Ashleigh Developments Pty Limited v Valuer General

APPLICANT Mr A Rider, barrister INSTRUCTED BY Hicksons Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr G Newport, barrister INSTRUCTED BY Crown Solicitor's Office

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

10/30054 Ashleigh Developments Pty Limited v Valuer General

This decision was given as an extemporaneous decision. It has been revised and edited prior to publication. 1 SENIOR COMMISSIONER: Ashleigh Developments (the company) owns a parcel of land at Corks Lane (the site), in the hinterland of Milton on the New South Wales south coast. The parcel is the subject of a granted development consent from the local council that would permit a residential subdivision of 157 allotments to be carried out over three stages. The Valuation of Land Act 1916 (the Act) establishes a right of appeal to the Court pursuant to s 37 and subsequent sections, against a statutory valuation by the Valuer General of any parcel of land. The company has appealed to the Court against the valuation that has been applied to its subdivision parcel at Milton, with that valuation being as at 1 July 2008.

2 At the commencement of the proceedings, the party's legal representatives, their advising valuers and I spent the day travelling to the site and to four other en globo subdivision parcels that Mr Adlington, the expert valuer appearing to give evidence for the Valuer General, and Mr Hanrahan, the expert valuer appearing to give evidence on behalf of the company, had used in their comparative sales analyses. Those comparable developments comprised two residential subdivisions in the eastern outskirts of Nowra, known respectively as Carrington Park - that being a later stage of that existing development, and the second being Peppermint Grove - also a later stage of an existing development.

3 We proceeded, having inspected those two locations, to Milton, where we inspected the site. We then proceeded to the two further locations that were considered by the valuers, they being to the south of Batemans Bay. The first was a portion of an existing subdivision known as the Lilli Pilli Estate, and the second was a subdivision known as Tomakin.

4 As I subsequently expressed to the representatives to the parties, I, at the time of inspection, had significant reservations about the utility about the Tomakin land for two reasons. The first is that, unlike all four other subdivision sites that were hinterland developments, the Tomakin site was immediately behind the frontal dunes and effectively represented two separate subdivisions - namely a small subdivision that was a beachfront subdivision, in effect, and a residual subdivision of a larger number of allotments that was somewhat removed from the beach but only a matter of hundreds of metres rather than the distance that was evident in the other locations.

5 The second distinguishing feature was that the evidence that I had of the sale of the Tomakin subdivision was that it had been made under distressed financial circumstances. I expressed the view (that was subsequently endorsed by the valuers and accepted by the advocates on behalf of the parties) that the Tomakin subdivision was not one that warranted consideration any further in the proceedings.

6 The statutory valuation that is the subject of the appeal is that as at the base date of 1 July 2008. The statutory valuation appealed against is $3,600,000. Mr Adlington provided a statement of evidence in which his resultant analysis was to contend for a confirmed valuation of approximately $4,300,000, a figure which, during the course of the evidence, resulted in a revised valuation of $4,160,000. However, Mr Newport, counsel for the Valuer General, on instructions, indicated that the Valuer General was not seeking, as would potentially be possible pursuant to the provisions of s 40(1)(b) of the Act, to substitute the higher valuation but was merely seeking confirmation of the statutory valuation.

7 Mr Hanrahan, who had provided a statement of evidence, had initially contended for a valuation of $2,500,000, but, during the course of the appeal, revised that, on the basis of the concurrent evidence given by him and Mr Adlington, to a value of $2,198,000.

8 The process that was undertaken during the course of not only the initial joint conferencing and the further joint conferencing that took place between the valuers, but also during the course of the concurrent evidence that was given by the valuers (and some further informal discussions which took place between the valuers during the course of the appeal), led the consideration of the appeal to take a modestly different path from that upon which it had embarked in the beginning of the hearing. However, that is not impediment to a proper consideration and determination of this matter, as s 39 of the Act expressly states that the parties' cases are not limited to the grounds of the objection, and, as a consequence, those matters that had arisen during the course of the discussions and the evidence are validly and appropriately before me.

9 The result of the further evidence and consideration by the valuers resulted in a conventional sales adjustment table that included significant elements of agreement between the valuers. In each case they took the subdivisions at Carrington Park, Peppermint Grove and Lilli Pilli to derive an adjusted value per allotment (which value was to be multiplied by 157 - that being the number of lots in the applicant's approved subdivision).

10 There were a variety of factors that impacted on the calculations that they undertook. There was, with the exception of one adjustment factor, agreement between Mr Hanrahan and Mr Adlington. As a consequence, this makes it only necessary for me to consider whether the adjustments that have been applied by each of them for the lead-in period for the development are appropriate, and if so, what are the consequences of my determination in that regard.

11 Each of them had agreed positions on four monetary calculation bases leading to two adjustment factors. The adjustment factors were for the rate of sales of the allotments, and with respect to these, there was agreement between the valuers with respect to each of the three comparable sites, and I have adopted those adjustment rates without interference.

12 With respect to the adjustment for the lead-in period, there is a significant difference between the valuers. The differences, as I understood the evidence, primarily arose from Mr Hanrahan taking the view that the site would not be developed until all other vacant land in Milton had been exhausted by sale.

13 I explain that proposition, as I understand it, as follows: o It was Mr Hanrahan's view that the rate of sales arising in the Milton undeveloped land market for single allotments is approximately .9 allotments per month; and o It was Mr Hanrahan's position that the total number of vacant allotments (excluding the site) that were available for such purposes, constituted about seventy or so - these comprised two estates that he had identified, together with a sprinkling of vacant "salt and pepper" allotments within the existing Milton township area. 14 Mr Hanrahan and Mr Adlington agreed that, with the exception of those two estates, the vacant allotments within the township and the site, there is no other residentially zoned land available, in the foreseeable future, in and around Milton.

15 Mr Hanrahan assumed, for reasons that he described, that a postulated purchaser of this site undertaking the purchase process upon which I am to value the land - that is, a purchase that is undertaken in accordance with s 6A(1) of the Act (being a bona fide purchaser; a bona fide seller on reasonable terms and conditions in an unconstrained market) would approach such a purchase, it was his evidence that such a purchaser as at the base date would foreshadow that at the rate of approximately .9 allotments per month and knowing the available land in Milton, would plan not to release any of the development - not even the first stage of this development - until the expiry of a period until 2015 that would have entirely exhausted the totality of the available land supply in Milton (other than the land contained in this subdivision).

16 Mr Adlington's position, although as I understood it derived on a slightly different and more complex basis, did not accept this proposition, and assumed that the land would be released for development on a much shorter time period - that is, within a year or two of purchase.

17 I have some difficulty in accepting the totality of Mr Hanrahan's evidence on this point. Mr Hanrahan's three adjustments for the lead-in period assumed (and were based on his calculation compared to the other three developments) a cost of financing of approximately five per cent per annum for the totality of the period until his notional lead-in period would expire in 2015. That caused him to make an adjustment on this basis of thirty per cent for Lilli Pili and Peppermint Grove, and twenty per cent for Carrington Park. Mr Adlington's countervailing position on these factors, was ten per cent for Lilli Pilli and five per cent for each of Carrington Park and Peppermint Grove.

18 I accept, given the comparatively low rate of realisation in Milton and the rate that there would be new land available because of the limitation of supply, that it might well be a reasonable analysis that a purchaser of the site, knowing that there would be some scarcity value into the future, would choose a longer time period than would ordinarily be the case as proposed by Mr Hanrahan.

19 However, it is also clear that the statutory basis for this appeal is that, pursuant to s 40(2) of the Act, the onus of proof lies with the appellant in these cases. To the extent that I have any discomfort about the totality of evidence or am not satisfied that it has been proved on the balance of probabilities, I must not accept that the appellant has discharged its onus.

20 I am not prepared to accept that a prudent purchaser, in 2008, would plan on leaving any development of this site until after every other possible allotment in Milton had been sold. I have reached that conclusion for two reasons. The first is that I am not satisfied on Mr Hanrahan's evidence, contra Mr Adlington's evidence, that there is a compelling and overwhelming fiscal case for such a decision.

21 Setting that aside, I also cannot be satisfied on the basis of any evidence properly before me that all of the salt and pepper infill blocks that are within the Milton township, even accepting that they are there in the numbers asserted by Mr Hanrahan, would be placed on the market during the relevant period. However, I have concluded that it would be appropriate to allow an adjustment for a lead-in period that is longer than that which was accepted by Mr Adlington but is significantly less than that proposed by Mr Hanrahan.

22 As a consequence, rather than the adjustment factors that were proposed by Mr Hanrahan of thirty per cent for Lilli Pilli and Peppermint Grove, I am satisfied (on his five per cent per annum basis) that it would be reasonable to assume that the lead-in period would expire in about 2013, thus deducting ten per cent from each of his adjustments - being two years at five per cent. A similar adjustment would be appropriate for Carrington Park. Thus, for the adjustment factors (on the sole matters that I need to determine), I accept that would be appropriate to apply an adjustment factor of twenty per cent for Lilli Pilli and for Peppermint Grove, and ten per cent for Carrington Park.

23 On my calculations, that results follows (see also the table inserted below) - Mr Adlington's adjusted value person allotment for Lilli Pilli was a little over $35,000 per lot, Mr Hanrahan's was approximately $23,500 and, on the basis that I consider it appropriate to calculate, it is a little over $29,000. For Peppermint Grove, the numbers respectively are $26,300, $14,300, and my conclusion of slightly less than $19,000. For Carrington Park, the numbers are $29,500, nearly 419,000, and, on my calculation, nearly $27,000.

24 During the course of his evidence, having reached the deduced numbers that he had adopted for each of the three comparable subdivisions, Mr Hanrahan then put the proposition that I should not confine myself to adopting the lowest of the three values in his range between $23,500 and $14,300, but that I should adopt a value of $14,000 - being below his lowest comparable adjusted value. Mr Rider, counsel for the applicant, properly conceded that to do so would constitute double dipping but adopted $14,300 - being the lowest of the numbers that were proposed by Mr Hanrahan. I am unable to accept such an approach.

25 Whilst Mr Adlington, properly in my view adopted, the lowest possible number of the three that he had adopted, thus arriving at a valuation considerably in excess of that which was pressed as the to be confirmed statutory valuation, Mr Hanrahan offered no basis why the conventional basis for considering a range of adjusted values - that is, considering adopting a value somewhere within the range - was not an appropriate course to follow.

26 I have undertaken the further set of calculations based on the three numbers that I have derived, accepting in part Mr Hanrahan's evidence for a higher adjustment for the lead-in period for the subdivisions. These appear in the following table: 27 If I were to take the three values that I have derived, they total $75,103 leading to an average of $25,304 - rounded to the nearest dollar, that would give a derived value for the totality of the subdivision on the site of $3,939,000.

28 I consider under the circumstances that that might be unfair to the applicant, given that the range is quite broad. I therefore consider that it iss appropriate to adopt an average of the lower two values, rather than inserting the value from Lilli Pilli as I consider that it was, given the comparative nature of the sites that we inspected, the least comparable of the three, both as to topography and location. Taking an average of the two lower values - being those in the eastern outskirts of Nowra - there is an average of $22,881.50 per allotment - giving a value across the totality of the site, on my calculations, of $3,592,000 or slightly more.

29 Therefore, on that basis, I am satisfied that that is sufficiently near the $3,600,000 - that is, the statutory valuation - that the appeal should be dismissed and the Valuer General's valuation should be confirmed. The exhibits will be returned on that basis.

30 I need make one further observation before pronouncing the formal orders. One of the matters that Mr Newport, counsel for the Valuer General, suggested I should take into account was the likely lifetime of the development consent that applied in 2008. The consequence of taking that into account would be to bring forward the lead-in time.

31 The decision of the Court of Appeal in Hunter Development Brokerage Pty Ltd v Cessnock City Council [2005] NSWCA 169; (2005) 63 NSWLR 124, makes it clear that the threshold for commencement of a development (and thus the sustaining of the development consent on a longer term basis) is comparatively benign. I thus decline to accept any proposition that says there would have been, in the eyes of the purchaser at 2008, any substantive risk of failure of the consent by the effluxion of time in 2013. That express matter put by Mr Newport, is rejected.

32 Therefore as a consequence, all of the foregoing, the orders of the Court are: 1. The appeal is dismissed, 2. Pursuant to s 41A of the Valuation of Land Act 1916, the valuation of the Valuer General as at 1 July 2008 is confirmed; and 3. The exhibits are returned.

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