Maurici v Chief Commissioner of State Revenue

Land and Environment Court (NSW)|1999-10-06|Before: Cowdroy J, Mr J

Land and Environment Court of New South Wales CITATION: Maurici v Chief Commissioner of State Revenue [1999] NSWLEC 282

PARTIES APPLICANT Maurici

RESPONDENT Chief Commissioner of State Revenue

Valuation of Land Act Act 1916 No 2 s 4, s 6A LEGISLATION CITED: Environmental Planning and Assessment Act 1979 Land and Environment Court Act 1979 s 56A

DATE OF JUDGMENT DELIVERY: 12/23/1999

APPLICANT Dr C Birch with Mr J Stoljar (Barrister)

SOLICITORS Speed & Stracey LEGAL REPRESENTATIVES: RESPONDENT Mr T Blackman (Barrister)

RESPONDENT I V Knight

JUDGMENT: IN THE LAND AND MATTER No. 30039 of 1999 ENVIRONMENT COURT CORAM: Cowdroy J OF NEW SOUTH WALES DECISION DATE: 23/12/99

Anthony Phillip Maurici Applicant v Chief Commissioner of State Revenue Respondent JUDGMENT

This is an appeal instituted pursuant to the provisions of s 56A of the Land and Environment Court Act 1979 ("the Court Act") against the decision of Commissioner Nott which was delivered on 6 October 1999.

In his judgment Commissioner Nott found that the land value of premises known as 66 The Point Road, Woolwich at 1 July 1997 to be $1,950,000. Such valuation was fixed pursuant to the provisions of s 6A of the Valuation of Land Act 1916 No 2 ("the VLA Act").

Mr Maurici ("the appellant") submits that the learned Commissioner made three errors of law in his judgment. The challenges are dealt with hereunder.

The first ground of challenge is made upon the basis that in the formulation of his judgment, Commissioner Nott concentrated his attention upon a comparable sale of vacant land but failed to deduct the value of an improvement, namely a high sandstone retaining seawall ("the wall"). To reach his valuation the Commissioner was required to determine the value in accordance with the requirements of s 6A(1) of the VLA Act which provides:- (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made.

Commissioner Nott endeavoured to use comparable sales of vacant parcels of land in the Hunters Hill area as a guide for his assessment. One such property was known as 30B Viret Street Hunters Hill. In respect thereof, Commissioner Nott gave great weight to a sale of that property that occurred on 4 July 1996.

The Commissioner described in detail the physical features of 30B Viret Street upon which a wall was erected on top of the rock shelf above mean high water mark. The Commissioner found that such wall was not a retaining wall relating to the reclamation of land. Such wall retained a substantial volume of filling without which much of the levelled land of no 30B Viret Street would not exist. Accepting the sale of such land as comparable, Commissioner Nott made no deduction of the value of the wall.

The term "land improvements" as defined in s 4(1) of the VLA Act relevantly includes the following:-

(d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation (d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land for the purpose of the erection of a building, structure or work, not being for the purpose of irrigation or conservation, (e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and

The appellant argues that since the word 'retaining walls' was referred to in (e) and since there is no reference to 'retaining walls' in (d), the value of such wall is not a 'land improvement'. Commissioner Nott accepted the submission of Mr Croker, valuer for the respondent that the retaining wall should be regarded as the land improvement as defined.

In Justin John Enterprises Pty Limited v Valuer General [1999] NSWLEC 208, this Court reviewed the authorities concerning the appropriate approach to be followed when considering the issue of 'land improvements'. In summary it requires an assessment of the state of the land without any man-made improvements other than those which are specifically referred to in the definition of land improvements contained in s 4(1) of the VLA Act.

The Commissioner considered that the wall formed an integral part of the filling. He said at [25] of his judgment:- However, it seems to me that where, as a question of fact, the filling or levelling (of the surface of the land or for the purpose of a proposed building site) could not exist without the existence also of a supporting structure, then any added value from the filling or levelling (as thus necessarily supported) should be included as part of the land value of the subject land. He also said at [27] of his judgment:- Without the retaining wall, one would have to imagine a massive volume of fill near the waterfront being magically kept in place, extending to a sheer vertical height of about 3 m above water level; whereas in reality, without the wall, a massive area of soil or fill would come tumbling down over the rock base of the wall and into the river. With great respect to the Commissioner, I cannot agree with his conclusion. The sole test to determine whether the wall constitutes a land improvement is found in subparagraph (d) of the definition of 'land improvements'. Whilst the filling and leveling is a 'land improvement' in accordance with the definition, the wall is not. It is irrelevant that the fill might not be capable of supporting itself. Any structure supporting such fill is not a land improvement unless it comprises an integral part of reclamation as provided by paragraph (e) of the definition of land improvement. Not being included, it is an 'improvement' as distinct from 'land improvements' being the works and structures defined in s 4(1) of the VLA Act. In Morrision v The Federal Commissioner of Land Tax (1914) 17 CLR 498 at 503 Griffith CJ said:- Any operation of man on land which has the effect of enhancing its value comes within the definition of 'improvement'.

Although it was argued for the respondent that this challenge is one which is factual, I do not agree. The application of legal principle to any factual circumstance is in itself a question of law. I uphold this ground of appeal.

In this challenge the appellant submits that the Commissioner failed to adopt an appropriate method of valuation. The appellant's valuer, Mr Byron, produced evidence of sales of several improved properties in the Hunters Hill area which were regarded as comparable. Mr Byron had valued the improvements on lands the subject of such sales and had then sought to assess the cost of renovating the existing structures on the land to a new condition. The total value of improvements assessed was then deducted from the contract price in order to attempt to reach a value of the land without improvements.

From the 15 properties advanced as comparable sales, the Commissioner rejected all those put forward by the appellant except one property namely, 5 Kareelah Road Hunters Hill because they related to improved properties.

The Commissioner expressed a preference for relying upon sales of unimproved land. At par [31] of the Commissioner's judgment he considered the method of valuation of deducting the added value (if any) of the improvements in the contract price in order to obtain an estimated land value. He said:- ... in valuing residential properties for the purpose of s 6A(1) of the Act, this method is generally not as reliable as using sales of vacant land or of land where the improvements may be regarded as having little or no value.

In support of its submission, the appellant relies upon a passage contained in a joint judgment of the High Court of Australia in The Valuer General v Fenton Nominees Proprietary Limited [1982] 150 CLR 160 at 163. In this passage the High Court observed that competing valuations of the parties were based, ' largely, if not exclusively, on sales of parcels of improved land in the commercial area of Mt Gambier in the general vicinity of the respondent's premises .... In this situation the critical question which confronted the valuers was: how should the prices paid for the improved land be converted so as to reflect an unimproved land value?' . The appellant says by analogy the same question should have been addressed by the learned Commissioner.

The appellant also relied upon the decision of Nap Nap Station Pty Limited v Valuer General (1989) 72 LGRA 275. In that decision the Court determined that it was permissible to deduct the estimated value of the improvements from the actual sale price of a comparable improved property to establish a deduced land value. The appellant also relied upon a decision of the Land and Valuation Court in Estate of George James v Valuer General (1941-1945) 15 LGR 110. At 112 Roper J said:- Further, if it appears that land is being devoted to its proper use from the point of view of exploiting its value, and that the improvements upon it are necessary and proper for that use, and that there is no element of value involved in the improved value other than the intrinsic value of the land the of the improvements, then there is in my view, no error involved in a valuer forming his opinion of the unimproved value of the land by deducting the value of the improvements from the improved value.

The respondent submits that this challenge does not represent an error of law, but a reflection of the fact that the Commissioner preferred the approach taken by the respondent to the issue of valuation rather than that of the appellant. It says that Nap Nap Station is to be confined by its facts to the circumstances of that case which involved complex questions concerning the carrying capacity of a rural property. The respondent also says that the decision of Roper J in James v Valuer General was predicated, as appears at 110 of that judgment upon the basis that it should be applied where, ' there are no sales of really comparable land whether improved or unimproved' . The respondent relies upon the established principle in Tooheys Ltd v Valuer General [1925] AC 439 wherein Lord Dunedin, delivering the judgment of the Privy Council said at 443:- It is, therefore, to approach the question from a completely wrong point of view to begin with the valuation which takes in the improvements and then proceed by means of subtraction of a sum arrived at by an independent valuation in order to find the required figure.

It should be noted that the Privy Council subsequently found it necessary to clarify the decision in Tooheys Ltd (see Tetzner v Colonial Sugar Refining Co Ltd [1958] AC 50 at 56). The passage quoted above is to be considered in context as it related to a unique factual circumstance and such passage cannot be regarded as establishing a general principle.

Mr Boyle's method did not correspond with the traditional method of valuation. The Commissioner rejected the approach of Mr Boyle upon the ground that there was no precedent for his method and secondly because it produced an artificially low valuation of the unimproved capital value of the land. The rejection of Mr Boyle's method of valuation of the acceptance of evidence of actual sales does not establish that the learned Commissioner erred in valuation method.

As a second attack upon the Commissioner's methodology it is submitted that the Commissioner ought to have had regard not only to sales of vacant land but also to properties which had been improved. It is submitted that the concentration of attention upon unimproved capital values produced an abnormally high valuation for the appellant's land.

The Commissioner said in his judgment:- But in valuing residential properties for the purpose of s 6A(1) of the Act, this method [ie of deducting the value of improvements] is generally not as reliable as using sales of vacant land or of land where the improvements may be regarded as having little or no value.

Obviously the Commissioner was concerned to consider sales of vacant land because they did not involve any element of speculation concerning the value of improvements. He considered that a sale of land in its natural state ought to provide a more as a comparable value when assessing the value of an unimproved parcel of land in the same area unless there were some exceptional circumstances. I reject this ground of challenge subject to a consideration of the issue referred to in the next challenge.

The appellant submits that the sales of the vacant parcels of land were unduly inflated and therefore unreliable as comparable sales due to a 'scarcity factor'. Such argument is based upon an answer in cross-examination of the respondent's valuer in which he acknowledged that a scarcity factor was a known component of vacant land sales in the Sydney metropolitan area and that such factor might be incorporated in the valuations of the Valuer General made pursuant to s 6A of the VLA Act.

Commissioner Nott declined to make any deduction in the comparable sales of vacant land because of the scarcity factor. With the exception of one property which had erected upon it a derelict but substantial house, all of the comparable sales relied upon were of vacant lots.

To this challenge the respondent submits that the selection of properties by the Commissioner is not unreasonable within the Wednesbury sense and that no error of law is demonstrated.

Whilst there is nothing to suggest that such sales do not represent a comparable sale for use in assessing the value of the appellant's land, it is not clear from the judgment whether the Commissioner paid any regard to the remaining valuations and if he did, the extent of such consideration. The learned Commissioner said that he reached his conclusion 'principally' upon the first six valuations.

Had it not been for the acknowledgment by the respondent of the existence of the scarcity factor, this ground would be rejected. However as it is acknowledged to exist and as it is not clear whether such factor has caused the sales of vacant parcels of land to be inflated, this issue must be addressed. I uphold this ground of appeal.

The appeal be upheld.
The proceedings be remitted to Commissioner Nott for re-hearing.
The respondent pay the appellant's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

(1999) 105 LGERA 318

At a glance

Court

Decision date

Before

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Judgment (41 paragraphs)

Parties

Cases Cited (3)

Cited By (1)