidence
Mr Pilat provided a table of 24 sales[75] which he considered to be evidence of value for similar residential development sites.
[75] Exhibit R6 page 18
His analysis of the sales and comparisons led him to conclude that Gungahlin is a higher value environment than Greenway for similar product. Whilst referencing 12 sales in Greenway, Mr Pilat eventually opted for just three “preferred” sales in his assessment.
In his oral evidence[76] he stated that the key sales relied for the after value were:
[76] Transcript of proceedings 30 January 2020 page 157

Sale Division Section Block Date Price Site area

1 Lyons 70 1 Mar-19 $18,160,138 23,289

23 Belconnen 200 2 Jun-15 $31,000,000 16,314

24 Belconnen 52 34 & 37 Jun-15 $13,150,000 4,800

The sales reflected the following values:

Sale Division Site area Dwellings sqm Dwg $/dwg

1 Lyons 23,289 492 47 $36,911

23 Belconnen 16,314 745 22 $41,611

24 Belconnen 4,800 326 15 $40,337

Mr Pilat considered the Lyons sale (sale 1) which shows $36,911/dwelling to be the best evidence of value. This sale does not include a commercial component. It is also a much larger site than the subject property, being nearly seven times the size and with a unit yield of 492 dwellings (82% more than the subject) at a site density of 47m²/dwelling (compared with 12.3m² on the subject).
Mr Pilat did not go into any detail regarding the two Belconnen sales in his report. In oral evidence, he confirmed that he was involved in a number of matters relating to sale 24 and that they had informed his opinion about the sale. He stated that the sale with the commercial component removed would only reduce the unit value by a couple of thousand dollars.[77]
[77] Transcript of proceedings 31 January 2020 page 247
He then adopted a value of $25,000/dwelling excluding the commercial component for the subject property. Applying that amount to 270 dwellings would lead to an after value of the subject property of $6,750,000.
Neither valuer provided any detailed description or calculations as to how they proceeded from the sales to their final adopted figure. Mr Pilat also relied on “previous ACTVO LVC valuation review reports within Gungahlin”[78] to support his figure.
Issues in relation to after value and parties’ submissions
[78] T documents page 192
In their submissions in relation to the after value of the subject property, the parties addressed the following issues:
(a)whether the GST component of sale prices should be included or excluded when ascertaining the after value of the subject property;
(b)the way in which the value referable to GFA was achieved;
(c)the implications of the changes to the purpose clause for the after value of the subject property;
(d)the implications, if any, of the partial removal of the easement for the value of the subject property;
(e)whether the after value should be determined by reference to the consolidated lease over the subject property or the four future leases of the subdivided blocks; and
(f)the best way of ascertaining the unit value of the residential component of the subject property.
GST: In relation to the sales considered by Mr Pilat at page 18 of his report,[79] counsel for St Landco submitted that:
(a)for the purpose of section 277 of the P&D Act, the value of the land should be the capital sum which could be realised at sale excluding GST;[80]
(b)accordingly, the GST inclusive sales prices of the properties on which Mr Pilat relied should be reduced by the GST component (whatever that was) with a consequential reduction in the per unit price.[81]
[79] Exhibit R6
[80] Transcript of proceedings 31 January 2020 page 270
[81] Transcript of proceedings 31 January 2020 page 272
Counsel for the Commissioner contended that both valuers fell into error in relation to GST. He noted that:
(a)Mr Robertson did not specify whether his totals were inclusive or exclusive of GST (except for sales Franklin 4 and 5B, which he analysed incorrectly); and
(b)Mr Robertson and Mr Pilat had the same values in respect of specified sales (Block 1 Section 17 at Coombs, Block 3 Section 114 at Amaroo, Block 4 Section 57 at Greenway, Block 1 Section 76 Greenway, Blocks 34 and 37 Section 52 at Belconnen) and hence, if each made the same error then, in respect of the GST aspect, it was possible to make a like-with-like comparison of their valuations.[82]
[82] Transcript of proceedings 31 January 2020 page 290
He referred to, but made no submissions about, the judgment of the NSW Land and Environment Court in Storage Equities Pty Ltd v Valuer-General[83] (Storage Equities).
[83] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137
The only issue in Storage Equities was whether the land value of the properties should include GST.[84] The parties’ valuers agreed on values with and without a GST component. The former was 10% greater than the latter, 10% being the rate at which GST is ordinarily imposed.[85] The Court considered submissions on a range of issues, including that:
(a)there could be an issue in individual transactions whether GST was payable on the purchase, whether the GST liability might be less than 10%, whether the purchaser would be exempt from liability to pay GST or no GST would be payable by the vendor, and therefore each contract should be interrogated to decide whether there was a GST component in the price paid;[86]
(b)the price of a parcel of land will be determined by the market, which will adjust for the inclusion of GST in the purchase price;[87]
(c)statutory valuations and valuation reports prepared on behalf of the NSW Valuer-General include GST which has formed part of the purchase price;[88] and
(d)the sale price of land inclusive of GST does not represent, or a afford evidence of, the value of the land to the vendor because the vendor receives the GST component of the sale price as the holder of the tax to be remitted to the Australian Tax Office, therefore the value of the land is evidenced by the price received net of GST.[89]
[84] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [3]
[85] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [10]-[13]
[86] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [27], [29]-[31], [35]-[37], [46], [47]
[87] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [21]
[88] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [21]
[89] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [25], [26], [28], [40]
The Court determined that the land value of each property for each base date should include GST.[90] It did so on the basis that section 6A(1) of the Valuation of Land Act 1916 (NSW) described the “land value” as the capital sum which the fee simple “might be expected to realise” if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that improvements had not been made.[91] The principles articulated in Spencer vCommonwealth are relevant to the application of section 6A(1).[92]
[90] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [14]
[91] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [17], [22]
[92] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [23], [24]
The Court considered that the phrase ‘to realise’, when read in the context of section 6A(1) of the Valuation of Land Act, means that:
the determination of value is to be made as if the land was converted to cash or money by reason of the hypothetical sale contemplated by the section. The land, so converted, necessarily reflects that sum of money that secures the entitlement of the purchaser to a transfer of title. The amount paid by the purchaser is the sum “realised” by the vendor on the transaction regardless of any component of that sum that the vendor may be liable to pay as a consequence of receiving it.[93]
[93] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [41]
Consequently, the land value is the amount expected to be received on the sale of that land, including any GST that the vendor might be liable to pay, and no adjustment should be made to those transactions on account of any GST liability of the vendor.[94]
[94] Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 at [48], [54]
The Court noted that its decision was consistent with observations in other judicial decisions, citing CSR Ltd v Hornsby Shire Council [2004] NSWSC 946; 57 ATR 201, and Tomago Aluminium Company Pty Limited v Valuer General [2010] NSWLEC 4.[95]
[95] Storage Equities Pty Ltd v Valuer-General [2013] [ NSWLEC 137 at [50], [51]
For present purposes, we note that the definitions of V1 and V2 in section 277 of the P&D Act include the following:
(a)V1 means “the capital sum that the lease might be expected to realise” if the lease were varied as proposed, and the lease were genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require; and
(b)V2 means “the capital sum that the lease might be expected to realise” if the lease were not varied during the remainder of its term, and the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions that a genuine seller would require.
A comparison of those extracts with section 6A(1) of the NSW Valuation of Land Act shows the extent to which the same phraseology is used. On that basis, it might be that this Tribunal should follow the approach taken by the NSW Courts and include a GST component in the determination of V1 and V2 in this and similar cases.
However, for two reasons we have decided not to express a concluded view in this case. First, neither party addressed the Tribunal in any detail about this matter. Indeed, the reference to the Storage Equities decision was made late in the proceedings and then without any supporting submissions. The issue is sufficiently important to be the subject of full argument before the Tribunal in an appropriate case. In the meantime, we have considered that decision for the purpose of highlighting the appropriateness of future valuations identifying whether there was a GST component in individual sales on which a valuer relies and, if so, the amount of that component. As was made clear in arguments before the Court in Storage Equities, it might be that in some cases there is no GST component or the component is for an amount other than 10% of the amount on which GST is calculated. Consequently, it would be important to interrogate each sale for this purpose, so that when the issue is properly raised before the Tribunal, the evidence provides a clear basis for determining the value of the subject land whatever the Tribunal decides in relation to the GST issue.
Second, the valuation evidence in relation to most of the sales referred to in these proceedings did not identify whether the sale price included GST and, if so, the amount of the GST component. Consequently, it is not possible for this Tribunal to proceed with confidence that (if we were to adopt the approach in Storage Equities) the sale price in each case included the full amount (if any) of GST payable in relation to that sale. For present purposes, we proceeded on the basis that the sale prices advanced by each party’s valuer were calculated on the same basis as each other’s sale price (unless specifically identified otherwise).
GFA: Counsel for St Landco criticised the GFA figure proposed by Mr Pilat for the after value because:
(a)it was drawn from Ms Hill’s work and was not Mr Pilat’s derivation;
(b)there was no attempt to acknowledge the differences between the five sales (for example, by reference to their locations in different suburbs, the different site areas and their commercial enterprises and their purpose clauses) and, in particular, that none of the sale properties approached the 568m² of integrated commercial GFA as part of the mixed use development.
In his submission, the Greenway sales on which Mr Robertson relied were the most comparable, with appropriate adjustment downwards because of the mature town centre and the presence of large Government agencies in the area. That comparison was, he submitted, more useful than references to sales along the Northbourne corridor where it could not be assumed that historic rises in property values would continue in a linear (rather than cyclical) manner.[96]
[96] Transcript of proceedings 31 January 2020 pages 273-274
Mr Pilat implied that he had made a separate allowance for the commercial GFA component when deriving his initial “dwelling rate of $28,000 excluding commercial component”.[97] This is not evident in any of his sales analysis calculations or in his tabulation of the sales. His analysis of the Blocks 34 and 37 Section 52 Belconnen sale derives a rate per dwelling of $40,337, the same as Mr Robertson. Mr Robertson in his analysis went a step further in ascribing a value of $1,000/m² GFA to the 1,710m² of commercial space to determine a purely residential unit value of $35,862.[98]
[97] Exhibit R6 paragraph 79
[98] Exhibit A1 page 29
It is not clear to the Tribunal that Mr Pilat has separately applied a value to the commercial components of the mixed use development sales in his report. It is clear that Mr Robertson has included it, however the extent of the impact is impossible to gauge without knowledge of the extent to which it impacts as no GFA figures are included in two of his three sales. It is sufficient to accept that both valuers took a broad brush approach to the analysis of the sales. The Tribunal accepted that approach.

Purpose clause: The approved Crown lease for the consolidated block of the subject property includes the purpose clause which commences with the statement that the lessee covenants “To use the premises for the purpose of non retail commercial use AND IN ADDITION the premises may also be used for one or more of the following” listed uses. That opening is identical to the opening of the purpose clause for the leases of Block 4 and Block 5.
Counsel for St Landco proceeded on the basis that the consolidated lease is the lease for which the after value is to be determined. He submitted that both valuers relied on sales with different purpose clauses[99] but that Mr Robertson gave detailed evidence that the rate he arrived at included the non retail commercial use necessary to unlock the additional uses.[100]
[99] Transcript of proceedings 31 January 2020 page 295
[100] Transcript of proceedings 31 January 2020 page 295
Although the draft consolidated lease contains the purpose clause noted above, counsel for the Commissioner submitted that the requirement for primary non retail commercial use lapses in the after value because it is only present in the commercial component of the draft subdivided lease,[101] not the residential component.[102]
[101] See T documents page 232
[102] See the purpose clauses of the two residential leases at T documents pages 241 and 250, see also the minor use lease T documents page 258
For the reasons given in relation to the purpose clause in the ‘before’ scenario, we are not satisfied that there is sales evidence which demonstrates the extent of the impact of the purpose clause on the value of the subject property (whether in its consolidated lease or the subdivided leases).
Easement: Counsel for St Landco submitted that, in ascertaining the after value of the subject property, it was not appropriate to place a separate value on the removal of the easement. If the subject property had been offered for sale immediately after the variation, the easement would have gone. It would not need to be purchased. No value had been added or lost. Further, there is no separate value that could be ascribed to this easement. Any ascription of value to the loss of the easement is included in the per unit figures for the 270 units on the site because the proposed building will be constructed across what was the old easement area.[103] He also submitted that in the ‘after’ scenario, it does not matter whether the subject property is a single lease or the proposed subdivided leases because the easement no longer exists.[104]
[103] Transcript of proceedings 31 January 2020 page 274
[104] Transcript of proceedings 31 January 2020 page 294
Counsel for the Commissioner submitted that the additional area of former easement available for development (rather than for access to Block 3) would be of value to a developer of the subject property. He contended that the value might be nominal, but it is not “nil.”[105]
[105] Transcript of proceedings 31 January 2020 page 290
We have concluded, for two reasons, that the current easement (and the absence of part of the previous easement) had no significant impact on the value of the subject property in the after scenario. First, access to the subject property from the surrounding streets can only be obtained by way of the easement which also provides access to the adjoining Block 3, as it did in the ‘before’ scenario. To the extent that it affected the value of the subject property in the ‘before’ scenario, that effect is unchanged in the ‘after’ scenario. As noted in the discussion of the ‘before’ scenario, the previous easement which extended to the east across Blocks 4 and 5 did not have a significant effect on the value of those blocks. The removal of that easement has little or negligible effect on the after value of the subject property.
Second, the sales evidence related to properties without easements. The unit value was derived from those sales. There is no sales evidence of the extent to which, if at all, an easement of the type on the subject property in the after situation would affect the application of comparative sales or the calculation of unit values.
Consolidated lease v subdivided leases: The notice of decision dated 5 September 2018 included approval, subject to conditions, of the proposal for the consolidation and re-subdivision of Block 4 and Block 5 Section 224 Gungahlin into four leases containing various strata parcels. The conditions included:
(a)condition A6, requiring the surrender of the existing Crown leases over Blocks 4 and 5 and the acceptance of a new consolidated Crown lease; and
(b)condition A11, requiring the surrender of the consolidated Crown lease and acceptance of four new Crown leases for the subdivided blocks.[106]
[106] T documents pages 196, 198, 199 and the attached draft leases at pages 217-263
The effect of those conditions is that the lessee must surrender the consolidated Crown lease and accept the new Crown leases in the form of the attachments after built works are complete to a nominated stage to allow for a survey of the subdivided blocks (condition A8).
Counsel for the Commissioner submitted that, in ascertaining the after value of the subject property, the Tribunal should look not only at the consolidated lease but also the subsequent subleases. The legislation requires the after value to be determined by reference to the end point.[107] The law requires that the subdivision be taken into account.[108]
[107] Transcript of proceedings 31 January 2020 pages 286-287
[108] Transcript of proceedings 30 January 2020 page 107
Counsel for St Landco disputed the Commissioner’s submission on the following evidentiary and legal grounds:[109]
(a)No one has valued the consequential subleases. If the Commissioner’s submission is accepted, there is no evidence upon which to strike an after value. That is reason enough to reject the Commissioner’s submission.
(b)The P&D Act refers to the value of the lease when offered for sale immediately after the approval takes effect. In the present circumstances, condition A6 of the approval provides that the lessor obtains a consolidated lease and can commence building. It is not for some years (and after the building is undertaken) that the condition of approval regarding the subdivision takes effect. As those two stages are significantly apart, and section 277A requires the Tribunal to assume that the land is vacant,[110] what is being valued is the vacant land after the consolidation of the lease has occurred.
[109] Transcript of proceedings 31 January 2020 pages 294-295, see also transcript of proceedings 30 January 2020 pages 105, 108
[110] Section 277A of the P&D Act provides that in working out V1 and V2 under section 277 an improvement in relation to the land comprised in the lease must not be taken into account.
In our view, for the purpose of deciding this case, the answer to this issue is found in both the legislation and the evidence before the Tribunal. First, section 277(2) of the P&D Act defines V1 to mean different things in different circumstances (in essence, where the variations are or are not a consolidation or subdivision) and section 277(4) provides that where the approval for a development application relates to two or more chargeable variations, V1 and the LVC are worked out as if the chargeable variations were one chargeable variation.
In the present case, the approval of the development application included:
(a)a variation to the purpose clause to add minor use and residential use (so the V1 would be calculated by reference to the capital sum that the lease “might be expected to realise” if the lease were varied as proposed and the lease were offered for sale “immediately after the variation”); and
(b)conditions that require the surrender of the existing Crown leases over Blocks 4 and 5 and acceptance of a new consolidated Crown lease (condition A6) and the surrender of the consolidated Crown Lease and acceptance of four new Crown leases for the subdivided blocks (condition A11).[111]
[111] T documents pages 196, 198, 199 and the attached draft leases at pages 217-263
Although condition A11 is included in the approval, it cannot take effect until built works are completed to a nominated stage to allow for a survey of the subdivided blocks (condition A8). The capital sum for the Crown lease can be assessed on the basis of what the consolidated lease “might be expected to realise” with conditions A6 and A11 applying but before condition A11 has been complied with. In other words, the after value has to take into account the end point, even though what is required to reach that point has not and (at the time the valuation is determined) cannot be realised. That conclusion is reached on the basis that section 277(2)(b)(i) does not preclude reference to subsequent subdivisions as required by the conditions on which the variation was approved. As already noted, section 277A of the P&D Act provides that in working out V1 (and V2) an improvement in relation to the land comprised in the lease must not be taken into account.
Second, the only valuation evidence before the Tribunal in this case is for single parcels (like a consolidated lease). Neither valuer attempted to value the subject property as if it comprised subdivided leases. We note, for example, that in re-examination, Mr Robertson explained the rate he assigned per unit included a commercial component (rather than a separate ground floor commercial component which will be the subject of a separate lease) and that the rate was lower than any other sale “given the development structure hasn’t been fleshed out.”[112] He also stated that, although he was aware of the proposed consolidation and subdivision of the Crown leases, he adopted a “blended rate” because of what he described as the “dominance of the residential component” (a GFA of 20,085m2) in the proposed development where the (as yet unspecified) area required in relation to the ground floor commercial component is likely to be about 568.5m².[113]
[112] Transcript of proceedings 30 January 2020 page 112
[113] Transcript of proceedings 30 January 2020 pages 111-112, see also T documents pages 191, 228-237
Because that is the only evidence before the Tribunal, we cannot speculate about whether the value was or would be influenced by the requirement to surrender the consolidated lease and accept four new Crown leases at some future date.
Unit value: Counsel for St Landco noted that Mr Pilat’s unit rate for the after value of the subject property was based primarily upon the sale of Block 1 Section 70 in Lyons. In his submission, that sale is not a good comparator with the subject property, given the differences in size, density, zoning and location.[114]
[114] Transcript of proceedings 31 January 2020 page 270
Counsel for the Commissioner noted that both valuers had adopted a unit value when assessing the residential component of the after value of the subject property.[115]
[115] Transcript of proceedings 31 January 2020 page 287
He acknowledged that many of the comparative sale properties were not of the same density as the subject property and that other factors such as location were also relevant. In that context, he noted that:
(a)Mr Pilat’s figure of $25,000 per unit was lower than all but one of the comparative sales when analysed on a dollar per unit basis; and
(b)Mr Robertson’s figure of $20,000 was lower than the lowest of the sales which were analysed.[116]
[116] Transcript of proceedings 31 January 2020 page 287
Counsel for the Commissioner criticised Mr Robertson’s expert opinion that the change in the lease purpose clause achieved only a 50% increase in the after value of the subject property. In his submission, that estimated proportion of increased value was “patently too low” and “actually outlandish.”[117] Counsel also noted that Mr Robertson conceded that his report was based on a mid-2019 assessment rather than September 2018, and that more than half of the table in Mr Robertson’s report about take-up rates related to take-up rates in the second half of 2019 which, counsel submitted, are of no relevance to the position as at September 2018.[118]
[117] Transcript of proceedings 31 January 2020 page 287
[118] Transcript of proceedings 31 January 2020 pages 287-288
Counsel for St Landco submitted that Mr Pilat adopted a rate per unit for residential property based on his analysis of sales which included commercial components[119] then valued separately the commercial value of the subject property resulting in a “double count”[120] rather than, for example and preferably, striking a residential per unit rate that includes some commercial value and noting that there will be a mixed use development with some commercial rights attached to it. In this case, the primary use will be residential rather than commercial, and so it is incredibly difficult to ascribe a separate value on the basis of GFA for commercial use, particularly where such use is part of a mixed-use integrated development.[121]
[119] See Exhibit R6 paragraph 79
[120] Transcript of proceedings 31 January 2020 page 272
[121] Transcript of proceedings 31 January 2020 pages 272-273
Counsel for the Commissioner submitted that even if the commercial component is valued separately and added to the $25,000 per unit figure advanced by Mr Pilat, the result would be $26,521, which is close to the $25,000 figure.[122]
[122] Transcript of proceedings 31 January 2020 page 290
In reply, counsel for St Landco characterised that approach as double counting because, in his submission, the $25,000 was struck on the basis of sales which included a commercial component. Rather, the commercial GFA needs to be “clipped off” and the Tribunal cannot take it into account.[123]
[123] Transcript of proceedings 31 January 2020 page 294
The sales provided by both valuers provided a good coverage of transactions over the relevant period. The uniqueness of the subject property meant that finding anything truly ‘comparable’ would be a difficult task. The fundamental difference in approach by the valuers, valuing on a site area basis versus a GFA basis further complicated the matter. In the end both valuers took a broad approach and applied a value per residential unit across the subject property’s potential 270 units. Consciously or subconsciously they have both used the same tool to determine the value.
The Tribunal accepts the submission by counsel for St Landco[124] that the wrapping up of the whole commercial and residential components in a single figure is the better and safer course to determine a value, particularly given that the commercial use represents such a small percentage of the GFA.
[124] Transcript of proceedings 31 January 2020 page 273
Comparable sales: Counsel for the Commissioner observed that there was relatively little evidence about movement in the residential market in Gungahlin, but he referred to the written evidence in City to Gungahlin Light Rail, Project Delivery Report (June 2019)[125] which showed that between 2014 and 2018 there was a 27% increase in the value of houses. Although the present case involves the use of land for residential units, he contended that one would expect a commensurate increase in the value of units in that period.[126]
[125] Exhibit A6
[126] Transcript of proceedings 31 January 2020 page 288
On the basis that there had been such a shift in value, counsel criticised Mr Robertson’s after value figure which was based on sales in 2014 and 2015 and which Mr Robertson had not adjusted appropriately to take account of the upward movements in the residential market along the light rail corridor.[127]
[127] Transcript of proceedings 31 January 2020 page 288
The parties agreed that the subject property is a few hundred metres from, and is accessible to, the light rail.[128] However, there was no evidence that the light rail is sufficiently close to the subject property to affect its value. Nor was there evidence of an increase in the market value of commercial or residential properties that was attributable to the proximity of the light rail. In any case, it could only be relevant to the after value of the subject property.
[128] Transcript of proceedings 31 January 2020 page 289
Counsel for the Commissioner also suggested that the Tribunal be cautious with regard to Mr Robertson’s sale 6 (Block 4 Section 57 Greenway) which was approximately a $21,000 per unit figure because:
(a)it was (on Mr Robertson’s report) by comparison with the subject property, at an inferior location, with different social status, and it takes longer to travel from the sale property to the city by public transport; and
(b)there was a five year prohibition on changing the lease purpose clause (whereas other properties in the area sold by the Land Development Agency had lease variation changes to increase density shortly after they were sold).[129]
[129] Transcript of proceedings 31 January 2020 page 288
He also noted that, of the sale properties, the development in Belconnen approaches the density of the subject property and has views over Lake Ginninderra which the subject property does not have. Allowing for the Belconnen property’s superior features, if it is valued at $40,000 per unit a figure of $25,000 per unit for the subject property is appropriate.[130]
[130] Transcript of proceedings 31 January 2020 pages 288-289
Counsel for St Landco submitted that because of its location (including its proximity to and views of Lake Ginninderra) and it being a developed centre with a number of Commonwealth agencies, the Belconnen property is not comparable with the subject property, which is in a primarily residential area.[131]
Consideration and conclusion
[131] Transcript of proceedings 31 January 2020 page 294
The subject property is different from the mainstream of residential development sites within the ACT. It is of high density (12.3m²/dwelling) on a small site necessitating multi storey high rise development to achieve its potential. Of the sales listed, the great majority reflect densities of between 33m² and 55m² of site area per dwelling.
Only the two sales in Belconnen, at 22m²and 15m², provided sites of similar density although the former was of a scale and value that limited its comparability.
The most comparable of the sales is the Belconnen sale of blocks 34 and 37 in June 2015 for $13,150,000. It is a slightly larger site (+44%) and has a higher yield at 326 dwellings (+21%). It also includes an area of commercial use GFA of 1,945m²(according to Mr Pilat’s October 2018 report[132]) or 1,710m² (according to Mr Robertson’s report[133]). The sale property is in a superior location to that of the subject property and is superior to it on a per dwelling basis.
[132] T documents page 189
[133] Exhibit A1 page 29
Mr Pilat calculated $40,337 per dwelling (including commercial component).[134] In his valuation report, Mr Robertson calculated $41,222 per dwelling (including commercial component). He also calculated $35,862 per dwelling without the commercial component (assessed at $1,000/m² of GFA).[135]
[134] T documents page 189
[135] Exhibit A1 Page 29
Both Mr Robertson and Mr Pilat analysed the sales on an overall basis inclusive of any commercial component. No attempt was made by Mr Pilat to split the analyses based on a separate value for the commercial component, so as to derive a purely “residential unit” value.
The same applies to the partial withdrawal/extinguishment of the right of way easement. None of the key sales were identified as being so affected, so any values derived from them must reflect land that is free of encumbrance. As noted earlier, the consolidated block in the after scenario is still partially affected by an easement in favour of lot 3.
Mr Robertson considered $25,000/dwelling to be at the upper end of his range of values and Mr Pilat considered the same figure to be at the lower end of his. Having regard to the valuers’ analyses of the sales evidence, the Tribunal considers that the rate of $25,000/dwelling is appropriate for the subject property.

The after value of the subject property is therefore assessed at $25,000/dwelling or $6,750,000.
For the reasons outlined above no further charges need to be added in relation to the commercial space or for the partial easement removal.
The final values assessed are therefore:
(a)V1 – After Value $6,750,000;
(b)V2 – Before Value $2,350,000;
(c)difference $4,400,000.

Remissions

This case raises two additional issues:
(a)Whether the Tribunal has jurisdiction to decide the amount of remission, or remissions, to which St Landco is entitled.
(b)If the Tribunal has jurisdiction, whether St Landco was entitled to a remission or remissions calculated under disallowable instruments DI 2016 –28 and DI 2018–89.
Because the Tribunal cannot resolve the second issue unless it has the power to do so, the first issue must be determined as the threshold issue.
Sections 277B and 278 of the P&D Act provide the legislative context in which the Tribunal can determine the jurisdictional issue.
Section 277B (1) states:
277BLease variation charge under s 277—working out statement
(1)This section applies if—
(a)a development application in relation to a s 277 chargeable variation of a nominal rent lease is approved; and
(b)the lease variation charge in relation to the s 277 chargeable variation has been worked out (the original decision); and
(c)the commissioner for revenue gives a notice of assessment of a lease variation charge under section 276D (1); and
(d)an application has not previously been made under section 277C for reconsideration of the original decision.
(2)The applicant for the development application may ask the commissioner for revenue for a statement (a working out statement) explaining the commissioner’s working out of the original decision.

NoteIf a form is approved under s 425 for this provision, the form must be used.
(3)The commissioner for revenue must give the applicant a working out statement within 20 working days after the day the applicant asks for the statement unless—
(a)the notice of assessment contains the matters that the working out statement would contain; or
(b)a document that contains the matters that a working out statement would contain has already been given to the applicant.

Section 278 states:
278Remission of lease variation charges
(1)The Minister may determine circumstances in which an amount of a lease variation charge for a chargeable variation of a nominal rent lease must be remitted.
(2)If a determination is made under subsection (1), the Treasurer must determine an amount to be remitted for each lease variation charge for a chargeable variation to which the determined circumstances apply.
(3)The amount must be expressed as a percentage of the lease variation charge for a chargeable variation.
(4)The commissioner for revenue must remit the amount determined under subsection (2) for a chargeable variation to which the determination applies.
(5)A determination under this section is a disallowable instrument.
Note A disallowable instrument must be notified, and presented to the Legislative Assembly, under the Legislation Act.
St Landco’s submissions
St Landco submitted that the scope of the decision under reconsideration is the “original decision” referred to in section 277B(1)(b), that is, the working out of “the lease variation charge in relation to the s 277 chargeable variation.” The original decision is not confined to the integers prescribed by section 277 but is the lease variation charge worked out in relation to those variables. That includes LVC remissions determined in accordance with section 278, subsection (4) of which provides that the Commissioner (and, by extension, the Tribunal on review) must remit the LVC in accordance with Ministerial determinations made from time to time. The definition of “original decision” refers to the change determined “in relation to” section 277, including remissions which the Commissioner was obliged to apply by virtue of section 278. This is because the LVC is not worked out until any remissions in relation to the chargeable amount have been worked out. In that submission, the LVC is only worked out once – after V1 and V2 have been reckoned, the resulting figure is multiplied by 75%, and any remissions have been applied. Without that third step, the LVC has not been worked out.
St Landco submitted that the Tribunal will not have acquitted its task of working out the LVC charge in relation to the section 277 variation unless it determines the proper remission of that charge which applies to the subject property.
Counsel for St Landco referred to the decision of a differently constituted Tribunal in Georgalis and ACT Planning and Land Authority[136] (Georgalis) in which the issue about whether the Tribunal can review remissions was not the subject of detailed consideration. Rather, the Tribunal assumed that it had jurisdiction to do so.
The Commissioner’s submission
[136] Georgalis v ACT Planning and Land Authority [2012] ACAT 1
The Commissioner’s submission in relation to jurisdictional issue has the same legislative starting point but urges a different conclusion on the Tribunal, namely that the decision in relation to remissions is not before the Tribunal, and the Tribunal has no jurisdiction to consider it.
In that submission, the Tribunal’s jurisdiction is determined by reference to Schedule 1 of the P&D Act. Item 29 of that Schedule lists the reviewable decision for present purposes as the reconsideration decision made under section 277E(1)(b)(ii) confirming the original decision. ‘Original decision’ is defined in section 276 by reference to section 277B(1)(b).
The Commissioner submits that the only “section 277 chargeable variation” that is worked out is the calculation found in section 277(1), which is LVC = (V1-V2) x 75%. Therefore, the ‘original decision’ is confined to the LVC worked out in section 277(1). It does not extend to, or include, any determination regarding remissions under section 278.
In relation to the decision in Georgalis, counsel for the Commissioner submitted that the reason the Tribunal assumed that it had jurisdiction in relation to remissions was that it had such jurisdiction at that time. The law changed subsequently. At one time the Tribunal could review section 278 decisions, but it cannot do so now.
Counsel drew an analogy with land tax cases[137] where:
(a)decisions to impose land tax or not to remit land tax are reviewable; but
(b)decisions to impose interest on land tax or not to remit interest on land tax are not reviewable.
[137] See e.g. Fryar & Commissioner for ACT Revenue [2012] ACAT 73
In his submission, the mere fact that there is some overlap in the subject matter does not make a decision reviewable.
Consideration and conclusion
The issue is resolved by reference to the language of the relevant sections and the sequence of events under those consecutive sections.
In addition to sections 277B and 278 quoted above, section 276 includes the following definitions that apply in Division 9.6.3 of the P&D Act (which includes sections 277, 277B and 278):
LVC determination means a determination made under section 276E (Lease variation charges—LVC determination).
original decision—see section 277B (1) (b) (Lease variation charge under s 277—working out statement).
working out statement—see section 277B (2) (Lease variation charge under s 277—working out statement).
Under section 277(1):
277Lease variation charges—s 277 chargeable variations
(1)The commissioner for revenue works out the lease variation charge for a s 277 chargeable variation of a nominal rent lease as follows:
The terms LVC, V1 and V2 are defined in section 277.
Section 277B(1)(b) applies if the LVC in relation to the section 277 changeable variation “has been worked out.” In other words, section 277B(1)(b) only applies if something has already occurred, namely the changeable variation has been worked out. That decision is the starting point and hence is referred to as the ‘original decision.’ It is only after that decision has been made that the applicant for the development application may ask the Commissioner for a statement explaining the Commissioner’s working out of that decision. The Commissioner must provide such a statement unless one of the exceptions applies.
The Minister’s determination about the circumstances in which an amount of the LVC must be remitted is discretionary. The Treasurer determines the amount by which an LVC for a changeable variation must be remitted, and that is expressed as a percentage of that LVC. In other words, any Ministerial determination refers to an LVC which has already been made and is expressed as a percentage of that amount, i.e. the original decision.
The Commissioner must remit the amount for a changeable variation to which the determination applies. The remission can only be made in respect of an existing LVC, i.e. the original decision.
That conclusion is supported by the definitions in section 276 quoted earlier that apply in Division 9.6.3 of the P&D Act, not only section 277B. Section 276 defines ‘original decision’ as what it is defined to mean in section 277B(1)(b), not as defined in section 277B(1)(b) as varied (if at all) by a Ministerial determination under section 278. So too, the definition of ‘working out statement’ is as defined in section 277B(2), not as a working out statement that is revised (or prepared) to include any revision resulting from a Ministerial determination under section 278.
The conclusion is also supported by the history of the relevant sections of the P&D Act. The current sections 277B and 278 were included in the P&D Act on 1 July 2011 as part of a scheme to replace provisions concerning change of use charges with provisions concerning LVCs.[138] At the time of the 2010 decision under review in Georgalis, section 278 set out when the ACTPLA (not the Minister) would remit all or part of a change of use charge for a variation of lease under section 276, as prescribed by regulation. The reviewable decisions listed in Schedule 1 of the P&D Act at that time included as Item 28 a “decision under s 278 about amount of remission of change of use charge for variation of lease.” The decision maker listed in column 3 was the “planning and land authority.” Neither that provision nor a provision in similar terms was part of the July 2011 amendments to Schedule 1, and so there was no comparable provision at the date of the LVC decision under review in this case.
[138] Planning and Development (Lease Variation Charges) Amendment Act 2011. See also the discussion of the new definition of ‘original decision’ in relation to section 277B (1)(b) in the explanatory statement presented by Ms Katy Gallagher MLA, Treasurer .
It follows from that conclusion that this Tribunal has no power to decide whether a particular remission or remissions should have been applied in relation to the LVC which is the subject of these proceedings. Consequently, this Tribunal cannot and hence should not consider the submissions of St Landco in relation to a decision or decisions about remissions.

Conclusion and orders

For the reasons set out above, this Tribunal has concluded that:
(a)the before value (V2) of the subject property, taking into account the Crown lease purpose clause applying immediately before 5 September 2018, was $2,350,000;
(b)the after value (V1) of the subject property, taking into account the Crown lease purpose clause applying immediately after the variation on 5 September 2018, was $6,750,000; and
(c)the Tribunal has no power to decide whether a particular remission or remissions should have been applied in relation to the LVC which is the subject of these proceedings.
In light of those conclusions, this Tribunal orders that:
(a)The reconsideration determination of the Commissioner for ACT Revenue made on 2 August 2019 in relation to the Lease Variation Charge (LVC) for Blocks 4 and 5 Section 225 Gungahlin (the subject property) be set aside.
(b)The matter be remitted to the Commissioner for ACT Revenue to reconsider the LVC in relation to the subject property on the basis that the before value (V2) of the subject property is $2,350,000 and the after value (V1) of the subject property is $6,750,000.
(c)The Commissioner for ACT Revenue issue a new Notice of Assessment pursuant to section 276D(1) of the Planning and Development Act 2007.
………………………………..
President G Neate AM
For and on behalf of the Tribunal.

HEARING DETAILS

FILE NUMBER:	AT 73/2019
PARTIES, APPLICANT:	St Landco No 1 Pty Ltd ACN 614 636 805
PARTIES, RESPONDENT:	Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT	Mr B Buckland
COUNSEL APPEARING, RESPONDENT	Mr M Hassall
SOLICITORS FOR APPLICANT	Mills Oakley
SOLICITORS FOR RESPONDENT	ACT Government Solicitor
TRIBUNAL MEMBERS:	President G Neate AM Senior Member D Lovell
DATES OF HEARING:	29, 30 and 31 January 2020

Sale	Division	Section	Block	Date	Price
1	Amaroo	114	3	Jun-19	$450,000
2	Franklin	31	4 & 5	Jun-16	$2,510,000 (ex GST)
3	Coombs	17	1	Mar-15	$4,000,000
4	Gungahlin	88	4	Apr-16	$4,050,000
5	Gungahlin	246	4	Feb-19	$3,750,000

Sale	Division	Site Area	$/m² site	GFA (m²)	$/m² GFA
1	Amaroo	440	$1,023	260	$1,730
2	Franklin	3,558	$705	1,064 (community) 401 (medical)	$998 $3,715
3	Coombs	8.844	$450	1,137 (community) 4,429 (commercial)	$897 $1,598
4	Gungahlin	1,078	$1,576 (unimproved)	995	$1,708
5	Gungahlin	2,705	$1,386