Tomago Aluminium Company Pty Limited v Valuer General - [2010] NSWLEC 4 - NSWLEC 2009 case summary — Zoe

NSWNSWLEC

Tomago Aluminium Company Pty Limited v Valuer General

[2010] NSWLEC 4

Land and Environment Court (NSW)|2009-10-08|Before: Pepper J

View original source

At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2009-10-08

Before

Pepper J

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

Introduction 1 This is an appeal by way of application by Tomago Aluminium Company Pty Limited ("the applicant"), under s 37 of the Valuation of Land Act 1916 ("the Act"), against the land value assessed by the Valuer General ("the respondent") in respect of the property known as the Tomago Aluminium Smelter, Tomago Road and Pacific Highway, Tomago ("the subject property"). 2 The land value of the subject property at 1 July 2007 ("the base date"), was assessed by the applicant at $23,500,000 and by the respondent at $48,200,000. Although the respondent tendered valuation evidence that the land value was approximately $60,000,000, which was higher than the statutory assessment, the respondent does not submit that the statutory assessment set out in the Notice of Determination should be increased. 3 The subject property and five comparable sale sites were the subject of an on-site and external inspection on 6 October 2009, followed by a hearing in Court on 7 and 8 October 2009. 4 I gratefully acknowledge the assistance of Acting Commissioner Parker who was present during the hearing of this matter and attended the site inspections referred to above. Summary of Decision 5 For the reasons given below the appeal is dismissed. Statutory Framework

[2]

6 The appeal is brought under s 37(1) of the Act, which provides that: 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). 7 "Land value" is relevantly defined in s 6A of the Act as follows: (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. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made. 8 The term "land improvements" is defined in s 4 of the Act to mean: Land improvements means: (a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths, (b) the picking up and removal of stone, (c) the improvement of soil fertility or the structure of soil, (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 (otherwise than for the purpose of irrigation or conservation) that is associated with: (i) the erection of any building or structure, or (ii) the carrying out of any work, or (iii) the operations of any mine or extractive industry, (e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and (f) underground drains. 9 Sections 26 and 27 of the Act make provision for the valuation of land which, whilst comprising separate parcels, is held in single ownership. Such was the case in the present Notice of Valuation. 10 Where notice is received of the valuation, an objection to the valuation may be made to the respondent, who must determine the objection (s 33-35C of the Act).

[3]

11 If a person is dissatisfied with the determination of an objection, an appeal may be lodged with the Land and Environment Court (s 37 of the Act and s 19(b) of the Land and Environment Court Act 1979). Section 40 of the Act describes the power of the Court on appeal: (1) On an appeal, the Land and Environment Court may do any one or more of the following: (a) confirm or revoke the decision to which the appeal relates, (b) make a decision in place of the decision to which the appeal relates, (c) remit the matter to the Valuer-General for determination in accordance with the Court's finding or decision. (2) On an appeal, the appellant has the onus of proving the appellant's case. 12 Section 40(2) provides that the applicant has the onus of proving its case on appeal. The consequence of this provision is that in practical terms Tomago, as the applicant, has the onus of establishing that the valuation put forward by it through its expert is correct. The Subject Property 13 The subject property comprised Lot 15 DP258020, Lot 3232 DP618103 Lot 70 DP634535, Lot 301 DP634536, Lot 3 DP808004 and Lots 2, 3, 4 and 5 DP1043561. 14 The subject property comprised an area of approximately 507 ha, including approximately 319.41 ha of constrained land and approximately 187.59 ha of unconstrained land. 15 The unconstrained land was a large site of which approximately 99.59 ha was used for the operation of the Tomago Aluminium Smelter, approximately 71 ha comprised land adjacent, suited for industrial sub-division but impacted by past sand mining, together with a separate parcel of approximately 17 ha comprising industrial development land adjacent to the Pacific Highway. 16 The unconstrained land was freehold, was of irregular shape, required little fill and had frontage and access to both the Pacific Highway and Tomago Road (a secondary road). 17 The highest and best use of the subject property was use for industrial purposes. Location 18 The subject property was located approximately 200 kms north of the Sydney CBD and approximately 20 kms north of the City of Newcastle, in an area characterised by industrial uses. Planning 19 The subject property was zoned 4(a) Industrial General under the Port Stephens Local Environmental Plan 2000, a zoning within which use for a range of industrial purposes is permissible with development consent. The Evidence 20 In their joint report dated 24 September 2009 both Mr Anthony St Leon and Mr Robert Dupont agreed that the land value of the constrained land as at the base date was $4,000,000. This was accepted by the parties in a Statement of Agreed Facts filed on 16 June 2009. 21 The value of the balance of the land having an area of 187.59 ha, the unconstrained land, remains in dispute. The scope of the dispute may be summarised as follows: Determination $ psm Total VG's determination in Notice of Valuation $9.49 psm (on the assumption the whole of the land has the same value) $17,802,291 Main industrial land (in use as a smelter: 99.59 ha) $11 psm Valuation of Mr Anthony St Leon Main industrial land (subdivision area: 71 ha) $5 psm $19,604,900 Pacific Highway industrial land (vacant land: 17 ha) $30 psm Valuation of Mr Robert Dupont $30 psm $56,277,000

[8]

(c) the report of Mr Arthur Love dated 31 March 2009 - a geotechnical engineer. He gave evidence of the constraints on development of the subject property and concluded that: the historical presence of the coal mine imposed severe restrictions on development of the area of the site affected by the mine thereby reducing its value for any purchaser (although in his oral evidence Mr Dupont contradicted this opinion, stating that the defunct coal mine imposed limited restrictions on development); the presence of a number of water pipelines restricted access to some portions of the subject property and restricted its development; and the significance of the historical sand mining on portions of the subject property was that the cost of development in sand mined areas significantly increased the cost of development and decreased the value of the land affected by previous sand mining. 31 The evidence in these further reports was not traversed by contrary evidence filed by the respondent, and the authors of the reports were not required for cross-examination. 32 While not the subject of any considered submissions by the applicant, the reports were relied upon by Mr St Leon as a basis for the analysis in his report. Consideration of the Comparable Sales Evidence 33 The comparable sales were considered in the context of determining the land value of the unconstrained land. 34 The principal area of dispute between the valuers arose from the disagreement as to the comparability of such relevant sales and what adjustments were required to be made to those sales to render them directly comparable. 35 A secondary area of dispute was that whereas Mr Dupont included GST as part of the full market price of the comparable sales on the basis that it was part of the negotiated price between willing but not anxious parties, Mr St Leon did not because in his opinion, the GST was a tax additional to the land value and therefore separate to it. 36 The zoning of each of the comparable sales was similar to that of the subject property.

[20]

Findings 44 In Holcim (Australia) Pty Ltd v Valuer-General [2009] NSWLEC 225 Biscoe J described the process of adjusting for differences in comparable property sales as follows (at [31]): [31] The basis for the valuers' valuation assessments is the sales comparison method. Accepted valuation practice permits adjustments for differences, such as in location, area and time to enable valuers to have comparable values which, following adjustment, account for the various differences with the subject property. Such adjustments are generally based on a reasoning process drawing on the skill and experience of the valuer and are undertaken to derive an opinion of value through a deductive process. Because properties are rarely identical, adjustments for differences are obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property. Too many adjustments potentially render the comparable sale unsafe to rely upon. Caution is therefore required where large adjustments are to be made. Reflecting the significant roles of skill, experience and personal assessment in the adjustment process, the scope for differences in the quantum and direction of adjustment between valuers can be considerable. 45 To this it may be added that it is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency. 46 As stated above, Mr St Leon's analysis of the indirectly relevant comparable sales led him to conclude that the land value of the unconstrained land approximated $19,500,000 as at the base date. Of this Mr St Leon attributed $5,100,000 (approximating $30 psm) to the separate parcel of land adjacent to the Pacific Highway, $10,950,000 (approximating $11 psm) to the 99.59 ha of land used for the operation of the smelter and $3,550,000 (approximating $5 psm) to the 71 ha of adjacent land suited for industrial subdivision but impacted by past sand mining.

Tomago Aluminium Company Pty Limited v Valuer General

At a glance

Court

Decision date

Before

Source

Judgment (35 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)

Cited By (18)