Communication Towers
20 Bowesco's September 2007 accounts indicate they carry the value of the leasehold interest in the Optus and Telstra communication towers at $245,000. The accounts indicate that figure is based on an independent valuation dated 8 August 2006, it appears, by Mr Worthington of Elders Real Estate. The value of the leasehold interest is based on an annual income of $30,000. ASIC submits that the rent, if any is received, is not proven; the basis for the rent not established; and, the value asserted is not demonstrated.
21 Bowesco relied on evidence provided by Mr Carey that Bowesco agreed to lease the site of the petrol station to Woolworths Ltd at a rent lower than it wished and in return received a right to lease a space on the adjoining property developed as a shopping centre for use as a site for telecommunication towers. According to Mr Carey, Bowesco occupies the area, free of rent and sub-leases the area for communication towers to Telstra and Optus. Mr Carey produced an "owner statement" from Westpoint Realty, a company in liquidation but in which he retains an interest, which he said indicated that the net rental was $30,597.69 [Exhibit 4].
22 In cross-examination Mr Carey was taken to documents concerning the communication towers. Mr Carey acknowledged he provided the documents to Mr Bernie Worthington, a former employee of Westpoint Corporation, for the purpose of Mr Worthington preparing a valuation of Bowesco's interest. Mr Carey acknowledged his signature on one of those documents, which was an agreement to lease between the owners of the shopping centre and Bowesco, requiring Bowesco to pay $12,000 per annum to the owners of the shopping centre. Mr Carey said the documents provided to Mr Worthington did not comprise the completed agreement with the owners of the shopping centre and referred to another transaction involving another company, Eastlands Pty Ltd, which was referred to in the unsigned Optus sublease. Although Mr Carey complained that the completed documents were held by ASIC he conceded that he had made no direct inquiry for access to the relevant documents from ASIC.
23 ASIC submits that the evidence of Mr Carey is vague and too general to be of assistance. Mr Carey could not adequately explain how the agreement to which he referred to was not documented on any agreement in evidence and how it could be reconciled with the completely contradictory documents he provided to Mr Worthington for the purpose of providing a valuation.
24 Bowesco also called evidence as to the value of the communication towers from Mr Worthington. Mr Worthington's valuation dated 8 August 2006, assessed the value of Bowesco's interest as $245,000 based on the net rental of $24,500 per annum. The same report is relied upon by Bowesco as evidence that its interest in the lease over the communication towers is worth $300,000.
25 In cross examination Mr Worthington conceded that he had previously lost his valuer's licence for a period of 3 months as he was found liable for an allegation of negligence in the preparation of a valuation. Mr Worthington also conceded to his earlier association with Mr Carey and Westpoint Corporation. ASIC submits both of these concessions render Mr Worthington's evidence unreliable.
26 In cross-examination Mr Worthington conceded he did not check the veracity of the arrangements he was valuing. He did not see properly executed agreements and qualified his report on the basis that the documents were executed and provided that Bowesco could transfer its interest. Bowesco has not tendered executed agreements in order to meet the qualification. In a further affidavit by Ms Carey sworn on 10 April 2008, she deposed that despite conducting her own searches, including through her solicitors and directly with Telstra and in the respect of the Optus sub-lease with Minter Ellison solicitors, she had been unable to locate the lease and sub-lease.
27 Mr Worthington indicated that his instructions on the net rental were materially different to the evidence of Mr Carey. According to Mr Worthington, Bowesco received $24,500 net of the rent paid to the owners of the shopping centre. ASIC submits this difference of evidence was not reconciled by Bowesco and casts further doubt on the evidence of Mr Carey as to the arrangements concerning the communication towers.
28 Mr Worthington's valuation depended on his assessment that the interest should yield 10% per annum, but Mr Worthington conceded that his report identified no analysis by which he reached that opinion other than the nature of the interest being that a leasehold interest was riskier than a freehold interest.
29 I have afforded no weight to the valuation report of Mr Worthington, primarily because the lease and sub-lease documents, which are said to underpin his rationale and by reference to which he qualified his valuation report, have not been produced. It was, in other respects, flawed. For example, it did not refer to the sub-lessee's right to terminate the sub-lease without penalty on one month's notice; it did not refer to anecdotal sales evidence, which Mr Worthington said in evidence he relied upon; it did not compare the terms of the leases to any other similar leases or comment on the commercial merits of the subject leases; it did not consider technological or regulatory environment for communication towers and how that may affect the value; and finally that the valuation failed to account for rates and taxes that Bowesco may need to pay. Bowesco has failed to establish any value to be attributed to these communication towers.