Lanp Tax v Duncan.

Lanp Tax v Duncan. - [1915] HCA 12 - HCA 1915 case summary — Zoe

[24]

will in all probability be soon required for some of them, but there may be no one actually willing at the moment to buy it at any price. Still it does not follow that the land has no value. In my judgment 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?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together." In the same case my brother Zsaaes expressed an opinion which was adopted by the Full Court in Commissioner of Land Tax v. Nathan (1), which is, I think, entirely in accord with the view I expressed, but amplifying to some extent what I had said. He pointed out particularly that all potentialities - although he did not use that word - of the land must be taken into consideration. He said (2): - * The all important fact . . . is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advan- tageous purpose for which it was adapted. The plaintiff is to be compensated ; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him." That was not a case of land tax, but in Nathan's Case, which was, the Court held that substantially the same rule applied. The theory of the hypothetical purchaser does not therefore assume the existence of a person actually willing to buy. The contention for the Commissioner now is that that theory does

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consideration the possibility of there being a number of persons

two, five, ten or a hundred - who would have been willing amongst them to buy the whole of the land. The two hypo- theses are entirely different. The hypothesis of a willing pur- chaser assumes, as I have shown, ability as well as willingness to buy. An hypothesis which assumes an indefinite number of purchasers able and willing amongst them to buy the whole of the land in separate parcels is quite a different thing, and is not the hypothesis made by the Act. A parcel of 6,000 acres of land is not substantially the same subject matter as (say) thirty parcels of land separated from one another by roads, and com- prising together with the roads the original parcel. If, therefore, the owner can be treated for any purpose as a subdividing owner, he must be treated as one who has already gone to the expense of subdividing, and the value to him is no greater than it would be to a purchaser who had bought the land for the purpose of making such a subdivision, that is, not greater than the price such a purchaser would have given for it. It was also suggested, and indeed pressed, that the vendor is not entitled to expect to get a realized capital sum, but ought to be satisfied with a nominal amount of purchase money, not realized, but part of which is allowed to remain on the security of the land. That is an entirely different thing from a realized capital sum, and may or may not be equivalent to it in value. In general, I suppose, a person who sells land assigns a value to it in his own mind, and if he chooses to give credit considers what is the present value of the amount he will ultimately and actually get in exchange for the land. If he gives credit, the length of credit, the sufficiency of the security for the unpaid purchase money, the probability of the land maintaining its value, and of his ultimately getting the whole of the price - these and many other things would be taken into consideration. A man may think that he could get £3,000 for a parcel of land at once. He may also think that, if he subdivides the land and offers very liberal terms, speculative buyers will be likely to give nominal prices amounting to a great deal more than £3,000. But on the whole he may come to the conclusion that £3,000 in hand is more

[40]

Reference has been made to various cases, including those of the very highest authority, the Privy Council, in which it has been held that in compensation cases the test is the value of the land to the owner. I need not pursue those cases because, as far as the particular question raised here is concerned, the Act lays down the standard, and it is a mere question of interpreting that standard. Compensation cases may fall under the same rule, as I think they do, but it is an independent consideration. This case must in any event be governed by the Act, and the standard put by the Act is that the "unimproved value" means "the capital sum which the fee simple of the land might be expected to realize if offered for sale on such reasonable terms and con- ditions as a bond fide seller would require, assuming that the improvements (if any) thereon or appertaining thereto and made or acquired by the owner or his predecessor in title had not been made." The interpretation put upon that by the learned Judge from whom this appeal comes was that it does not include a possible subdivisional sale by the owner. He thought that it meant necessarily a sale of the whole of the land in one block. In my opinion, that is a wrong construction. There is one vendor, but the interpretation section says nothing about one purchaser. 'The whole of the land is for the purpose of the section assumed to be disposed of in fee simple by the vendor. But it does not connote that the only potentiality to be considered is one pur- chaser who is able and willing to take the whole of the land wno ictu. That would reduce the range of competition and very materially affect the unimproved value of the land. In my opinion, as far as the test is concerned, the question is what could the vendor expect to get by realizing the land on terms not unduly restricted - * such reasonable terms as a bond jide seller would require," as the section says; expanded that means the best terms a seller can get having regard to what an ordinary prudent purchaser would look upon as not unreasonable from his own standpoint, and therefore as not loading, so to speak,

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The reason why the judgment is independent of the erroneous test and of the erroneous admission of evidence is this: that in taking a certain step for arriving at his conclusion the learned Judge traversed some ground which is common to both parties, that is to say, he took as his starting point at this stage the £7 7s. which was the average price obtained at the subdivisional sale in 1912, and he worked backwards from that, as he was entitled to do. He said that there were two circumstances, the terms and the competition, which as they existed in 1912 were different from the corresponding cireumstances at the critical date in 1910. He had evidence before him, which he mentions, of several witnesses who stated what they thought represented in money the difference between the two sets of corresponding circumstances, and, as I read his judgment, he came to a distinct finding upon those independent facts. Mr. Mitchell urged that there was evidence bearing upon that point, namely, the affirma- tive evidence of several witnesses as to what the value of the land was on the basis of a subdivisional sale by the owner in 1910, which the learned Judge, so to speak, struck out from his consideration altogether - not that the learned Judge considered that evidence, gave it such weight as he thought it was entitled to, and then preferred other evidence upon which he acted, but that he declined even to consider it. I do not think the learned Judge took that course. He certainly discarded from his con- sideration the evidence of those witnesses given affirmatively as to the value of the land on subdivisional sales from the stand- point and on the basis as to which they testified. He said, "I do not accept their opinion" ; and he meant that he did not agree with them in starting to consider the value of the land if sub- divided by the owner. But when he reached the point of differ- ence between the value which the land fetched in 1912 and what in the opinion of those witnesses it would have fetched in 1910, I do not think he excised from his consideration any piece of evidence, but he accepted their conclusion on the point of differ- ence. One of those terms was the keener competition, that is to say, there was less land - 6,000 acres instead of 110,000 acres.

At a glance

Court

Decision date

Before

Source

Judgment (52 paragraphs)

Parties

Cited By (2)