whether representations were false or misleading and valuation negligently prepared
20 The test in a valuation case: On or about 7 May 2007 the respondents provided the applicants with the valuation prepared by Mr Coleman. While he signed a new valuation as of this date, the valuation provided was in effect confirmation of that which Mr Coleman had made on 3 April 2007 for Mortgage Ezy.
21 In these circumstances, the applicants contend that the valuation provided by the respondents to them contained representations that the subject property represented acceptable security for their mortgage purposes, which were false or incorrect, and constituted a gross overvaluation, in that the market value of the subject property as at 3 April 2007 was not the $1,600,000 stated in the valuation, but only about $1,030,500.
22 The parties generally accept that a gross overvaluation may, depending on the circumstances, constitute a contravention of s 52 of the TP Act and negligence at common law.
23 In relation to representations concerning the valuation of subject property it is often accepted, having regard to the facts of the case, that a valuation given by one party to another will not be considered misleading or deceptive and not prepared without due care and skill merely because another, perhaps more experienced, valuer arrived at a different valuation figure. Accordingly, it is generally accepted, as it is here by the expert valuers, that a valuation will not be considered misleading or deceptive or negligently prepared, if it falls within a range of values that a competent valuer might ascribe at the material time to the value of the subject property valued: see generally Genworth Financial Mortgage Insurance Pty Ltd v Hodder Rook & Associates Pty Ltd [2010] NSWSC 1043 (Genworth) at [21][23] and [56][57], per Einstein J and authorities there referred to; Kestrel Holdings Pty Ltd (ACN 009 590 265) v APF Properties Pty Ltd (ACN 095 297 019) [2009] FCAFC 144; (2009) 260 ALR 418 at [148].
24 The valuers here suggest that a tolerance of about 10% of market value might be considered an acceptable tolerance in a property valuation of the type here under consideration. Senior counsel for the applicants in closing submissions, perhaps more generously, considered that the central question of fact is whether the market valuation of $1,600,000 was more than 10% or perhaps, at most, more than 15% above the market value. Accordingly, counsel submitted that if the market value was $1,400,000, allowing a 15% margin at the outer limit, a valuation of just over $1,600,000 would not be unfair in this case, or to put that in stricter terms, not incorrect from a competency point of view and not misleading or deceptive for the purposes of the s 52 TP Act cause of action, or in breach of the duty of care owed by the valuer to the client. I proceed on the basis expressed on behalf of the applicants, which was not quibbled with on behalf of the respondents.
25 Mr Coleman's 3 April 2007 valuation: In his valuation authorised 3 April 2007 and provided to Mortgage Ezy, which was confirmed on 7 May 2007 in the valuation provided to the applicants, Mr Coleman valued the subject property at $1,600,000, made up of a land value of $1,520,000 and improvements of $80,000. As can be seen, most of the value was in the land.
26 In the Property Summary in the valuation, Mr Coleman correctly noted the address of the subject property at 95 Curtin Avenue, Cottesloe, the relevant title details and zoning and that the Site Area of the subject property was 458m2.
27 However, in a number of other respects, Mr Coleman seems to have been a little slovenly in the information he provided. For example, he recorded the Site Dimensions as "Corner lot", when it was not and specified that the car accommodation was a "Garage" when it seems plainly to have been a carport.
28 Also, Mr Coleman did not note the prior sale of the subject property itself less than two years earlier, in June 2005, for $750,000. Under Recent Sales of the Subject Property and Earlier Sale of the Subject Property Mr Coleman recorded "n/a", meaning "not applicable".
29 However, for both the purposes of assessing whether the valuation was misleading and deceptive, or incorrect, or prepared negligently, those details effectively may be put to one side, because it is plain that the value in the subject property was mainly in the land value and it is also plain, on Mr Coleman's evidence, which I accept in this regard, that he had prior familiarity with the subject property and was not confused about which property he was actually valuing in April 2007.
30 In relation to the value of the subject property, Mr Coleman's valuation relied upon seven sales, which he evaluated in his statement of Sales Evidence & the Market and which I abbreviate for present purposes as follows:
7 Eileen Street, Cottesloe, 19/9/2006, 170m2, $1,450,000, three bedroom constructed in 1995, "inferior overall" by comparison.
21 Rosser Street, Cottesloe, 1/1/2007, 445m2, $1,500,000, four bedroom fully renovated, "inferior overall".
20 Brighton Street, Cottesloe, 12/9/2006, 668m2, $1,630,000, two bedroom built in 1951, predominantly land value, "superior overall".
51 Brighton Street, Cottesloe, 20/10/2006, 647m2, $1,780,000, two bedroom, 1953 construction, "superior overall".
33 Napier Street, Cottesloe, 2/9/2006, 668m2, $1,825,000, three bedroom, constructed in 1935, "superior overall".
32 Boreham Street, Cottesloe, 5/10/2006, 663m2, $2,270,000, modern located on the corner of Gordon Street, "superior overall".
2 Lyons Street, Cottesloe, 5/10/2006, 361m2, $2,300,000, three bedroom brick and iron, good presentation, "superior overall".
31 Mr Coleman indicated in the section dealing with Sales Evidence and the Market that the level of market activity was "Good" and that the recent market direction was "Steady". In answer to the question whether there was a two or multitier market, he stated "No".
32 In the valuation Mr Coleman added Additional Comments in the following terms:
As at the date of valuation, the subject property is considered to have a current fair market value of $1,600,000, which is supported by the analysis of comparable sales evidence.
The sales evidence analysed varied in age, size, condition, location and the overall level of improvements provided, however the sales evidence listed represents a fair level of comparison.
The market value has been assessed exclusive of GST.
The subject property does represent good security for mortgage purposes.
Sales evidence are considered dated, however, recent sales of a similar nature and within close proximity to the subject property are limited, accordingly the value at the date of sale has been adjusted to take into account any trends since that time.
33 Mr Coleman gave evidence at the trial of this proceeding. He commenced with Propell, when it was known as Ray White Valuers (WA) in May 2000 as a student/assistant valuer, having graduated from Curtin University of Technology in 2000 with an undergraduate Bachelor of Commerce majoring in property. He became a licensed valuer in October 2002. From October 2002 until 2004 he prepared valuations for properties throughout the Perth metropolitan area, but since 2004 has predominantly valued prestige residential properties focussing on Perth's western suburbs and other high valued areas. At the time of trial he was employed as the valuations manager of Propell in Perth and had held that position since 2007.
34 Mr Coleman considered that in the period 2004 to 2007 he had prepared the following numbers of valuations in the western suburbs area:
86 in Cottesloe.
18 in Swanbourne.
119 in Mosman Park.
26 in Peppermint Grove.
78 in Claremont.
52 in Dalkeith.
44 in Nedlands.
35 Mr Coleman explained that to prepare these valuations he typically:
Spoke on an approximately fortnightly basis to real estate agents active in the areas regarding valuation requests and the strength of buyer interest in the market.
Regularly monitored Cottesloe property sales using RP Data, which provides details of property sales, listing price and sales price and does this almost on a daily basis.
Attended Propell office meetings every two months, where licensed valuers discussed trends in the Perth real estate market and at which he spoke on trends specific to the Cottesloe property market.
Attended numerous auctions in the area to gain a direct impression of the level of demand and activity in the market. In this regard he attended approximately 5 to 10 auctions in Cottesloe in 2006 to 2007.
Regularly reviewed subject property statistics compiled by RP Data and the Real Estate Institute of Western Australia (REIWA).
36 Mr Coleman's view at the time he prepared the valuation based upon this experience was that from the start of 2006 to early 2007 the Cottesloe market experienced very strong growth before steadying in early to mid-2007.
37 He remarked that in the period from 2006 to early 2007 properties advertised for sale in Cottesloe were often advertised as "from" a set amount and more often selling for more than that, which was opposite to the ordinary practice wherein a subject property was advertised at an "aspirational" price.
38 So far as the valuation he prepared for Mortgage Ezy dated 3 April 2007 was concerned, Mr Coleman explained that having received instructions to prepare the valuation he contacted the owner for permission to inspect the subject property, which permission was given. On 3 April he conducted a search of the Home Open database for records of property sales in Cottesloe in the Department of Land Administration's (DOLA's) electronic records for residential sales for Cottesloe for the previous six months and on a copy of the print out of the data made handwritten annotations for the purpose of choosing properties to use to compare to the subject property when making the valuation and in this respect chose seven properties for comparison. Those seven were the seven ultimately listed in the valuation as set out above.
39 Mr Coleman says that he recognised that these sales were somewhat dated and were not individually of a similar size, location and quality to the subject property. Mr Coleman said he understood that Mortgage Ezy required a minimum of three sales within three to six months of the valuation date and within 10% of the assessed value of the subject property. If that could not be done, as it could not be in this case, additional sales had to be included and comments added explaining why this could not be done.
40 Mr Coleman stated that, as he did not have sales evidence available to him which accorded with these requirements and which was in close proximity to the subject property, he had to broaden his search parameters to cover the entire suburb of Cottesloe and adjust each sale to take into account the overall level of improvements, locational factors, aspect/views afforded and land areas. In that regard, Mr Coleman considered the seven properties listed together provided a reasonable range of sales which could be used to determine the value of the subject property.
41 In preparing the valuation Mr Coleman confirmed that on 3 April 2007 he inspected the subject property and completed a checklist as well as a sketch of the subject property. He also drove to each of the seven other properties in order to see whether each was inferior or superior to the subject property. His inspections of those properties, however, was only external, although he had previously inspected two of them, 7 Eileen Street and 51 Brighton Street in about September and October 2006.
42 Mr Coleman said that before he completed the valuation, he spoke to a real estate agent known to him to ascertain her general market perception of property demand and supply, and her view was that there was a minimal supply and a lot of demand, but it was difficult to gauge land values because of the unprecedented demand, views he then shared.
43 Valuation of Mr Ross Hughes: The applicants called Ross Allen Hughes to give expert evidence. Mr Hughes is a licensee partner of Ross Hughes Property and a licensed valuer in Western Australia. He has more than 40 years experience in business, especially the property industry. Between 2007 and 2010 he was President and Vice President of the Australian Property Institute and between 1997 and 2002, was variously a board member and chairman of LandCorp, a State government property agency.
44 Mr Hughes was briefed by the applicants to prepare three reports. First, he was briefed to provide a valuation in respect of the subject property as of 3 April 2007. Once that was to hand, he was further briefed by the applicants to review the respondents' report dated 3 April 2007. Then he was later briefed to review the valuation of the subject property prepared by Mr Steve Kish of Burgess Rawson, which had been filed on behalf of the respondents in this proceeding.
45 In his valuation report dated 30 March 2010 (Exhibit 7), Mr Hughes valued the subject property at $1,030,500 as at 3 April 2007. He completed that report without any awareness of and without regard to the respondents' valuation, a desirable approach in the proceeding such as this as it helps to avoid any conscious or unconscious contamination of the independent valuer's mind.
46 In his valuation Mr Hughes had regard to the classical definition of market value provided by Griffiths CJ in Spencer v The Commonwealth (1907) 5 CLR 418 at 441.
47 Mr Hughes noted formal matters such as title particulars, that there were no limitations or encumbrances and then described the location and site and services of the subject property.
48 In particular, he made the following observations concerning location:
The subject property is an old residential cottage on the southern fringe of Cottesloe, adjacent to the neighbourhood of Mosman Park.
Cottesloe is a well serviced beachside residential suburb, is well served with government and private schools and is 1km west of the Swan River.
Mosman Park railway station is situated some 200m to the south of the subject property as is the commercial precinct of Mosman Park.
49 Mr Hughes then noted improvements on the site, providing photographs of the improvements and noting also that the subject site had a rear frontage to George Street.
50 Mr Hughes then provided what he termed an "Economic Overview" based upon information from the Chamber of Commerce and Industry of WA. As of the December quarter 2006, he observed the following as key points:
Business confidence in the outlook for the WA economy fell to a three and a half year low in the December quarter.
However, business sentiment about the current economic environment remains high, with 93% of respondents describing current economic conditions as positive.
Businesses reported slightly weaker operating conditions, but activity remains positive overall.
Price pressures appear to have eased slightly this quarter, but wages under input costs remain at a high level.
51 Mr Hughes further commented that:
The property market peaked in the June quarter of 2006 then reflected signs of moderating in 2007.
Since the second half of 2006 there have been discernable downward pressures and shifts in the property market. It is extremely unlikely the boom market conditions of 2006 will be repeated.
Progressively slowing market conditions during the second half of 2006 were largely symptomatic of an interest rate induced slump and an inevitable price correction following several years of unprecedented growth rates, which created affordability issues.
52 As to the basis of the valuation he conducted, Mr Hughes noted that the main valuation methods are market comparison, cost approach, income capitalisation and hypothetical development approaches, although he also noted that, on close examination, all of these methods are really different forms of a market comparison method of valuation. He rejected the appropriateness of the methods of cost approach, income capitalisation or hypothetical development in this instance and considered the primary methodology in arriving at value of the subject property should involve weighted application of sales evidence.
53 Mr Hughes accepted that the highest and best use of the subject property was as a single residential redevelopment site.
54 In adopting the approach he recommended, Mr Hughes stated that sales of similar use properties in Cottesloe were more suitable for comparison with the subject property as they largely comply with the following requirements within reasonable limits:
Land use and potential utility.
General location.
Dates of transactions.
Physical characteristics.
Amenities and services.
Transaction circumstances.
55 Mr Hughes then identified a range of "historical sales evidence" in his section dealing with Sales Evidence in respect of improved properties, which he evaluated and reduced to a value per square metre, and which I abbreviate as follows:
43 Curtin Avenue, Cottesloe, February 2006, 382m2, $1,065,000, or $2,788m2, dated sale of three bedroom 40 year old dwelling, which fronts a service road separated from Curtin Avenue with views of the Indian Ocean, "significantly superior" to subject property;
79 Curtin Avenue, Cottesloe, February 2006, 491m2, $799,000, or $1,627m2, dated sale of a three bedroom 80 year old brick and tile dwelling which fronts Curtin Avenue, "inferior";
131 Curtin Avenue, Cottesloe, February 2006, 491m2, $790,000, or $1,609m2, dated sale of a three bedroom 75 year old brick and iron dwelling which fronts Curtin Avenue, "inferior";
65 Curtin Avenue, Cottesloe, June 2006, 466m2, $1,275,000 or $2,736m2, three bedroom, 70 year old brick and tile which fronts a cul de sac service road, site elevated, "superior";
21 Rosser Street, Cottesloe, December 2006, 445m2, $1,500,000, or $3,371m2, current sale of four bedroom, two bathroom 85 year old weatherboard and iron dwelling in popular street, 70 metres from Curtin Avenue, "significantly superior";
86A Grant Street, Cottesloe, January 2007, 474m2, $1,300,000, or $2,743m2, current sale of four bedroom, two bathroom 20 year old brick and tile dwelling in popular dual carriageway street, "significantly superior";
119 Curtin Avenue, Cottesloe, February 2007, 491m2, $1,690,000, or $3,442m2, current sale of five bedroom, two bathroom 80 year old brick and tile dwelling which fronts road separated from Curtin Avenue, "significantly superior".
56 Mr Hughes also noted sales of vacant land, which he also evaluated, and in respect of which he also provided a per square metre analysis, as follows:
2A Nailsworth Street, Cottesloe, January 2006, 440m2, $1,200,000, $2,727m2, "significantly superior";
11B Barsden Street, Cottesloe, April 2006, 428m2, $1,165,000, $2,722m2, "significantly superior"; and
5 Albion Street, Cottesloe, September 2006, 292m2, $600,000, $2,055m2, "marginally inferior".
57 Mr Hughes further noted that the subject property itself had sold in June 2005 after being advertised for sale for about 44 days, for $750,000. He noted that the price reflected a sale rate of $1,638m2.
58 He considered that the sales evidence noted as well as the June 2005 sale of the subject property needed to be considered and weighted.
59 In completing what he termed a "Competitive Market Analysis", Mr Hughes noted what he considered were three comparable but unsold properties on the market that indicated current market dynamics:
92 Railway Street, which had been on the market for 150 days with a current asking price of $1,149,000 or $1,971 per square metre improved.
167 Curtin Avenue, which had been on the market for about 52 days at an asking price of $1,050,000 or $2,488m2 improved.
217 Curtin Avenue, which had been on the market for about 75 days at an asking price of $1,050,000 or $1,899m2 improved.
Mr Hughes expressed the view that the asking price range of between $1,900 to $2,490m2 improved for those unsold properties was an indicator of value for the subject property and of slowing market conditions.
60 Again utilising a per square metre rate, Mr Hughes commented on the sales evidence by saying that sales of "superior" improved properties indicated a value range of between $2,700 to $3,400m2.
61 He also noted that sales of vacant land indicated a value range of $2,000 to $2,700m2 and a value towards the lower end of that range for the subject property.
62 Mr Hughes then expressed the view that sales of "more comparable improved properties" indicated a value range of $1,600 to $2,000m2. That is to say, having regard to the sales evidence he had provided, that Mr Hughes considered the "more comparable improved properties" to be:
79 Curtin Avenue, sold in February 2006;
131 Curtin Avenue, sold in February 2006; and
Vacant land at 5 Albion Street, sold in September 2006.
63 Mr Hughes then concluded:
Whilst the median price of established house sales in the western suburbs of Perth reflected significant increases since the June quarter of 2005, it is unlikely that 95 Curtin would have appreciated by more than say 40% since that date. A notional value of $1,050,000 indicates a rate of $2,293 per square metre for 95 Curtin as at April 2007.
In my opinion the value of 95 Curtin Avenue as at 3 April 2007 is $1,030,500 or $2,250 per square metre.
64 It is apparent that Mr Hughes in providing this valuation considered that the value of the subject land would not have appreciated by more than 40% since its June 2005 sale at $750,000, and that a per square metre rate inflated by a 40% increase over that time, whilst higher than the rate indicated for his list of more comparable properties ($1,600 to $2,000m2) and within the indicated range for vacant land ($2,000 to $2,700m2), lent support to his valuation, and that anything greater than that would be too high a value.
65 In his second report dated 1 July 2010 (Exhibit 8), Mr Hughes reviewed the 3 April 2007 valuation of the respondents. In analysing the seven sales that Mr Coleman used for the purposes of his valuation, Mr Hughes expressed the view that this involved reliance on "underlying rates of sale" ranging from $2,444 to $8,529m2 and the adoption of a value rate of $3,493m2 for the subject land. While Mr Coleman plainly did not use a rate per square metre for his valuation purposes, it is clear that Mr Hughes found it useful to "convert" Mr Coleman's sales evidence to such a rate so that he could assimilate it into his own assessment.
66 Mr Hughes expressed the view that a competent valuer would not use, for the purposes of valuation, six of the seven sales because they differed in offering significantly better amenities and/or being significantly better located.
67 Mr Hughes indicated that of the seven, he would only have relied upon the sale of 20 Brighton Street, Cottesloe for $1,630,000 in September 2006, it being a subject property of 667m2, analysed by him at $2,444m2 improved. On the basis that the valuer was required initially to identify those recent sales to support a valuation he could have included 20 Brighton Street. He later explained, during crossexamination, that he had not included it in his initial historical sales evidence because he had not then been aware of it. Mr Hughes considered 20 Brighton Street to be "generally superior".
68 Mr Hughes considered each of the other six properties and stated why in his opinion each should be considered "significantly superior" or "superior" and "not comparable" to the subject property.
69 Mr Hughes in this second report confirmed his view that the market value of the subject property after taking account of sales evidence was about $1,000,000. He stated that the approximate market value could be deduced by applying a value of $2,183m2 to the 458m2 area of the subject property. He accepted that a range of plus or minus 10% should apply, thus indicating a market value range of between $900,000 to $1,100,000.
70 As a result he considered the market value ascribed in Mr Coleman's valuation of $1,600,000 for the subject property as at 3 April 2007 "to be excessive". He considered a market value of $1,000,000 to be more realistic as of that date. He did not consider Mr Coleman's valuation to be within parameters sometimes allowed for differences of opinion in valuations of this sort, namely within 10% of the valuation found. It follows that if Mr Hughes had considered a tolerance of 15% above $1,000,000 as appropriate, namely $1,150,000, he would also have considered this to be excessive.
71 Valuation of Mr Steve Kish: Steve Kish, a director of Burgess Rawson and a certified practising valuer in Western Australia was briefed by the respondents to provide an expert report on his opinion as to the market value of the subject property as of 3 April 2007, and also as of 13 February 2010.
72 Mr Kish in his valuation report (Exhibit 13) noted many of the same formal matters concerning the subject property as had been mentioned in the reports of Mr Hughes and also in the respondents' valuation.
73 The principal difference between the valuation of Mr Kish and the other reports referred to, so far as the formal parts are concerned, is that he chose to describe the subject property as "2A George Street" rather than 95 Curtin Avenue, Cottesloe, on the basis that the redevelopment of the property as a single residential site would most likely take advantage of the George Street, rather than the Curtin Avenue, frontage, something that Mr Hughes did not later seriously quibble with.
74 In relation to market and sales activity for the purposes of the 3 April 2007 valuation, Mr Kish noted the following sales evidence as relevant, which he evaluated, and may be abbreviated as follows:
2 Athelston, Corner Haining Road, Cottesloe, April 2007, 814m2, $1,800,000, older style home built in 1950's, "better than the subject";
119 Curtin Avenue, Cottesloe, February 2007, 491m2, $1,690,000, quality character home with more recent extensions, "better";
167 Curtin Avenue, Cottesloe, June 2007, 420m2, $1,050,000, fibro/iron house, 1900's, "not as good";
S/L1, 197 Curtin Avenue/Finey Street, Cottesloe, February 2007, 642m2, $1,070,000, brick and tile house, 1930's, "not as good";
217 Curtin Avenue, Cottesloe, May 2007, 554m2, $995,000, brick and iron cottage with more recent additions, "not as good";
19 Elizabeth Street, Cottesloe, July 2007, 569m2, $1,450,000, brick and tile cottage, apparently upgraded since sale, "overall slightly inferior";
72 Grant Street, Cottesloe, May 2007, 481m2, $1,550,000, brick and tile cottage built 1945 with recent upgrades, "overall only slightly marginally better";
50 Griver Street (corner North Street), Cottesloe, June 2007, 547m2, $1,297,000, older style brick and tile home, apparently upgraded since sale, "overall inferior and not as good";
71 Hawkstone Street, Cottesloe, May 2007, 493m2, $1,530,000, brick and tile home 1970's, "marginally better";
27 Jarrad Street, Cottesloe, May 2007, 445m2, $1,275,000, would appear to be upgraded home since sale, "not as good due to substantially inferior location";
7 Kathleen Street, Cottesloe, May 2007, 463m2, $1,380,000, weatherboard/iron 1920's, upgraded since sale, "not quite as good";
24 Lillian Street, Cottesloe, June 2007, 402m2, $1,510,000, vacant land sale and developed since sale, "marginally better"; and
32 Salvado Street, Cottesloe, July 2007, 390m2, $1,340,000, character brick and tile home, "not as good".
Of these 13 sales, 11 were subsequent to Mr Coleman's valuation date of 3 April 2007. Neither of the two earlier sales - 119 Curtin Avenue and S/L 1, 197 Curtin Avenue - were mentioned by Mr Coleman.
75 As noted above, in assessing the value as at 3 April 2007, Mr Kish took into account the frontage to George Street upon new construction. In doing so, he considered that the current improvements added limited value. He also considered the site to be elevated.
76 Mr Kish noted REIWA Statistics during the two closest quarters to the subject valuation date and noted that growth was substantial - 4.5% (June 2007) and 8.3% (March 2007) and over the twelve month period a "quite phenomenal" 40.4% (June 2007) and 42.7% (March 2007).
77 As to the annual change of 40.4%, Mr Kish considered this a guide to movement in the market although his valuation was provided on the sales evidence referred to. His view was that this was a "substantial buoyant period".
78 Mr Kish then expressed the view that the sales evidence provided a fairly broad range from $995,000 up to $1,800,000 but that he considered the majority of the evidence to be within the range of $1,340,000 up to $1,550,000. He said this suggested a value in the order of $1,450,000 to $1,500,000.
79 In particular, Mr Kish considered 24 Lillian Street to be similarly affected by Curtin Avenue and the nearby railway, on a similar awkward shaped site, which had been sold as a redevelopment site for $1,510,000 (in June 2007) and which he considered "slightly better".
80 Mr Kish then said that having regard to the very buoyant market as at the date of valuation, the market value would be within this range. Therefore he had adopted a midrange value of $1,475,000.
81 As far as the buoyant market was concerned, Mr Kish noted, as a further "check" to support his assessment, that the subject property was purchased in June 2005 for $750,000 when the median price in Cottesloe was $1,000,000. By comparing this to the June quarter 2007 median price which reflected $1,790,000, this showed a 79% increase over the period. Applying that rationale to the purchase price in June 2005 of $750,000, he considered 79% increase would reflect a value in the order of $1,342,500 as at June quarter 2007, and that this was within 10% of the value he had adopted and so within an acceptable range. Mr Kish later agreed with Mr Hughes this constitutes an invalid valuation methodology.
82 Mr Hughes' responsive report: In a third report dated 28 January 2011 (Exhibit 9), Mr Hughes condensed Mr Kish's report and responded by evaluating the sales evidence relied on by Mr Kish as follows:
"Significantly superior and not comparable"
2 Athelstan Road
217 Curtin Avenue
"Superior"
119 Curtin Avenue
19 Elizabeth Street
72 Grant Street
50 Griver Street
71 Hawkstone Street
27 Jarrad Street
24 Lillian Street
32 Salvado Street
"Does not constitute an open market transaction"
167 Curtin Avenue
83 As to the six sales of the 13 that fell within the range $1,340,000 up to $1,550,000, Mr Hughes suggested they were not comparable and had been applied on the basis of gross price that had not been adequately analysed and weighted. He considered all six to be in superior locations, not exposed to the detrimental impacts of Curtin Avenue, being in close proximity to the railway and a busy road. Mr Hughes also considered that the six were not comparable as the sales occurred subsequent to 3 April 2007.
84 In Mr Hughes' view, the "most comparable" of the current sales selected by Mr Kish was S/L 1, 197 Curtin Avenue in February 2007 at $1,070,000, which had been totally discarded by Mr Kish.
85 Similarly, he considered that three of the sales listed which reflected the lower price range of $995,000 to $1,070,000, all being properties exposed to the impacts emanating from Curtin Avenue, were relevant and should not have been discarded by Mr Kish. In essence, Mr Hughes was critical of the methodology employed by Mr Kish in listing 13 sales, including subsequent sales, discarding some of the highest sales and some of the lowest, and then working from the range then created.
86 He also considered that a current sale of 119 Curtin Avenue in February 2007 appeared to have been discarded by Mr Kish without adequate weighting analysis as to why it was "better".
87 Joint statement of valuers: Pursuant to pre-trial orders of the Court, Messrs Hughes and Kish conferred concerning their expert reports on the valuation of the subject property as at 3 April 2007 and produced a joint statement dated 25 February 2011 (Exhibit 10).
88 The valuers reached agreement on the formal matters and further noted that Curtin Avenue has over 20,000 average weekday traffic movements and that impacts on the subject property by exposure to Curtin Avenue are exacerbated by rail traffic and disturbance emanating from level crossings.
89 The valuers agreed that the prime valuation methodology should be based on the evidence provided by sales of comparable properties. They also agreed that a higher level of comparability should be drawn between the subject property and properties fronting Curtin Avenue which are on a slip road, especially those properties which have two street frontages.
90 They also agreed that check methodology applied in the report and valuation by Mr Kish based on median price statistics was not appropriate.
91 Matters in respect of which the valuers continued to disagree following their conferral were as follows:
retrospectivity and subsequent sales evidence;
dual road frontage;
selection of sales evidence; and
sales evidence analysis methodology.
92 As to retrospectivity and subsequent sales evidence, Mr Kish expressed the view that dicta of Williams J in Daandine Pastoral Company Pty Ltd v Commissioner of Land Tax of the Commonwealth of Australia (unreported decision of the High Court of Australia, Queensland Registry in Appeal No 2 of 1942) (Daandine) supported the view that in conducting valuations in circumstances of proceedings such as these it was permissible to have regard to sales of comparable properties that occurred after the valuation date, subject to there being no supervening events which altered the conditions previously existing. Mr Hughes, however, considered it was not appropriate to use evidence of sales completed after 3 April 2007 at all, and considered that the Daandine approach was not relevant to the circumstances of a valuation of the subject property for present purposes.
93 As to the dual road frontage, Mr Kish considered that for all practical purposes the frontage of the subject property is to George Street and any redevelopment would result in Curtin Avenue becoming a secondary frontage. Mr Hughes expressed the opinion that the frontage to George Street is advantageous however the majority of sales referenced possess either rear access, side access or dual street frontage, which is already factored into the valuation of the property. Further, Mr Hughes considered that the advantages in frontage to George Street did not extinguish the negative impacts amounting from exposure to Curtin Avenue.
94 Concerning the selection of sales evidence used by Mr Hughes, Mr Kish expressed the following disagreement:
He disagreed with the use of 43 Curtin Avenue on the basis it was dated and views may be impacted by rooftops to the West.
He disagreed with the use of 79 Curtin Avenue because it was a dated transaction.
He disagreed with the use of 131 Curtin Avenue because it was a dated transaction.
He disagreed with the use of 65 Curtin Avenue because it was dated and, whilst acknowledged to be a fairly good comparison, was not superior to the subject property. He also disagreed with the comment that the peak of recent market trends occurred in June 2006, when, in his opinion, this market status occurred in the March quarter of 2007.
He disagreed with the use of 86A Grant Street because it fronts a busy thoroughfare and the aesthetics and style of improvements should be discounted for a neighbourhood in Cottesloe.
He disagreed with the use of the vacant land sale at 2A Nailsworth Street because the sale is dated and the property is impacted by the Cottesloe Council Depot; although Mr Kish acknowledged that the location is superior to the subject property.
He disagreed with the use of 11B Barsden Street because it was a dated sale; although he acknowledged that the location is significantly superior to the subject property.
He disagreed with the use of the vacant land sale at 5 Albion Street because the property is small and in an inferior location.
He agreed that the sale of 119 Curtin Avenue was relevant.
He declined to comment in relation to the sale of 21 Rosser Street.
95 Mr Hughes generally maintained the views he had previously expressed in commenting on Mr Kish's report as to why the following sales were not comparable:
2 Athelston Road;
167 Curtin Avenue;
217 Curtin Avenue;
19 Elizabeth Street;
72 Grant Street;
50 Griver Street;
71 Hawkstone Street;
27 Jarrad Street;
7 Kathleen Street;
24 Lillian Street; and
32 Salvado Street.
96 Mr Hughes agreed that the sale of 119 Curtin Avenue was relevant.
97 Mr Hughes expressed the opinion that the sale of S/L 1, 197 Curtin Avenue was very comparable and a relevant indicator to the value of the subject property. and disagreed with the opinion of Mr Kish that the property was "Not as good" as the subject property.
98 As to sales evidence analysis methodology, Mr Kish considered sales evidence on the basis of gross price and weighted same by overall comparison to the subject property. Mr Hughes, by contrast, stated that he considered the sales evidence in accordance with the systematic procedure set out in the International Valuation Guidance Note 1 (ANZ VGN1) entitled "Real Property Valuation" and analyses based on relevant units of comparison or price per square metre. The valuers disagreed on the approach to analysis of sales evidence. In the opinion of Mr Hughes, sales evidence used by Mr Kish was not reported and adequately analysed in accordance with the requirements of the Australian Property Institute guidelines. Mr Kish disagreed.