ACT Civil and Administrative Tribunal|2017-01-23

ESTATE OF ANTHI JOHN NOTARAS v COMMISSIONER OF ACT REVENUE (Appeal) [2017] ACAT 2 (23 January 2017)

ESTATE OF ANTHI JOHN NOTARAS v COMMISSIONER OF ACT REVENUE (Appeal) [2017] ACAT 2

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 68, 79, 82

Cases cited: B & T Constructions (ACT) Pty Ltd v Construction Occupations Registrar and Anor [2013] ACTSC 219

Brewarrana Pty Ltd v Commission of Highways (No 2) (1973) 6 SASR 541

Chakravarty & Commissioner for ACT Revenue [2013] ACAT 11

Challenger Property Asset Management Pty Ltd v Stonnington City Council [2011] VCS 184

Charan Dan v Amirkhan (1920) LR 47 Ind App 255

City Hill Pty Ltd v ACT Planning and Land Authority and ACT Civil and Administrative Tribunal [2015] ACTSC 40

Commissioner for ACT Revenue v Rosnet Pty Ltd (1994) 116 FLR 215

Commonwealth v Arklay [1952] HCA 76; (1952) 87 CLR 159

Estate of Notaras and Commissioner for ACT Revenue [2016] ACAT 19

Fenton Nominees v Valuer-General (1981) 27 SASR 258

Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275

ISPT Pty Ltd v City of Melbourne [2007] VCAT 652

ISPT Pty Ltd v Commissioner for ACT Revenue [2013] ACAT 43

ISPT Pty Ltd v Melbourne City Council [2008] VCA 180

Kelly v Australian Postal Commission [2015] FCA 1064; (2015) 67 AAR 359

Lacey v Attorney-General of Queensland [2011] HCA 10; (2011) 242 CLR 573

Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111

Minister for Aboriginal Affairs v Peko-Wallsend [1986] HCA 40; (1986) 162 CLR 24

Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418

Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295

Texts/Papers cited: International Valuation Standards

Appeal Tribunal: Acting Presidential Member R Orr QC

APPEAL TRIBUNAL: Acting Presidential Member R Orr QC

The order of the original Tribunal dated 16 March 2016 is set aside and substituted with an order that the unimproved value of Block 16 Section 1 Griffith as at 1 January 2013 was $2,100,000.

**1. This appeal relates to the valuation of the unimproved value of Block 16 Section 1 Griffith at 32-34 Franklin Street (subject property), held by the executors of the estate of Anthi John Notaras (appellant), as at 1 January 2013.

2. The Commissioner for ACT Revenue (Commissioner or respondent) initially decided the unimproved value was $2,482,000, a decision upheld by the Commissioner on internal review on 27 March 2014, disallowing the objection by the appellant.[1] The appellant (then applicant) claimed it should be valued at $1,800,000.[2]

3. The appellant applied for review of that decision under section 68 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) The review is provided for in section 108A of the Taxation Administration Act 1999 (Tax Administration Act), together with section 73 of the Rates Act 2004 (Rates Act). The original Tribunal set aside the decision and substituted a decision that the unimproved value of the property was $2,365,000. The original Tribunal considered a number of comparable sales, but reached its conclusion on the basis of the sale of the property next door to the subject property (Sale 1).

4. On 14 April 2016, the appellant appealed that decision under section 79(3) of the ACAT Act.[3] The appeal is an application to the tribunal against a decision of the original Tribunal. In these reasons the Tribunal hearing the appeal is referred to as the Tribunal and the tribunal which heard the decision under review is referred to as the original Tribunal. References in other instances are to the tribunal.**

5. In summary, the Tribunal decides that it was an error for the original Tribunal to reach its conclusion on the basis of only one comparable sale, Sale 1, especially because there are a range of factors that suggest that this was not a sale for market value. Rather a basket of available comparable sales should have been considered. Based on the evidence before the original Tribunal in relation to a basket of comparable sales, the Tribunal determines the unimproved value of the subject property at 1 January 2013 at $2,100,000.

6. The appeal was heard on 17 and 18 August 2016 in relation to an amended notice of appeal dated 9 May 2016. On 17 August 2016, despite an objection by the Commissioner, the Tribunal undertook a view of the following properties to familiarise itself with the locations of some of the comparable properties considered and viewed by the original Tribunal:

(a) 32 -34 Franklin St, Manuka (subject property);

(b) 36-38 Franklin St, Manuka (Sale 1);

(c) 24 Bougainville St, Manuka (Sale 5); and

(d) 165 City Walk, Civic (Sale 4).

The Tribunal had before it the documents which were before the original Tribunal. This Tribunal uses the same exhibit numbers for this material as were used in the original proceedings. The Tribunal also had before it the transcript of the earlier proceedings on 4 and 5 December 2014, 12 February 2015 and 24 April 2015. The Tribunal had an Appeal Book (AB) which collected these materials. The Tribunal also had the submissions of the parties in the original hearing, and an outline of submissions of the appellant, respondent's submissions and outline of submissions in reply of appellant in relation to these appeal proceedings.

**7. The land the subject of the appeal has an area of 607 square metres (sqm) with frontages to Franklin Street and Palmerston Lane, Manuka. The property is zoned Commercial CZI Central Core in the Territory Plan and forms part of the Manuka Group Centre. It contains a single storey building of 497 sqms which is subject to two leases, one to a bookstore, the other a restaurant.

8. At the original Tribunal, Mr Phil Green (Mr Green) of MMJ Real Estate (MMJ), an associate member of the Australian Property Institute, gave evidence for the appellant. Mr Geoffrey McInerney (Mr McInerney), also an associate member of the Australian Property Institute and a former member of the Australian Valuation Office (AVO), gave evidence for the respondent. The original Tribunal examined sales in ten other sites nominated by the parties.

9. The two experts produced a statement of agreed facts which listed areas of agreement and of disagreement for eight comparable sales, and of the subject property (Joint Experts Report).[4] As in the earlier proceedings, reference to MMJ values refers to the valuations proposed for the expert for the appellant, and references to AVO values refers to valuations proposed by the expert for the respondent.

10. The original Tribunal considered three possible methods of or approaches to valuation. The primary one used was the 'comparable sales method' or 'market approach'; in summary this involves seeking out relatively contemporaneous sales of comparable properties and using these as a yardstick for the valuation of the relevant land.[5] The appellant also proposed, and the original Tribunal noted, the 'capitalisation of rents method' or 'income approach', which Mr Green described as a measure of the investment returns from leases of properties and can be used to arrive at a capital value for a property. But the original Tribunal considered this approach unreliable in these proceedings.[6] The appellant also proposed, and the original Tribunal noted, the 'hypothetical development approach' which was described as a method designed to ascertain what somebody would pay for a site if they were to develop it from scratch in order to produce a building that represented the highest and best value. This approach was not pressed in the original Tribunal and it did not give it further consideration.[7]

11. In taking the comparable sales approach, the subject property and the other properties considered by the original Tribunal and included in the Joint Experts Report were as follows:**

Subject property: 32 Franklin Street, Manuka, Block 16 Section 1 Griffith

Sale 1-MMJ/AVO: 36-38 Franklin Street, Manuka, Block 15 Section 1 Griffith

Sale 2-MMJ/AVO: 31-39 Woolley Street, Dickson, Block 10 Section 32 Dickson

Sale 3-MMJ/AVO: Dickson Square, Block 32 Section 30 Dickson

Sale 4-MMJ/AVO: 165 City Walk, Civic, Block 12 Section 49 City

Sale 5-MMJ/AVO: 24 Bougainville Street, Manuka, Block 7 Section 2 Griffith

Sale 6-AVO: 16 Bougainville Street, Manuka, Block 40 Section 2 Griffith

Sale 7-MMJ (sic)/AVO (did not proceed): 24 Garema Place, Civic, Block 16 Section 49 City. There was some confusion about this property which is discussed below

Sale 7- MMJ (overlooked in the original Tribunal decision): 29 Jardine Street, Kingston, Block 27 Section 22 Kingston

Sale 8-MMJ/AVO: 10 Barker Street, Griffith, Block 23 Section 78 Griffith

Sale 9-AVO: 25 Murray Crescent, Griffith, Block 25 Section 2 Griffith

Sale 10-MMJ: 23-25 East Row, Civic, Block 21 Section 48 City.

**12. The original Tribunal had set aside the decision of the Commissioner and found that the unimproved value of the subject property was $2,365,000.[8] That value was reached after considering the sales of the properties listed, relying in particular on Sale 1.

13. In summary, the original Tribunal had concluded in relation to the sales it considered as most relevant as follows:**

(a) Sale 1: despite the sale being two years, nine months before the relevant date, the sale had a "high degree of comparability with a hypothetical sale of the subject land."[9] An adjustment was made for the difference in site area between Sale 1 and the subject property, reducing the sale price from $4,000,000 to $3,607,727. Another adjustment was made at a rate of $2,500 per sqm for improvements.[10] The full calculation is set out below at [16] of these reasons.

(b) Sale 2: a "slightly dated sale - two years and four months before the relevant date. "... [T]he location is significantly inferior and the lease purposes are more restricted." Accordingly the sale had "a low degree of comparability with the subject property."[11]

(c) Sale 3: "the property and the sale ... have a low degree of comparability [and] [n]either valuer has pressed this sale as having particular usefulness."[12]

(d) Sale 4: the original Tribunal did "not accept the rates per square metre allowed by either valuer for improvements ... the property and the sale have a low degree of comparability." That was due to significantly inferior location, low public visibility, area less than half the area of the subject property, narrow frontage, access for service and vehicles was from a crowded rear. These factors meant the sale "has limited use in a determination."[13]

(e) Sale 5: "opportunities for use of the site and the existing building are severely limited by heritage constraints ... the location is significantly inferior with low public visibility ... and the Sale [had] a low degree of comparability."[14]

(f) Sale 7 (MMJ nominated): the valuer for the AVO did not consider the sale to be "readily comparable" and provided no analysis. The sale was disregarded by the original Tribunal in error.[15]

(g) Sale 8: Despite the findings of the original Tribunal that this sale "is useful as an indicator of the capital value of a well-positioned South Canberra commercial property with a range of permissible uses", it did not accept "the calculations of either valuer in arriving at an unimproved capital value". Hence the original Tribunal found it was not "useful for determining an appropriate unimproved capital value."[16]

**14. The appellant before the original Tribunal argued that Sale 1 should be disregarded because it was a related parties' transaction to the existing tenants, and therefore was not a genuine market sale, but one which had a special value to the purchasers. The original Tribunal rejected this argument and held that Sale 1 was not a special sale but was a genuine sale.[17]

15. On the basis of this analysis the original Tribunal held that Sale 1 was the only available sale useful in the estimation of the unimproved value of the subject property. It found that "Sale 1 has many points of similarity with the subject site", and the other sales offered little assistance.[18]

(a) took the price for Sale 1 of $4,000,000 on 18 March 2010;

(b) made no adjustment on account of time;

(c) adjusted for the difference in area with the subject property (which is 90.193% of the Sale 1 site), which brought the figure down to $3,607,727;

(d) adjusted for the value of improvements of $1,242,500 ($2,500 per sqm for 497 sqm);

(e) to give an unimproved value for the subject property rounded to $2,365,000 as at 1 January 2013.[19]

17. An amended notice of appeal dated 9 May 2016 was relied upon by the appellant. This included 17 grounds which can be summarised as follows:

(a) the original Tribunal was wrong to rely on Sale 1 as evidence of the value of the subject property (grounds 9, 10, 11, 12, and 13);

(b) the original Tribunal was wrong to fail to consider adequately, or at all, sales 2, 3, 4, 5 and 7(MMJ) as evidence of value of the subject property (grounds 1, 2, 3, 4, 5, 6, 7, and 8); and

(c) the original Tribunal was wrong to reject the appellant's valuer's capitalisation of rents approach to valuation (grounds 14, 15, 16 and 17).[20]

18. The specific grounds raising questions of fact or law, summarised as relevant by the Tribunal, are as follows:

(1) The Tribunal erred in valuation principle or mistook the evidence in requiring the valuers properly to address the highest and best use of the subject site when there was no evidence to suggest that the highest and best use was not the current use.

(2) The Tribunal erred when it held that the usefulness of 'gross floor area' (GFA) as a comparator of value was limited by the varied locations and sizes of the analysed properties and the fact that all have two storeys except for the subject site and Sale 1, when it is in relation to those factors that GFA is useful in facilitating adjustments to take account of size and location and in enabling direct comparison without adjustment in respect of one and two storey buildings.

(3) The Tribunal erred in law in preferring the evidence of the valuer for the respondent over the evidence of the valuer for the appellant as to the movement in the market without consideration of the evidence or the provisions of reasons.

(4) The Tribunal erred in law or failed to act in accordance with correct valuation methodology when it disregarded the evidence of both valuers as to the value of improvements on the nominated properties and instead applied a rate per square metre of $2000 'for consistency' and $2500 for Sale 1 and the statutory sale property because of 'lofty ceilings' without reference to evidence or otherwise explaining the rates selected.

(5) The Tribunal erred in fact when it disregarded 'Sale 7' said by the valuer for the respondent not to have gone through, when the sale numbered 7 (29 Jardine Street Kingston) relied on by the valuer for the appellant was completed.

(6) The Tribunal failed to apply correct valuation methodology when it assigned degrees of comparability to each sale proposed as comparable, and classified each as useful or not useful, and relied on one sale only as comparable, when it ought to have considered the weight to be given to each sale which was comparable so as to arrive at a value for the subject property.

(7) The Tribunal acted on a wrong principle or took account of an irrelevant consideration when it regarded the limits on the redevelopment potential of the building the subject of Sale 4, there being no evidence that the purchaser in Sale 4 had regard to the development potential of the property and it was implicit in the approaches of both valuers that the purchaser did not do so.

(8) The Tribunal failed to accord the appellant natural justice in taking into account limits on the redevelopment potential of the building subject to Sale 4 without affording the appellant an opportunity to address the matter.

(9) The Tribunal erred in valuation methodology in holding that it was necessary for the characteristics of special value in a purchase by tenants to be demonstrated by evidence, when it ought to have held that it was necessary for evidence to be given to demonstrate that the purchase by the tenants did not involve special value.

(10) The Tribunal misdirected itself as to the correct application of the test in Spencer v Commonwealth, or failed to act rationally, when it appears to rely on evidence that the buyers in Sale 1:

(a) have long term business interests in the area, and

(b) applied ordinary business considerations to the purchase including the obtaining of finance from a bank which obtained an independent valuation

to reach the conclusion that the buyers were not anxious, when evidence of long term business interests rationally leads to a finding that the buyer would be seeking to protect their business interests, and obtaining finance from a bank which obtains an independent valuation is not an ordinary business consideration as contemplated by the test.

(11) The Tribunal erred in valuation methodology in holding that it was necessary for it to be shown by evidence that:

(a) Sale 1 was not genuine;

(b) Sale 1 involved a distressed seller or a forced sale;

(c) Sale 1 involved buyers who were anxious;

when it ought to have held that it was necessary for the respondent as the party asserting the comparability of Sale 1 to show that the sale was genuine, did not involve a distressed seller or was forced, and did not involve buyers who were anxious.

(12)The Tribunal misdirected itself as to the test for a market transaction required by the Rates Act section 6 and Spencer v Commonwealth, or failed to act rationally, when it found that:

(a) all known aspects of Sale 1 are consistent with the notion in Spencer of 'voluntary bargaining';

(b) there was no evidence that the purchasers felt any pressure to purchase the relevant property at some exorbitant, or even excessive, price;

(c) it is likely that they acted quickly out of a concern that the property would be placed on the market and they would have to compete with other purchasers;

(d) the purchasers applied ordinary business considerations including obtaining bank finance;

(e) the sale was a genuine sale; and

(f) Sale 1 was not a special sale in terms of the International Valuation Standards; in circumstances where

(g) both purchasers were existing tenants with established businesses and wished to secure their long-term interests;

(h) one had previously sought and was promised a first option to purchase the property;

(i) the vendor's offer was required to be accepted within 17 days;

(j) the offer was accepted within 7 days;

(k) the purchasers decided not to obtain evaluation because they did not have enough time;

(l) there was a risk that the purchasers might be unable to match an offer of another purchaser with a special interest; and

(m) the property was not offered to the market.

(13) The Tribunal made a finding not based on evidence when if confirmed that other market evidence indicated Sale 1 was within market parameters, given that it regarded Sale 4 as having limited use, and it did not consider the conclusions of the valuers as useful for determining an appropriate unimproved capital value for the subject site.

(14) The Tribunal erred in law by failing to give reasons for its findings:

(a) that it was not persuaded by the evidence of financial yield provided by the valuer for the applicant;

(b) there was no plausible evidence as to a realistic financial yield.

(15) The Tribunal took into account an irrelevant consideration as to the reliability of the rent capitalization method in so far as it relied on the evidence of the valuer for the respondent of initial yields of 5% and 5.5% for Sales 9 and 6 although both valuers had disavowed those sales and the Tribunal had no regard to them.

(16) The Tribunal failed to take account of a relevant consideration relating to reliability of the rent capitalization method in that:

(a) it ignored the evidence of the sale of Westfield Woden at 6.25% and the opinion of the valuer for the applicant concerning that sale as showing the tightest yield in Canberra for a retail property;

(b) it ignored the analysed yield of 6.78% for Sale 5 which the valuer for the applicant regarded as showing the level of risk assigned by the market in the Manuka Group Centre area.

(17) The Tribunal, in rejecting the rent capitalization method, erred in valuation principle by failing to have regard to a method which was capable of affording some evidence of value.

**19. Section 79(3) of the ACAT Act permits a party to appeal on a question of fact or law. The appellant must establish error of fact or law by the original Tribunal.[21]

20. The ACAT Act section 82 establishes the role of the Tribunal on an appeal under section 79(3):**

Handling appeals

_An appeal tribunal may, as the tribunal considers appropriate, deal with an appeal - _

(a) as a new application; or

(b) as a review of all or part of the original decision on the application by the tribunal.

**21. The tribunal has directed that the "appeal will be dealt with as a review of all of the original decision... [focusing] on the grounds identified in the application."[22]

22. What is meant by 'review' is not defined in the ACAT Act, nor in the Acts authorising review by ACAT, namely, the Rates Act and the related Tax Administration Act. In any event, whether the term 'review' or 'appeal' is used, "[a]ppeals being creatures of statute, no taxonomy is likely to be exhaustive."[23]

23. In the context of the tribunal's role generally in relation to administrative decisions, "Review of Decisions" is provided for in section 68 of the ACAT Act which says of review powers: "The tribunal may exercise any function given by an Act to the entity for making the decision."[24] Section 68(3) then 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.

24. The ACT Civil and Administrative Tribunal Procedure Rules 2009 (No 2) (ACAT Procedure Rules (No 2)) provide in rule 21 that for an appeal, the tribunal (a) has all the powers and duties of the tribunal that made the order appealed from, (c) may receive further evidence, (d) may make an order confirming, amending or setting aside the order of the tribunal appealed from and (e) may make any other order it considers appropriate. Rule 26 provides further for how the tribunal may obtain further material to allow it to make a decision on the appeal. It is clear in these circumstances, that the appeal tribunal has the powers in section 68, whether it is operating under section 82(a) or (b). Further, there is also the power to make orders concerning the exercise of a function provided for in section 56(b) of the ACAT Act. That section permits the tribunal to make orders "as the tribunal considers necessary or convenient."

25. The review in this instance under section 82(b) is not full de novo merits review. Rather it is a review of the original decision limited to a re-examination of any errors of fact or law identified. As Refshauge ACJ said of section 82 in Giusida Pty Ltd v Commissioner for ACT Revenue (Giusida), citing Legal Practitioner v Council of the Law Society of the ACT [2011] ACTSC 207; (2011) 257 FLR 118 at [14]:**

... the appeal in s 82(a) is what is usually called a 'hearing de novo' and that the appeal in s 82(b) is what is usually called a 'rehearing'.__[25]

I see no reason to resile from or change my view about the proper meaning of s 82 of the ACT Civil and Administrative Tribunal Act as here expressed. Indeed, careful thought and a consideration of the purpose and meaning of an internal appeal strengthens my view that a wider and generous power is intended and not one which restricts original decisions from proper scrutiny.[26]

26. The section 6 of the Rates Act at the relevant time establishes the meaning of the expression 'unimproved value' of land:

_(1) The unimproved value of a parcel of land held under a lease from the Commonwealth is the capital amount that might be expected to have been offered on the relevant date for the lease of the parcel, assuming that - _

_(a) the only improvements on or to the parcel were the improvements (if any) by way of clearing, filling, grading, draining, levelling or excavating - _

(i) if the Territory or Commonwealth had, before the parcel became rateable as a separate parcel, granted a development lease of land that included the parcel - made by the lessee under that lease or by the Territory or Commonwealth, or the cost of which was met by that lessee or by the Territory or Commonwealth; or

(ii) in any other case - made by the Territory or Commonwealth or the cost of which was met by the Territory or Commonwealth; and

(b) the circumstances that existed on the prescribed date also existed on the relevant date; and

(c) on the relevant date, the lease had an unexpired term of 99 years; and

(d) a nominal rent was payable under the lease for the 99 year term.

(2) The unimproved value of a parcel of land held in fee simple is the capital amount that might be expected to have been offered for the parcel at a genuine sale on the relevant date on the reasonable terms and conditions that a genuine seller would require, assuming that no improvements had been made on or to the parcel.

_"prescribed date", for a parcel of land, means - _

(a) for a determination of the unimproved value of the parcel - the date the parcel became rateable; or

(b) for an annual redetermination of the unimproved value of the parcel - the date the redetermination applies; or

(c) for a redetermination of the unimproved value of the parcel under section 11 (Redetermination - error) or section 11A (Redetermination - change of circumstances) - the date the redetermination begins to apply to the parcel.

The Dictionary in the Rates Act provides as follows:

"relevant date", for a parcel of land, means a date when a determination of the unimproved value of the parcel is or is to be made.

27. In the present case, the relevant date is 1 January 2013.

28. The Tribunal accepts the principles to be applied on the review are as stated by Refshauge ACJ in Giusida:

38. ... while error needs to be shown before the ACAT on appeal will set aside the original decision on the application from which the appeal is taken, it is not required that the error be 'manifest', 'obvious' or other than an error discernible by a proper assessment of the evidence and the law. I could find nothing in any parliamentary material, such as the relevant Explanatory Statements or the Parliamentary Speeches that suggested any different construction of the provision.

39. A final comment is necessary. The proceedings before the ACAT on appeal and before me refer at times to the common reference in appellate discourse as to what is 'open' to a first instance decision-maker. It seems to me that this is a wide term that needs careful consideration. It also needs to be clear that, if there is an error of fact or law in a finding of the ACAT, then it is not open to it to make such a finding unless the error is not a material one.

40. The evidence that permits a decision maker to draw a conclusion must have a character of reliability and reasonable substance; it must not be mere evidence, that it is simply what is put before the tribunal.

41. To take a comparison from the criminal law, the High Court in Doney v The Queen [1990] HCA 51; (1990) 171 CLR 207 made express comparison with evidence that a trial judge will find 'tenuous or inherently weak or vague' but which cannot prevent the case being permitted to be put to the jury. This is not the sort of evidence that permits a primary decision-maker to make a decision immune from appellate review. The High Court expressly contrasted such evidence with the power of an appellate court (but not a trial judge) to set aside a verdict which is unsafe and unsatisfactory. In that circumstance, however, what is open to the jury, must be respected, but the appellate court will review it.

29. A similar principle is expressed in more pithy form in Commissioner for ACT Revenue v Rosnet Pty Ltd (1994) 116 FLR 215, 283:

A judgment as to whether a sale is sufficiently comparable is a matter of expert opinion. It may not be capable of an exact exposition of reasoning. It should be interfered with on appeal only if the conclusion is not reasonably open or is the result of an error of principle: Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409.

**30. There is no one method of valuing land.[27] As noted above, the original Tribunal had submissions concerning three methods: the comparable sales method; the capitalisation of rent method; and the hypothetical development method.

31. As Wells J said in Bronzel v State Planning Authority (1979) 21 SASR 513, 516:**

... the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.

32. Turning to the first, comparable sales, method, the High Court said in Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111, 120:

16 ... The traditional, and usually unexceptionable, method is to seek out relatively contemporaneous sales of comparable properties between parties at arm's length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yardstick for the valuation of the relevant land.

33. The test for determining the market value of land has been classically stated by Griffith CJ in Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418, 432:

... the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?'

34. Similarly, the High Court observed in Commonwealth v Arklay [1952] HCA 76; (1952) 87 CLR 159, 169-170 that the value should be based on:

... an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations.[28]

35. Wells J of the South Australian Supreme Court also said in Brewarrana Pty Ltd v Commissioner of Highways (No.2) (Brewarrana):

... in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape ... land use (actual and potential), scope for, and difficulties of, development, ...; and in relation to the transaction of sale, the value must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected.[29]

36. In combination these extracts indicate the features of what would constitute a market sale for the purposes of the comparable sales approach if the methodology is to escape criticism. For a sale to be 'comparable' it is accepted that some sales are highly comparable, others less so. There is a spectrum of possible comparisons.[30] Adjustments may need to be made to the sale prices to account for relevant differences. The original Tribunal found this was the preferred approach for this matter; this Tribunal agrees.

Capitalisation of rents method: grounds 14-17

37. The original Tribunal considered the alternative capitalisation of rents method unreliable in these proceedings (at [93]). This Tribunal agrees with this conclusion and sees no error in it. The Tribunal therefore finds against the appellant on appeal grounds 14, 15, 16, and 17.

38. The appellant abandoned the hypothetical development method for the purposes of this appeal.[31] Therefore that method does not need to be further considered.

39. The application of the comparable sales method does however require further consideration. The pre-requisite for assessing unimproved value under the comparable sales method is, in most cases, that the assessment be based on a basket of sales of relative comparability. How many sales should be included in the basket was discussed by the Western Australian Court of Appeal in Western Australian Planning Commission v Arcus Shopfitters Pty Ltd (Arcus):[32]

... a core requirement of the comparable sales method is that the comparable sales be sufficient in volume to justify a deduction or inference as to value. What is sufficient in volume will vary from case to case. Generally, it will require multiple (more than two) sales. In those circumstances it is necessary to consider the comparable sales evidence as a whole in order to assess whether any of the sale prices are out of line with the main body of the sales evidence or whether there are any other conflicts in the evidence.

40. The trial Judge in Arcus had relied, as in this case, on one sale only for comparative purposes, and the Court of Appeal commented on the Judge's approach:

... there is no requirement that a valuer identify the most important comparable sale. There is a requirement that a sufficient sample of comparable sales be collected and analysed collectively and individually. Having performed the analysis, a valuer in the course of the process is likely to attach different weights to individual sales and if so will be able to identify the sale or sales to which he can appropriately accord the greatest weight. On this approach comparable sales are weighted but the sample remains representative and sufficient in volume.

For these reason, I am satisfied that the trial Judge's comparable sales methodology was flawed.[33]

(h) Did the original Tribunal rely on Sale 1 alone?: ground 6

**41. The principal issue before the Tribunal is whether the original Tribunal adopted the appropriate methodology when, in effect, it eliminated all sales other than Sale 1 to assess the unimproved value of the subject property.

The approach taken by the Tribunal does not follow correct valuation methodology which requires that evidence of value be obtained from a range of sales which are comparable in varying degree and are given weight accordingly - to focus on one only is wrong because it is an insufficient sample and thus unreliable....__[34]

**43. The respondent submitted that the original Tribunal had not made an error of law when ultimately it relied only on Sale 1. That conclusion was reached only after other sales were evaluated and it was found that Sale 1 was not out of line with the basket of sales.[35] The respondent also submitted it was open to the original Tribunal to place greater weight on Sale 1 and it did not do so to the exclusion of the other sales referred to.[36]

44. The original Tribunal found that all but Sale 1 of the ten sales considered was either of "low degree of comparability", "little use", "disregarded", or "the calculations used to assess the capital value could not be relied on".[37] As a consequence, the original Tribunal had concluded: "... only one available sale is useful in the estimation of an unimproved value for the subject site, i.e. Sale 1."[38]

45. The Tribunal does not accept that because Sale 1 was not out of line with the other sales, that they could safely be ignored. The fact that Sale 1 was not out of line rather suggests that the other sales should have been used as comparators. The original Tribunal excluded the sales rather than deciding they were "comparable in varying degrees".

46. The Tribunal finds this was contrary to the preferred basket of sales approach as described in Arcus. The methodology for the comparable sale method relies on a comparison of the subject property with at least a basket (more than two) of alternative sales for the assessment of unimproved value.

47. The Tribunal notes that the original Tribunal did start with a basket of sales. Ultimately, however, by eliminating all but Sale 1 as a comparator, it in effect only relied on Sale 1. This, as the High Court indicated in Maurici v Commissioner of State Revenue, was unreasonably selective.[39]**

(i) Was the reliance on Sale 1 acceptable because it was 'strongly comparable'?

48. There is an exception to the basket of sales approach. As Justice Morris noted:

...there will be circumstances where there is a sale or sales that are strongly comparable; in which case there will be no need to closely analyse other sales, even though these may be comparable in some way.__[40]

The transaction and the property itself must both be comparable if one sale only is to be relied on.[41] The Tribunal also recognizes that the degree of comparability of particular sales is predominantly a matter of judgment of expert valuers.[42] Nonetheless, that does not preclude the Tribunal from exercising its judgment on the facts and the evidence.

49. The Tribunal accepts that the subject property and the Sale 1 property were comparable because of location, size, the nature of improvements, and permitted uses. The issue is whether Sale 1 was 'strongly comparable'. As the Court noted in Arcus, if a single sale is to be relied on the experts must establish:

...firstly, that the sale price reflects market value and secondly, that there will be a single most comparable sale on which to determine value. Those matters should not be assumed. They must be tested.__[43]

**50. The appellant contested that the sale price for Sale 1 did not reflect market value because the circumstances of the sale raised an inference that this was a sale at special value. The appellant submitted that the purchasers "needed to have this property in order to protect their businesses."[44] As a consequence, it was submitted Sale 1 could not be considered to be 'strongly comparable'. The appellant argued that it was not necessary for it to prove there was a special sale at special value; it needed only to raise a legitimate question; it argued that it did so by pointing to the fact that the sale was to current lessees; the onus it argued was then on the respondent to show that the fact that the existing tenants were the purchasers was not of concern; they submitted that the respondent had not discharged that onus in this case. The appellant argued that the approach of the original Tribunal, which it was said required the appellant to prove the sale included special value and was therefore not comparable, involved an error of law.[45]

51. The respondent submitted that the expert valuer for the respondent did not identify any special value in Sale 1; and that sale was strongly comparable and could be relied on as the sole comparator.[46]**

(j) Inference that Sale 1 was sale at special value and hence not strongly comparable: grounds 9-13

**52. The original Tribunal had found "[n]o evidence was provided to the Tribunal that Sale 1 was not a 'genuine sale', nor that it had a 'distressed seller' or was a 'forced' sale. Similarly, no evidence was provided that the buyers were 'anxious'."[47]

53. In response to the submission that the purchasers of that property paid a premium above market, the original Tribunal denied that there was evidence to support such a claim and found that the "Sale 1 was at market value".[48] The original Tribunal also found that statements by the purchasers, together with the letter of offer from the Crown lessee, supported the argument that this was a genuine sale.[49]

54. There is no statutory definition of what amounts to the "unimproved value of a parcel of land" that is "the capital amount that might be expected to have been offered", under section 6 of the Rates Act, and what is a genuine comparable sale or market sale for determining this amount. There is also no statutory definition of what is not a genuine comparable sale or market sale. In the language of land valuation, however, circumstances rendering a sale 'special' and involving 'special value' suggests it is not a genuine comparable sale or market sale. Accordingly, the Tribunal was referred to, and is guided by, the International Valuation Standards (IVS), the code accepted by and which governs the operation of valuers, and to which they are expected to adhere in their valuations.[50]

A special purchaser is a particular buyer for whom a particular asset has 'special value' because of advantages arising from its ownership that would not be available to other buyers in the market.[51]
Special value is an amount that reflects particular attributes of an asset that are only of value to a 'special purchaser'.[52] 'Special value' can arise where an asset has attributes that make it more attractive to a particular buyer than to any other buyers in the market. These attributes can include the physical, geographic, economic or legal characteristics of an asset. 'Market value' requires the disregard of any element of 'special value' because at any given date it is only assumed that there is a willing buyer, not a particular willing buyer (clause 45). When 'special value' is identified, it should be reported and clearly distinguished from 'market value' (clause 46).[53]
Market value is the estimated amount for which an asset or liability should exchange on the 'valuation date' between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion.[54]
"in an arm's length transaction" is one between parties who do not have a particular or special relationship, e.g. parent and subsidiary companies, or landlord and tenant, that may make the price level uncharacteristic of the market or inflated because of an element of 'special value'. The 'market value' transaction is presumed to be between unrelated parties, each acting independently.[55]

56. The Tribunal's findings are that there were a number of circumstances relating to Sale 1 which raised an inference that its sale price could not safely be relied on as the sole comparator:

(a) The purchasers were two existing tenants of the owner, one of whom had requested a first option on purchase. That was a category of special relationship referred to in the IVS.[56]

(b) The tenants paid the asking price.

(c) They did so despite the response of one tenant to the initial proposal being we "should get a valuation as I thought the price was too high. However, John thought this would take too long and didn't want to miss out on the property."[57]

(d) They did so without obtaining a valuation. The independent valuation for the purposes of the bank loan was undertaken and provided to the purchasers after the agreement had been entered into.[58]

(e) There was no evidence of how the vendor assessed the sale price of $4 million.[59]

(f) The purchase price was agreed to within seven days, even though 17 days had been provided for, an unusually short period for a sale of this magnitude.

(g) One purchaser owned a business operating from the property, and his evidence was that at the time of purchase "my daughter lived in Griffith and I was hoping to establish her in the business as a means of income for her into the future."[60]

(h) The other tenant, owner of the suburb's newsagency said "I wanted to be my own landlord and secure the location for the newsagency."[61]

(i) The purchasers were paying rent at some $70,000 below market rate, and with one purchaser's tenancy with only three years to run (the other had thirteen years), each was keen to protect a business interest which might not continue if the ownership changed.[62]

(j) The sale of the Sale 1 property occurred nearly three years prior to 1 January 2013. Although neither party raised this as an issue at the original hearing, it was raised by the appellant before the Tribunal.[63]

(k) The Sale 1 property had three tenants and frontages for business at two points; the subject property had two tenants and one frontage only although there was access at the rear for deliveries.

**57. The Tribunal accepts that not one of the listed circumstances on its own would be sufficient to establish that the sale was a special value sale to a special purchaser. Nonetheless, in combination the factors provide sufficient evidence for the Tribunal to be satisfied that it would be unsafe to rely on Sale 1 as a strongly comparable sale, as one which could be categorised as a market value sale, and as the only comparable sale for the purposes of valuation under the comparable sales method. The factors listed indicate that this was not a sale between parties "each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations."[64]

58. The Tribunal does not accept that it is only in the case of a distressed seller or forced sale, or one in which the buyers were anxious, that a sale may be excluded from the normal market sale category. These are not the tests in the cases, nor as outlined in the IVS definitions.

59. The Tribunal is also conscious that as Brewarrana establishes, there is a need for caution in establishing strong comparability whenever matters such as:**

... the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other considerations that induced or may have induced them to conclude the contract at the selling price agreed ...__[65]

60. As Wells J noted too in Fenton Nominees v Valuer-General, [66] where:

... the particular circumstances and considerations that induced the respective parties to come together at the several prices agreed upon ... plainly ... take a sale out of the ordinary run of transactions that together constitute the relevant market, valuers are wont to say that the alleged comparable sale must be excluded because it was affected by 'special circumstances'.

**61. Sale 1 evinces characteristics which take the sale out of the ordinary run of transactions that constitute the relevant market. There was an existing tenant/landlord relationship between the purchasers and the vendor; one purchaser wanted to secure control of premises containing a newsagency which had been in that location for over half a century, an attribute specific to this purchaser; the other purchaser's motive was to secure a business which would provide an income for a daughter, an attribute particular to this purchaser; the purchasers paid the asking price; the absence of normal prudential checks prior to the contract being concluded, even if they do not suggest 'anxiety' on the part of the purchasers, at least raise a question as to the reasons for this uncharacteristically prompt conclusion of the sale and an inference that these were over eager purchasers.[67]

62. In addition, there was no independent valuation, no proper marketing, the sale was concluded unusually quickly, and given the personal and business interests of the purchasers in the sale, there were elements which negated its arms-length nature. Nor did the adjustments made by the original Tribunal for differences in area or for depreciated cost of the main improvements[68] address these concerns. In conclusion, a number of ordinary business principles were ignored casting doubt on the reliability as a market sale of Sale 1.

63. In so finding the Tribunal does not agree with the conclusions of the original Tribunal that the buyers applied ordinary business considerations to the purchase including obtaining finance from a bank, which required an independent valuation of the property,[69] and that the mere fact that "the buyers in Sale 1 have long-term business interests in the area"[70] was sufficient to explain the circumstances of the sale and to negate any inference that the sale was not at market value.

64. As the Court stated in Arcus in the quotation at [49] in these reasons, in order to rely on a single sale as strongly comparable, evidence must be provided that the sale price reflects market value.[71] In order to do so it was necessary to be satisfied that the sale does not reflect any element of special value.

65. As there was sufficient evidence for the Tribunal to infer that Sale 1 was not within market parameters, it was not correct methodology to rely solely on this one sale as strongly comparable for the purpose of estimating the unimproved value of the subject property. The correct methodology was to consider the basket of sales by way of collective analysis to allocate varying weight to the sales depending on their degree of comparability and to use this information to arrive at an assessment of the unimproved value of the subject property.[72] The Tribunal therefore upholds ground 6 of the notice of appeal, namely that the original Tribunal failed to apply correct valuation methodology when it relied on one sale only as a comparable. This deals also with grounds 9, 10, 11, 12 and 13, and it is not necessary to consider these further. The Tribunal below considers a broader range of comparable sales so as to arrive at a value for the subject property.**

(k) Is the Tribunal able to re-assess the unimproved value?

**66. Counsel for the appellant urged the Tribunal not to remit the decision if it found error justifying the overturning of the decision of the original Tribunal. He did so citing the principles by which the tribunal is to operate including that the tribunal in exercising its functions is to ensure its procedures are quick and inexpensive.[73]

67. He noted that the Commissioner's decision was made in 2013, that review by the original Tribunal took place in 2015, with a decision delivered on 16 March 2016. As he pointed out, if the matter was remitted, it would be 2017 before a final outcome was reached and a process that took that length of time was not quick.

68. Counsel for the respondent opposed a reconsideration by the Tribunal, relying on a statement in Brewarrana at 545 that for the Court:**

... to piece together, from the several valuations placed before it, what would be, in effect, a paramount valuation of its own ... would necessitate [the Court] accepting, pro tanto, the role of an expert.

**69. The Tribunal notes that Brewarrana concerns the restricted review powers of a court. The review powers of the tribunal are governed by the provisions in the ACAT Act, which are not necessarily those of a court. These limits are found in the discussion at [20]-[25] and [28]-[29] of these reasons.

70. Counsel for the respondent also noted that the nature of the errors which the Tribunal found, whether discretionary, or errors of fact or law, would be determinative of the Tribunal's ability to make a decision or to remit the matter. The Tribunal could not reach a new decision on matters for which further evidence was required.[74]

71. The Tribunal does not accept this position. As noted above, the ACAT Procedure Rules (No.2) provide in rule 21 that for an appeal, the tribunal (a) has all the powers and duties of the tribunal that made the order appealed from, (c) may receive further evidence, (d) may make an order confirming, amending or setting aside the order of the tribunal appealed from and (e) may make any other order it considers appropriate. Rule 26 provides for how the tribunal may obtain further material to allow it to make a decision on the appeal.

72. In Giusida Pty Ltd and Commissioner of ACT Revenue, the tribunal concluded: "[I]t is not the role of this Tribunal on appeal to revisit the discretionary merits of competing arguments or opinions of expert witnesses."[75]

73. But on appeal to the Supreme Court Refshauge ACJ said in Giusida this argument raised an arguable issue:**

The finding of a sale as comparable must be a finding of fact. If, in fact, the sale is not comparable but is relied on, or is comparable but not relied on, then this seems to me to be a mixed question of fact or law.

While discretionary decisions are limited in the way they can be subject to appellate scrutiny, they are not immune from such scrutiny.

If a sale is comparable, but is not considered, then that is a feature to be taken into account as a relevant consideration. Conversely, if a sale is not comparable, but is relied on, this is to fail to take into account a material consideration.

It is important to bear in mind the oft-repeated comment by the courts that the Court is not a valuer and cannot 'piece together a valuation of [its] own': Challenger Property Asset Management Pty Ltd v Stonnington City Council at 453; [17], though that does not mean that a Court cannot accept some evidence from one valuer and other evidence from another on a separate issue. As Zelling J said in Doherty v Commissioner of Highways (1974) 7 SASR 57 at 83:

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.__[76]

**74. Also as the extract at [28] of these reasons from Giusida indicates, the role of the tribunal when undertaking an appeal is to be guided by the decision of the experts and the evidence at first instance, but in doing so, the tribunal can use the opinions of the valuers in order to reach its own decision on that evidence.

75. While accepting that there are limits to its power as set out in Brewarrana and Giusida, the Tribunal is exercising the same powers of review and comprises members with expertise equivalent to those of the original Tribunal. It is appropriate that it exercise these powers.**

(l) Assessment of unimproved value of the subject property

**76. The Tribunal undertakes the task of assessment of the rate of unimproved value using the basket of sales approach. There was significant evidence from the expert valuers in the original Tribunal proceedings and the Tribunal relies on this, especially the Joint Experts Report.

77. At the hearing, the appellant said that if a basket of sales approach was adopted, the order or comparability of the basket of sales should be Sale 4, 5, 7, 2, 3, with the inclusion of Sale 1 dependent on the Tribunal's findings on the special sale issue.[77] The Tribunal accepted that these sales should be included with the addition of Sale 8. The Tribunal has included Sale 8 as the original Tribunal considered this sale to be useful and only excluded it from consideration because it did not accept the "calculations of either valuer." The Tribunal has made adjustments to avoid that problem.**

78. The Tribunal accepts that the highest and best use can be the current use. As the IVS explains at clause 32:

The market value of an asset will reflect its highest and best use. The highest and best use is the use of an asset that maximizes its potential and that is possible, legally permissible and financially feasible. The highest and best use may be for continuation of an asset's existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid.[78]

79. The Tribunal also accepts the submission of the appellant that "[t]here was no evidence to suggest that any of the nominated sales showed development potential which ought be factored into the highest and best use" including for the subject property.[79] Ground 1 of the notice of appeal is therefore upheld. Grounds 7 and 8 are also addressed in that the redevelopment potential of the site of Sale 4 is not considered relevant.

80. The Tribunal discusses the comparable sales below, and summarises these in the Table at [121] of these reasons. In its calculations the Tribunal has used the rate per site area for the Sales based on the figures in the Joint Experts Report (the row entitled Rate per Site Area in the relevant page for the Sale in the Report). The relevant figures are obtained by:

(a) taking the sale price (column 1 in the Table at [121] below);

(b) deducting the value of improvements (the row entitled Total Depreciated Amount & Rate for Main Improvements (A) in the relevant page of the Joint Experts Report) and sometimes other allowances for letting up, incentives and agents fees (the row entitled Allowances for letting up, incentives and agents fees (B)) (columns 2 and 3 in the Table at [121] below);

(c) to obtain the unimproved value (the row entitled Deduced Land Value in the relevant page of the Joint Experts Report);

(d) then dividing this unimproved value by the number of square metres for the relevant site, to give an unimproved value of the land per square metre (the row entitled Rate per Site Area in the relevant page for the sale in the Joint Experts Report) (columns 4 and 5 in the Table at [121] below) and;

(e) this then enabled calculation of a value as if the property were 607sqm, that being the site area of the subject property (columns 6 and 7 in the Table at [121] below).[80]

This enabled a comparison to be made across the Sales. Where the Tribunal digresses from this approach and the Joint Experts Report, this is noted in the discussion of the Sale below. No challenge was made to the general approach in the Joint Experts Report in these proceedings. In taking this approach and using the assessments of the experts, except where specifically noted, the Tribunal does not need to address the use by the original Tribunal of gross floor area raised in appeal ground 2, or the issue of movement in the market raised in appeal ground 3. Consideration is then given to ranking the comparability of the Sales.

**81. Sale 1, as discussed above, was of the property next door to the subject property and occurred on 18 March 2010 for $4,000,000. This property is slightly larger than the subject property at 673 sqm. The joint experts agreed that the value of the improvements for the subject property was $2,250/sqm.[81] They had different figures for the value of the improvements for Sale 1, namely $2,250/sqm for MMJ and $2,000/sqm for AVO. The original Tribunal allowed a rate of $2,500 per sqm for improvements for Sale 1 and for the subject property, given that both properties were of "sound construction with ceiling heights in the order of 4 metres",[82] and a generic rate of $2000 sqm for the remaining properties.[83]

82. That explanation, without more, does not indicate why the value for improvements was deemed to be the same for all other properties when the experts had provided differential rates for those properties. Nor does it adequately explain why the rate chosen by the original Tribunal differed from the rate agreed by the experts for the subject property and the rates provided by the experts for Sale 1. As a consequence, the Tribunal has relied for its calculations on the values for improvements identified in the Joint Experts Report. Ground 4 of the grounds of appeal is upheld in this respect.

83. The finding by the Tribunal that Sale 1 was not a strongly comparable sale, because of doubts it was one for market value, suggests it should be removed from the basket. Against that conclusion, there is the evidence that the location, size and use of the property do make it a comparable sale. As a consequence the Tribunal has not removed the sale but has taken its special sale feature into account in deciding the order of comparability of the basket of sales.

84. MMJ did not use the sale value of $4,000,000 for the property, but an adopted capitalized value of $3,210,000. From this it deducted a total depreciated amount for improvements of $1,434,750 (purportedly an amount of $2,250/sqm, though there appears to be some discrepancy in this calculation) to give a rate per site area of $2,645/sqm. This rate would give a value for the subject property of $1,605,515. As discussed above, the Tribunal does not agree with using this capitalized value approach to assess the value of the property subject to Sale 1. This Tribunal thinks, as did the original Tribunal, that the comparable sales approach is preferable. As also discussed above the Tribunal does not think that Sale 1 is a strongly comparable sale which can be used as the sole basis for the valuation. However it can be used as one of a basket of sales. In considering in this context the MMJ valuation, the Tribunal uses the actual sale price, rather than the adopted capitalized amount suggested by MMJ, and then the depreciated amount for improvements suggested by MMJ.

85. A sale price of $4,000,000 minus the assessed value of improvements yields a rate per site area of $3,811/sqm (MMJ, adjusted to use the sale price) and $4,309/sqm (AVO). This in turn produces an unimproved land value for the subject property, which is a smaller 607sqm, of $2,313,277 (MMJ), and $2,615,563 (AVO).

86. Sale 2 concerned a property at Dickson which sold for $4,000,000 on 16 September 2010. The site area was larger than the subject property at 1,124 sqm,[84] and has a two storey building at the front. The original Tribunal, in finding a low degree of comparability, did so because the sale was slightly dated, noting that the "valuers have arrived at almost identical unimproved values for the land, but the location is significantly inferior and the lease purposes are more restricted."[85]

87. The appellant submitted to the Tribunal that both valuers regarded the property as comparable to the subject property, but in a "significantly inferior location."[86] The respondent's evidence to the Tribunal was that "Sale 2 shows a reasonable degree of comparability to the Subject Sale ... once the inferior location is taken into account"[87] and that it was "not out of line with other market evidence."[88]

88. The Tribunal notes that MMJ not only deducted $990,000 ($1,500/sqm) for improvements from the sale price to get the unimproved value, but also an allowance for letting up, incentives and agents fees of $228,096. The rate per site area was $2,475/sqm (MMJ.) and $2,498/sqm (AVO)[89]. This yields an unimproved land value for a site area of 607sqm of $1,502,325 (MMJ) or $1,516,286 (AVO).

89. The figures for both valuers are close suggesting it is a good site for comparison. The ground floor uses of Sale 2 are similar to those of the subject property. The finding of the original Tribunal that it had a low degree of comparability does not adequately reflect the valuers' views that even taking account of the inferior location, it was a useful benchmark and reasonably comparable. This Tribunal therefore takes it into account.

90. Sale 3 is also of a property in Dickson on 20 December 2010 for $5,500,000 and this property is also larger than the subject property at 891 sqm, with a two storey building. The original Tribunal found that the sale had a low degree of comparability as "neither valuer has pressed this sale as having particular usefulness."[90]

91. The appellant, as with Sale 2, submitted to the Tribunal that both valuers regarded the sale as comparable, but in a significantly inferior location.[91] The appellant also stated of Sales 2 and 3 that "While these sales are the least comparable of those in the basket they nonetheless should have been considered and weighted by the Tribunal."[92]

92. The respondent noted that the parties were largely in agreement on the analysis of the sale property, the depreciation for improvements and the deduced unimproved value.[93] The respondent also said that, in the view of its valuer, this sale showed that the deduced site land value for the subject property and Sale 1 were "not out of line with other market evidence."[94]

93. The Tribunal concludes that, despite the "least useful" comment of the appellant, the valuers agreed that Sale 3 was a useful benchmark.

94. The Tribunal finds, based on the rate per site area of $3,172 (MMJ) and $3,171 (AVO) that the unimproved value of the property, reduced to 607sqm, would be $1,925,404 (MMJ) and $1,924,797 (AVO). Again, the fact that the figures for both valuers are close suggests it is a good site for comparison.

95. Sale 4 is of a property at City Walk in Civic on 12 January 2011 for $2,500,000. It is an area of only 233 sqm and contains a two storey building. The difference between the experts relates to the depreciation for improvements figures ($2,250/sqm (MMJ) and $2,500/sqm (AVO) and the size and location of the property. The valuer for the appellant considered this to be closely comparable and the best guide to the value of the subject property;[95] while the valuer for the respondent said the small size of the property, narrow frontage and its location detracted from its usefulness.[96] The rates per site area of $6,481/sqm (MMJ), and $6,011/sqm (AVO), produce an unimproved value for a property of 607sqm of $3,933,967 (MMJ) and $3,648,677 (AVO).

96. The original Tribunal had rejected the rate per square metre by both valuers and concluded that the property and the sale had a low degree of comparability with the subject property and was of limited use. It concluded:**

The location is significantly inferior and the site is less than half the area of the subject site with low public visibility. Opportunities for more than one ground floor tenancy are limited by the narrow frontage of less than 8 metres. Service and vehicular access is available only from a crowded public service court at the rear of the site. The sale price is almost exactly two years from the relevant date.__[97]

**97. The appellant was critical of the findings by the original Tribunal that the location is significantly inferior because it did not explain why it rejected the views of the experts that the property was either comparable (MMJ) or slightly inferior (AVO),[98] because it erred by using a "rate per square metre of gross floor area",[99] and because it took account of development potential (in considering in effect highest and best use) without indicating what weight it attached to this factor.[100]

98. The respondent disagreed and submitted that, on balance, the factors listed by the original Tribunal supported its conclusion about Sale 4.[101]

99. The Tribunal has discounted development potential generally in its assessment and does so in relation to Sale 4. On that basis, the Tribunal finds that the MMJ unimproved land value for a property reduced to 607 sqm is $3,933,967, and the AVO is $3,648,677.

100. Sale 5 is of a property at Bougainville Street, Manuka for $1,175,000 on 31 August 2011. This property has an area of 663 sqm and has a two storey building. The original Tribunal found that Sale 5 had a low degree of comparability, largely because it was "severely limited by heritage constraints", and the location was "significantly inferior with low public visibility."[102]

101. The appellant was critical of the respondent's value of improvements figure of $1000/sqm which was said to be "artificially low to bring it into line with the artificially high land values he attributes to Sales 6 and 9."[103] The respondent justified the improvements figure on the basis that it was "an inferior quality building which does not represent the highest and best use of the site"[104] and because of its heritage protection status.[105]

102. The valuer for the respondent also submitted that the market value reflected the small size of the property, its inferior location, inferior purpose clause, and the obligation to maintain a car park at its rear.[106] The respondent criticized the depreciation for improvements figure used by the valuer for the appellant because he had only "analysed the sale towards the end of 2014", not at the time of sale. The respondent also contended that the low degree of comparability was "entirely a question of weight and discretion", meaning, the Tribunal was bound to accept it.[107]

103. The Tribunal rejects this last contention for the reasons provided at [66]-[75] of this decision.[108] The depreciation for improvements figure used by the respondent should also be given little weight in line with the principle that the current use of a property can meet the highest and best use requirement.[109] The Tribunal also notes that although the property is used for commercial, not retail, purposes, other properties in the basket are also subject to the same use and have been considered. The Tribunal finds that this feature is no reason to exclude the property from its consideration, but that the heritage limitation should be taken into account.

104. The principal difference between the valuers is due to the value of improvements. The valuer for the respondent had inspected the property in August 2011, while the valuer for the appellant did not do so until "towards the end of 2014" at which time the property had been upgraded, making the value of the property "more in line with Sale 8."[110] The appellant did not deny this assertion.

105. On that basis, the Tribunal accepts that the depreciation for improvements finding of the valuer for the respondent is likely to be more accurate as at January 2013. At the same time, the Tribunal will take into account that the AVO figures have also been unnecessarily discounted for other reasons and this features in its ranking.

106. Based on the figures from the Joint Experts Report, the rate per site area is $1,083/sqm (MMJ) and $1,350/sqm (AVO) giving an unimproved land value for a property of 607sqm of $657,381 (MMJ) and $819,450 (AVO).

107. Sale 7 (MMJ) was of a property at Kingston for $2,250,000 on 29 January 2014. The property has an area of 323 sqm and a two storey building. The original Tribunal, in an oversight, did not consider this sale. That does not preclude this Tribunal from doing so, notwithstanding that analysis of the sale was provided only by the valuer for the appellant. In doing so the Tribunal in effect upholds ground 4 of the grounds of appeal.

108. The appellant submitted that the Tribunal should consider Sale 7 for itself, despite the absence of analysis by the valuer for the respondent.[111] The view of the appellant's valuer was that although the Sale 7 (MMJ) property was inferior to the subject property in terms of use and location, it was "consistent with it in terms of relative value."[112]

109. The respondent's valuer had said that the MMJ Sale 7 was not comparable "based on its size, location, and requirement to have two storeys and ground floor GFA limitation and the absence of a 'shop' as a permissible use."[113] On this basis the respondent suggested that the Tribunal could be comfortably satisfied that Sale 7 "has a low degree of comparability and utility and any consideration of it could not have affected the outcome in any material way."[114]

110. The Tribunal notes that the sale price of the property was $2,250,000 on 29 January 2014, that is, some twelve months after the relevant date. The depreciation for improvements figure by MMJ was $2,000/sqm as compared with $2,250/sqm for the subject property. Despite the "inferior" comment by the MMJ valuer, he considered the sale should be taken into account as it was consistent in terms of use (offices, drink establishment, and restaurant[115]), location (Kingston being an adjacent suburb to the subject property), and size (built GFA of 572 square metres on a site of 323 square metres). The valuer for the appellant had also said of Manuka and Kingston in the original hearing:**

ESTATE OF ANTHI JOHN NOTARAS v COMMISSIONER OF ACT REVENUE

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (297 paragraphs)

ESTATE OF ANTHI JOHN NOTARAS v COMMISSIONER OF ACT REVENUE (Appeal) [2017] ACAT 2 (23 January 2017)

Parties

Legislation Cited (3)

Cases Cited (13)