Sharsay Pty Ltd v Valuer-General - [2013] NSWLEC 181 - NSWLEC 2013 case summary — Zoe

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Sharsay Pty Ltd v Valuer-General

[2013] NSWLEC 181

Land and Environment Court (NSW)|2013-07-03|Before: Sheahan J, Mr J

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At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2013-07-03

Before

Sheahan J, Mr J

Source

Original judgment source is linked above.

Judgment (18 paragraphs)

[1]

Introduction 1The two applicant companies own a property at North Penrith, as tenants-in-common in equal shares, and have appealed against the decision of the Valuer-General ("VG") to disallow an objection they made contesting a land tax assessment notice (base date 1 July 2011). 2I heard this appeal with Acting Commissioner Cowell, and I gratefully acknowledge his assistance in its determination. 3The court undertook a comprehensive tour of inspection of all the properties relied upon by either side (Exhibit A1). The parties' respective valuation and town planning witnesses accompanied us on that tour. 4The valuation experts gave concurrent evidence, and were cross-examined, in the courtroom, but the planners were not required.

[2]

The Subject Site 5The subject land is Lot 2 DP 623918, known as 2091-2099 Castlereagh Road, North Penrith, and the appeal is brought pursuant to s 37(1) of the Valuation of Land Act 1916 which provides as follows: Any person entitled under Part 3 to object to a valuation may appeal to the Land and Environment Court if the person is dissatisfied with the Valuer-General's determination of any such objection to the valuation concerned (whether or not the person was the objector). 6The subject land has an area of 1.965ha, and is located 2.5km north of the Penrith CBD. It lies within the General Industrial ("IN1") Zone under the Penrith Local Environmental Plan 2010 ("LEP" - Exhibit A11). The respondent's Statement of Basic Facts (Exhibit R1) notes that the subject land is flood free, and is an "inline allotment with elongated, slightly irregular rectangular shape [and] near level topography". Castlereagh Road on its frontage is a four lane main road. 7The site is currently used for a "Metro Tyre" sales/service business, and for the parking/storage and servicing of large trucks belonging to "Mulgoa Quarries". 8The land tax levied by the notice challenged in this appeal was based on a valuation of $4.98M, which translates to a "unitary" land value of $253.43/m2. That valuation was confirmed by the VG, on or about 18 May 2012, but in these appeal proceedings, the VG contends for a site value of $4,617,750, a "unitary" figure of $235/m2, and accepts that the applicants' appeal should be allowed to the extent of that differential. 9On the other hand, the applicants contend for a market valuation, at the 2011 base date, of $2,947,500, which equates to a unitary value of $150/m2. They say that a land value in the order of $250/m² would be appropriate only for land "much superior" to the subject land, for example, land located in the industrial precincts of Eastern Creek and Erskine Park, to which, the court was told, Mulgoa Quarries was relocating, to take advantage of easier access to motorways M2 and M7.

[3]

The Valuation Evidence 10The expert valuers (Kent Wood for the applicants, and Colin Sorrenson for the respondent) agree that the appropriate method of valuation is the "adjustment of comparable sales" method. While a number of sales are agreed to be comparable, the valuers disagree on the appropriate adjustments of their value. 11"Bulky Goods" retailing is permitted on scheduled lands within the Light Industrial ("IN2") Zone under the LEP, and the parties' respective town planning experts agree substantially on all relevant planning issues, and that there is a concentration of bulky goods style outlets in the Jamisontown Industrial Precinct, generally coinciding with that part of it zoned IN2, whereas the subject site is within the North Penrith Industrial Area, which is characterised by more traditional industrial uses. 12However, the applicants complain that some of the alleged "comparable sales" relied upon by Sorrenson relate to land used for "Bulky Goods" outlets in the Jamisontown Industrial Precinct, which enjoys special exceptions pursuant to cl 2.5 and Schedule 1 of the LEP, which make the sales in that area non-comparable to the subject site. 13The three sales selected by both valuers involved land at 2182 Castlereagh Road, 121 Coreen Avenue, and 36 Jack Williams Drive. The three properties were sold as vacant lots with improvements. 14The Valuer-General relies, in addition, on the sales of 37-39 York Road, 65 Batt Street, 132 Blaikie Road, and 60 Jack Williams Drive, all of which are in the Jamisontown area. 15On the other hand, the applicants rely upon the sales of 198 Andrews Road, 16 Lambridge Place, 33 Cassola Place, 128 Blaikie Road, and seek also to rely, controversially, on the non-completed negotiation of a sale of the land immediately adjacent to the subject site (2101 Castlereagh Road, Penrith). 16Companies controlled by Eric McCall owned 198 Andrews Road and 16 Lambridge Place, and were pressured by their lender (NAB) to sell the subject properties for less, they say, than their market value. The McCall companies took action against Lamrock Legal Pty Ltd, recovering verdicts in the Supreme Court for substantial amounts of money allegedly lost by those companies as a result of the failure by Lamrock to follow through a leasing commitment in respect of another major property in Penrith, (see Fiuggi Holdings Pty Ltd and Actively Zoned Pty Ltd v Lamrock's Legal Pty Ltd t/as Lamrock's Solicitors and Attorneys [2012] NSWSC 1388). 17So far as the adjacent land is concerned, the respondent contends that its putative value should not be taken into account, as: (i)it was introduced into evidence on the question of the impact of the "Global Financial Crisis" on the market and there is little evidence in support of its relevance; (ii)such neighbourhood evidence is sometimes used in resumption/compensation cases but not in valuation appeals; (iii)such evidence is usually used only where (a)the offer and acceptance apply to the subject land, and (b)the negotiations end because of the intervention of a compulsory acquisition (see McDonald v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20CLR 231, Goold v Commonwealth (1993) 79 LGERA 407, at 415-7, and Marroun v Roads & Maritime Services ('Marroun') [2012] NSWLEC 199 (currently under appeal), at [121]-[132] and [183]-[203], together with the cases examined there. See also Alan Hyam, "The Law affecting Valuation of Land in Australia", 4th ed, pp139-145).

[4]

The Planning Situation 18The applicants relied on a town planning expert, John Mullane, and the respondent on Deborah Laidlaw. 19Their Joint Planning Report (Exhibit A10) notes (at 2.2) that the objectives of the two IN Zones are similar and that a number of land uses are permissible in both zones, but that both zones have uses that are permissible in that zone but not the other. The joint report notes (see 2.6) that retailing is permitted in the IN1 Zone only in respect of goods manufactured on the site, and on strict conditions, and (at 2.3) that the permissibility of bulky goods premises is a differentiating factor applicable to the IN2 Zone in Jamisontown Industrial Precinct, which allows a somewhat wider range of land use categories that are suitable for co-existence with light industrial/quasi retail uses, such as medical centres and hotel and motel accommodation. 20Conversely (see 2.4), the IN1 Zone is more of a traditional industrial area in which the additional uses permitted (i.e. being those that are not permitted in the IN2 Zone) are generally those with potentially greater environmental impact such as freight transport facilities, general industries, heavy industries as well as light industries. The range of actual land uses permitted in the IN1 Zone is more extensive than for the IN2 Zone, given the wide-ranging scope of the definitions of general industry and heavy industry that are permissible in this zone. Certain of these land uses would benefit from the larger lot areas that are more characteristic of the North Penrith Industrial Area than the Jamisontown Industrial Area. 21The planners also agreed (see 2.7) that the North Penrith and Jamisontown areas were both affected by Penrith Development Control Plan 2010, and there are limited exceptions to the equal application of that DCP to both areas. There is some controversy between the parties on the question of whether or not a turning lane may need to be added to Castlereagh Road outside the subject site if it is further developed. 22The planners concluded their joint report (at 2.8) as follows: We agree there is a concentration of bulky goods style outlets in the Jamisontown industrial precinct, generally coinciding with that part zoned IN2. The North Penrith industrial area is characterised as more of a traditional industrial area, although it also includes a range of salesyard style businesses (cars, caravans etc) along Castlereagh Road. We agree that these uses may have the benefit of existing use rights and are not permissible in the IN1 zone in LEP 2010. 23In her individual report (Exhibit R2), Laidlaw helpfully compared the two "IN" zones (in par 4.6 and Table 1), as follows: 4.6 I have reconfigured the table as it appears in the instrument so as to allow a direct comparison of which uses are permitted in both zones and which are permitted in one but not the other zone. I have highlighted in bold those uses that are permissible in both zones so that it can be seen that the uses in light type are permissible in only one or the other of the zones. Table 1 Zone IN1 General Industrial Zone IN2 Light Industrial 1.Objectives of zone To provide a wide range of industrial and warehouse land uses To provide a wide range of light industrial, warehouse and related land uses To encourage employment opportunities To encourage employment opportunities and to support the viability of centres To minimise any adverse effect of industry on other land uses To minimise any adverse effect of industry on other land uses To support and protect industrial land for industrial uses To enable other land uses that provide facilities or services to meet the day to day needs of workers in the area To promote development that makes efficient use of industrial land To support and protect industrial land for industrial uses To permit facilities that serve the daily recreation and convenience needs of persons working in industrial areas To promote development that makes efficient use of industrial land 2.Permitted without consent Roads Roads 3.Permitted with consent Animal boarding or training establishments, - - Amusement centres; Car parks; Car parks; - Child care centres; - Community facilities; - Crematoria; Depots; Depots; - Educational establishments; - Electricity generating works; Environmental facilities; Environmental facilities; Environmental protection works; Environmental protection works; Flood mitigation works; Flood mitigation works; - Food and drink premises; Freight transport facilities; - - Function centres; - Hotel or motel accommodation; General industries; - Heavy industries; - Industrial retail outlets; Industrial retail outlets; Industrial training facilities; Industrial training facilities; Landscape and garden supplies; Landscape and garden supplies; Light industries; Light industries; - Medical centres; Neighbourhood shops; Neighbourhood shops; - Places of public worship; Recreation areas; Recreation areas; - Recreation facilities (indoor); - Resource recovery facilities; Sawmill or log processing works; - Self-storage units; Self-storage units; - Service stations; Signage; Signage; Take away food and drink premises; - Timber and building supplies; Timber and buildings supplies; Transport depots; - Truck depots; - Vehicle body repair workshops; - Vehicle repair stations; Vehicle repair stations; - Vehicle sales or hire premises; - Veterinary hospitals; Warehouse or distribution centres Warehouse or distribution centres; - Waste or resource transfer stations 4.Prohibited Any development not specified in item 2 or 3 Schools, Any other development not specified in item 2 or 3

[6]

Discussion 28I summarised, in Marroun (at [196]-[208]), the established principles relating to valuation of land by the "comparable sales" method. 29Among the specific issues I addressed in Marroun were (1) the use of non-completed sales of comparable land ([121]-[134]) and [183]-[191]), and (2) the correct approach to adjustment of valuation figures arrived at ([202]-[208]). 30We rely upon the summary in Marroun in determining this present matter, and will not repeat it. 31Adjustments of "comparable sales" relied on in this case were suggested in respect of (1) timing (economic climate), (2) affectation, (3) size/area, (4) physical factors, (5) zoning, and (6) improvement(s). I will deal with these topics now, briefly in that order. 32Mr Sorrenson opined that the Global Financial Crisis ('GFC') had an impact on values of industrial land at Penrith between early 2008 and late 2009. He based that evidence on an analysis of vacant industrial land sales at Emu Plains (Tp30, LL 21-28, and see also Joint Expert Report, p19), and made no adjustments based on the timing of the sales. 33Mr Wood opined that between 2011 and 2012 the market fell by 17%, that it had not yet "responded" (Tp29, L1), and that it remained "very soft" (L43). He based that evidence upon the sales at 132 and 128 Blakie Road Jamisontown (Tp33, LL11-16). Mr Wood made no adjustments for improvements, differing sizes, or the inferior shape of 128 Blakie Road, and allowed a 5% ongoing reduction per annum for sales in 2010 and 2011. 34In our analysis, we have made only slight downward adjustments for timing/economics, to sales which took place between mid 2009 and the end of 2009, and no adjustments for sales in 2010 and 2011. However, adjustments have been made of between 2.5 and 15% for the impact on sales of flooding, or of easements for drainage, or transmission lines. 35The sizes of the alleged "comparable" properties ranged between 2,147m² and 42,000m², but we disregarded the sale of the property with an area of 2,147m² (60 Jack Williams Drive), as it required so much adjustment (50% or more) that it lost any objective value as a "comparable". 36 We had regard to both of the valuers' competing assessments based on access, location and shape of the properties, but, following the view, we arrived at our own assessments, and adopted Mr Sorrenson's assessment of 10% adjustments as between zoning areas. 37The only significant difference between the valuers in assessing improvements occurred in the analysis of the Bunnings sale (see below [40]-[42]).