Valuation
26 In April 2005, the late Frank Egan was engaged by the club to carry out a valuation on behalf of the applicant. After referring to the provisions of s 6A and s 14I and a number of sales Mr Egan reached the conclusion and expressed his opinion that the land value of the land under the provisions of s 14I was no more than the existing valuation made by the Valuer General, namely $2,400,000.
27 In June 2005 the respondent filed a valuation report by Mr Halias who after considering some identified sales and having regard to the highest and best use of the land as a golf course and clubhouse, determined a land value at base date 1 July 2003 as $5,900,000. Mr Halias assumed that although there were some doubts about a legal access to the property it would not be denied in the future. Moreover, he assessed the value on the basis that s 14I was not applicable on the basis of his opinion that the lease did not fall within the certain classes of lease from the Crown referred to in s 58F of the Valuation of Land Act.
28 Mr Egan prepared a reply to the valuation by Mr Halias on 18 July 2005. In his second report Mr Egan noted, in particular, that there was no natural water supply and there was a difficulty with analysing sales that might be applied to the subject land. Six sales were referred to by Mr Egan. He expressed an opinion that the only sale with any relevance to a golf course was a sale of land at Pitt Town to the Kellyville Golf Club. It reflected a rate of $40,450 per ha. Assuming that the subject land was 33 percent superior to the Pitt Town land Mr Egan adopted a rate of $60,000 per ha as appropriate. He adopted $25,000 per ha for the 25 ha of bushland to reach a total value of $2,666,000. After taking economic factors into account he concluded, on what he described as a realistic basis, that $2,450,000 was a reasonable assessment of land value under s 6A as at 1 July 2003.
29 In a further report filed on 3 November 2005 Mr Halias assessed the land value at base date 3 July 2003 at a reduced figure of $4,650,000. In this report Mr Halias only refers to the difficulty over responsibility for maintenance of the access. Following comparisons and adjustments to a number of sales Mr Halias applied different rates to that part of the land he regarded as passive-active open space land and the land described as bushland within the course area to deduce an unrestricted value of $5,800,000. After taking into account the particular conditions of the lease and in particular the potential for withdrawal of the land from the lease area, the obligation to maintain the footbridge, as the right for certain authorised personnel to have vehicle access across the land and the obligation to obtain ministerial approval for any substantial changes to the playing area, Mr Halias reduced the unrestricted value by 20 percent to determine what he described as a Crown Lease Restricted Value (Land Rating Factor) of $4,650,000.
30 At a joint conference of the experts on 16 March 2006 Mr Dundas indicated that whilst he supported the general thrust of Mr Egan's report, that is, it is uneconomic to construct a stand alone golf course, he did not support Mr Egan's assessed Land Value at $2,450,000. He was of the opinion that the Land Value should be $400,000.
31 The primary method of valuation relied upon by Mr Halias is that the assessment of the land should be as "unrestricted" land zoned "Open Space" having regard to not only the Pitt Town sale but also to other open space sales. Thereafter he maintained that a discount should be applied to take into account the restrictions applicable under the terms of the lease. Mr Dundas on the other hand, is of the opinion that the value of the land should initially be assessed by way of capitalising the existing market rent of the land, which he says has been determined by reflecting the terms and conditions of the lease. According to Mr Dundas that is equivalent to the requirement for determining Land Value under s 14I.
32 Mr Halias agreed that as a secondary approach the value of the land may be checked by having regard to the capitalisation of the rental value of the site. However, his investigation persuaded him that the initial rental of $60,000 per annum was determined under "rental rebate policy" relating to Crown Land or Crown Reserve held under lease for a golf course. He says there is also a difficulty in drawing comparison between other leases of golf courses due to the unique circumstances that apply in each rental assessment of rent payable.
33 Using a secondary approach Mr Dundas considered the value of the subject land as a golf course site was $2,500,000. This deduction has regard to the sale at Pitt Town and takes into account the size of the subject land, lack of water supply, proximity of an adjoining helicopter base and the presence of protected flora and fauna on the subject land. He then discounted the value by 50 percent due to terms and conditions of the lease notably the restrictions on assignment in cl 38, the constraint on access and the potential for withdrawal of parts of the land in accordance with cl 90. Accordingly he determined the land value of the subject land at $1,250,000.
34 The opinions expressed by Mr Dundas at the joint conference were generally and effectively confirmed in a written report which he prepared on 26 April 2006.
35 A second joint conference was held between the expert valuers on 29 June 2006. Further details of the respective analyses undertaken by the valuers was provided in a report of the joint conference, but each of them maintained the position they previously held and the opinions they expressed at the March conference.
36 I agree with the valuers that the only sale that presents any prospect of comparability with the subject land is the sale of the land at Pitt Town to Kellyville Golf Club. Even so there are major differences, which demand a significant adjustment in order to reconcile the two properties thereby greatly increasing the potential for an unacceptable margin of error. Virtually the only directly comparable feature of the sale land is that it was purchased for the purpose of a stand alone golf course. Other sales had the added complexity of the potential for the golf course being related to an attached tourist or holiday resort. The aspect and location of the subject site is vastly superior to the land at Pitt Town being adjacent to the coast, with spectacular views of the coastline and close proximity to the eastern suburbs of Sydney. Although it is clear that the subject land enjoys physical access, the legal situation has not been clarified sufficiently to enable the Court to reach a confident conclusion about its legality. There are certainly doubts about the responsibility for maintenance of the access road. Large areas of the subject site are covered by an endangered ecological community. The location of a helicopter base on an adjoining property is a significant detraction from its value.
37 The Pitt Town sale shows a rate of $40,451 per ha which Mr Halias adjusts to $125,000 per ha for the subject site. The adjustment appears to take into account matters such as location, use, amenity, the proximity of the helipad, access and flooding potential. However, the lack of a reliable continuous water supply is another significant distinguishing feature for the subject land.
38 Notwithstanding the adjustments required, a comparison to the sale at Pitt Town may ultimately prove to be of some assistance depending upon the Court's determination of the veracity of using the capitalisation of rent method.
39 Although Mr Halias' value of $4,650,000 is greater than the land value derived by the Valuer General, the respondent does not contend for the higher value. It is used merely to support the valuation to which objection has been taken.
40 In his oral evidence Mr Dundas made the following points against using the Pitt Town sale:-
- The Kellyville Golf Club had already sold its existing premises and was seeking to retain an active club membership.
2. The Pitt Town site is capable of a number of alternative uses such as agriculture, animal establishments, bus depots, bus station, childcare centres, community facilities, clubs, educational establishments, dwelling houses and hospitals.
3. Applying the terms of the lease the subject land is restricted to use for the purpose of a golf course.
4. Pitt Town is not exposed to the extremes of coastal weather (as the subject land is) which constrain the potential for vegetation growth.
5. The subject property is exposed to a situation whereby it is one of a number of golf courses competing for membership in relative close proximity with minimal potential for growth from residential development in the immediate area.
6. The potential for the flooding of the Pitt Town site could bring advantages in terms of water supply but disadvantages in terms of its amenity for use as a golf club. Conversely there is no flooding potential at the La Perouse site and there is not an assured water supply.
7. The subject site is constrained by the endangered ecological community of Eastern Suburbs Banksia Scrub.
8. Although a number of the constraints arising from the terms of the lease identified earlier do not, standing alone, have a significant effect, nevertheless they have a cumulative impact that does not apply to the Pitt Town land.
41 Mr Halias made the following observations in relation to his enquiries concerning the Pitt Town sale:
1. The General Manager of Kellyville Country Golf Club advised him that negotiations for the purchase were conducted on the basis that the land would be used for the purpose of constructing a golf course.
2. The land in Pitt Town is restricted by an environmental protection zoning.
3. He does not regard the NSW Golf Club land as having a restricted access by comparison to the Pitt Town land.
4. He recognised that almost 90 percent of the Pitt Town land is subject to flooding and made a discount accordingly.
5.- In accordance with instructions from the Chief Valuer of the Valuer General, the general restrictions imposed by Crown Leases are regarded as a formality so that a negligible or nominal amount is deducted to reflect those potential issues or matters that require ministerial consent.
6. On the other hand the constraint against harming or destroying the Eastern Suburbs Banksia Scrub is to be treated as an absolute restriction.
7. Generally an allowance of 10 percent has been made to reflect an adjustment for restrictions imposed by the lease.
8. Overall an allowance of 20 percent has been made to reflect all the restrictions including the so called nominal restrictions as well as the adjustments made to the land value by comparison to the sale.
42 Mr Halias has explained that the cleared lands have been analysed at the rate of $125,000 per ha whereas a discount of 50 percent has been applied to the bushland area by adopting a rate of $62,500 per ha. He thereby achieves an unrestricted value of $5,800,000 to which he then applies the discount of 20 percent to take account of the restrictions he regards as a formality (10 percent) and the additional restrictions, which exist beyond formality (10 percent). The total concession or deduction on that account therefore is 20 percent.
43 The above figures contrast to the $50,000 per ha "unaffected rate" adopted by Mr Dundas, who then reduced the result from a rounded figure of $3,000,000 to $1,500,000.
44 Mr Halias strongly disagrees with the 50 percent allowance made by Mr Dundas because the Pitt Town sale has been analysed on the basis of its potential use for a golf course, which accords with the restricted use imposed by the lease. In that respect he says the potential use reflected by the sale equates to the restricted use under the lease. That is the reason he only allows a 20 percent adjustment. In his opinion the additional 30 percent allowed by Mr Dundas is not justified.
45 Thus, there is a significant difference between Mr Dundas and Mr Halias based on an analysis of the comparable sale. The assessed unrestricted value adopted by Mr Halias equates to approximately $98,500 per ha in contrast to the unaffected rate per ha for La Perouse at $50,000 derived by Mr Dundas.
46 The difference in adjusted values is a reflection of the difficulty in a valuation exercise that involves a wide range of significant adjustments. The additional sales referred to by Mr Halias and Mr Egan do little to assist the Court to resolve the conundrum. The position is further complicated by the fact that Mr Dundas adopts an overall rate for the La Perouse property whereas Mr Halias and Mr Egan, (not unreasonably in my opinion) had regard to the different values that apply to the active lands and the bushland areas respectively.
47 In the circumstances I am not in a position as a judicial valuer to gain a great deal of assistance from the evidence from the valuers in respect of an application of the comparable sales method. I am therefore driven to approach the results with caution and seek a preferable method on the basis that it can be treated as more reliable.