1. The Valuer-General is a statutory office established under the VOL Act. The Valuer-General has the function of making general valuations of land within the State and in so doing must determine the annual value, the capital value, the site value and the unimproved value of land insofar as those values are required for imposing rates, taxes and imposts.[1]
2. The Valuer-General conducts general valuations with respect to all land in the State on an annual basis pursuant to ss 11 and 12 of the VOL Act. A value is assigned as at a date determined by the Valuer-General.
3. In the VOL Act, capital value relevantly means "the capital amount that an unencumbered estate of fee simple in the land might reasonably be expected to realise upon sale".[2]
4. As the matter turns on the correct application of reg 10(1)(a) of the Valuation of Land Regulations 2020 (VOL Regulations), it is convenient to set that out here. Regulation 10(1)(a) states:

... the following fixtures and improvements must not be taken into account in determining or assessing the annual value or capital value of land where the determination or assessment is to be used for the purpose of raising, levying or imposing any rate, tax or impost:

(a) any item of machinery, plant or equipment that is used in connection with a trade, business or manufactory and is not fixed to the land or premises or is fixed to the land or premises so as to be capable of being removed without structural damage (other than minor or trivial structural damage) to the land or premises.

1. A review by this Tribunal under s 25C of the VOL Act comes within the Tribunal's review jurisdiction but, in the exercise of that jurisdiction, the Tribunal will consider the matter de novo (adopting such processes and procedures, and considering and receiving such evidence or material, as it thinks fit for the purposes of the proceedings).[3]
2. Under s 34 of the SACAT Act, as modified by s 25C of the VOL Act,[4] a review of the Valuer-General's decision involves the Tribunal reaching the correct or preferable decision.
3. On a review, the Tribunal may affirm the decision that is being reviewed, or vary the decision, or set aside the decision and substitute its own decision or send it back to the decision-maker for reconsideration.[5]
4. Without limitation, a variation made by the Tribunal on the review of a valuation may consist of an increase or decrease in the valuation.[6]
5. In a recent decision of the President of the Tribunal, her Honour Justice Hughes said:

1. In a challenge to a valuation under s 25C of the Act, the onus is on the applicant to establish that the valuations he contends are correct, should have been made by the respondent.[7]

6. The Tribunal accepts that valuation is a matter of expertise. Consequently, as Debelle J put it in Ardoch Pty Ltd v Valuer-General (No 2):

[T]he court will not interfere with a valuation unless the appellant demonstrates that the valuer whose assessment is subject to appeal has made some error of law; has acted on a wrong principle of valuation; has misapprehended, misused or excluded relevant material, in other words, has failed to have had regard to relevant factors or has had regard to irrelevant factors; has misapplied principle or has in some other way erred in discharging the task of a valuer. The court will also interfere where the valuation is manifestly excessive or manifestly low.[8]

7. Prior to this Tribunal assuming jurisdiction over challenges to valuations of the respondent, the Supreme Court which was charged with the task, considered that it was not appropriate for the Court to select elements of one valuation and other elements of another to reach a third valuation.[9]
8. This was explained by the High Court in a valuation appeal from the Full Court of the Supreme Court of South Australia in Fenton Nominees v Valuer-General,[10] as follows:

The approach to be taken by an appellate court in valuation appeals has been discussed and applied in this Court. It has always been recognized that because the assessment of value involves the exercise of a discretionary judgment an appellate court should not substitute its opinion for that of the court below unless it is shown that the court below has acted on a wrong principle of law or that the valuation was erroneous. See Emerald Quarry Industries Pty. Ltd. v. Commissioner of Highways (S.A.) [1979] HCA 17; (1979) 142 CLR 351, at pp 355-356; Federal Commissioner of Taxation v. St. Helen's Farm (A.C.T.) Pty. Ltd. [1981] HCA 4; (1981) 146 CLR 336, at p 381, and the cases there cited.

9. The role of the Tribunal is different from that of the Court and the Tribunal is expressly authorised, as an administrative body, to substitute its own decision for that which is under challenge. However, this is a somewhat academic observation where the decision is one wholly comprised of an opinion that is the subject of expertise. Unlike in respect of some other jurisdiction exercised by the Tribunal, the Tribunal is not required to be constituted by or with a valuer when conducting a valuation review. Accordingly, it is appropriate to maintain the approach that the outcome arrived at will be one that either adopts a particular valuation that has been contended for by a party, or remits the question for reconsideration.[11]
10. In the Supreme Court, Justice Parker said:

The Valuer-General submits that when confronted with differing expert valuations, it is not the function of the Court to take an average of the valuations. That would be contrary to the accepted principles of valuation.[12] The Valuer-General also submits that it is not permissible for the Court to extract some elements from one valuation and other elements from another so as to produce a third separate valuation.[13] I accept the correctness of those propositions.[14]

11. For the purposes of the conduct of these proceedings, I have adopted what was said in these decisions.

1. The subject land is some 4.335 hectares and is situated on the River Murray. It is zoned as a Caravan and Tourist Park and is used for that purpose.
2. The respondent holds a lease from the District Council of Loxton Waikerie over the land and operates the caravan park on the land, known as the Waikerie Holiday Park. More is said about the lease below.
3. On the date of valuation, the respondent operated 74 caravan sites and 23 accommodation cabins on the subject land. The 74 caravan sites were all connected to power. Other improvements included a two-bedroom manager's residence with attached office, recreation room, camp kitchen, laundry, two transportable amenities (toilets/bathrooms) blocks, barbecue facilities, swimming pool, jumping pillow and playground, internal roadways and landscaping.
4. Prior to 2016 the subject land was used as a lightly improved camping ground but has been substantially developed since then, predominantly by the respondent, but with capital expenditure also provided by the council.[15]
5. The Valuer-General made a determination, by way of a general valuation, that the capital value of the land was $2,100,000 as at the date of valuation of 1 January 2022. The respondent subsequently objected to that valuation and that objection was disallowed by the Valuer-General.
6. The respondent applied for a review of the valuation under s 25B of the VOL Act. The review valuation was conducted by Mr Montgomerie, a valuer appointed for that purpose under the VOL Act. He was instructed to undertake the review on 31 July 2023 by the Registrar, Valuation Review Panels, which appears to be part of the Office of the Valuer-General.[16]
7. Mr Montgomerie completed his review on 15 December 2023. In undertaking his review, Mr Montgomerie decreased the capital value of the subject land to $1,360,000. It is this decision that is the subject of these proceedings.

1. The lease was entered into between the District Council of Loxton Waikerie and the respondent on 4 February 2016. The initial term was six years, with seven rights of renewal of three years each.
2. The lease noted that it was a "ground lease" and that the lessee intended to carry out works to the premises to make it suitable for use as a "caravan park incorporating powered and unpowered sites, cabins, on site vans, amenities and playground".[17]
3. Commencing rental was $10,000 (excl GST) with fixed annual increases for the first five years then annual market/CPI reviews for the balance of the lease.
4. As at the date of valuation, the rent was $40,000 (excl GST).
5. It does not appear to be in dispute that the advantageous initial terms were in recognition of the capital expenditure to be made by the respondent to progressively develop the former camping ground for use as a caravan park.
6. At the expiry of the lease, the lessee is expected to have removed all of the Lessee's Equipment from the land.[18] "Lessee's Equipment" is defined in clause 1.2 of the lease to mean:

any and all cabins, non-permanent buildings, fixtures and removable fittings and other services, plant and equipment installed in or brought on to or kept in the Premises by the Lessee but expressly excluding the Lessee Contributed Infrastructure.

7. For completeness, I note that the Lessee Contributed Infrastructure is defined in clause 1.2 as the permanent infrastructure set out in Annexure A of the lease that the Lessee was required to construct or install and that would not be removed. This was underground services (electricity, sewer, stormwater, mains and irrigation water), internal roadworks (including paving and kerbing), fencing, entry road and entry statement, and an SA Power Networks transformer upgrade.
8. I note also that the lease refers to permanent "Lessor Contributed Infrastructure" by reference to a development agreement executed by the parties contemporaneously with the lease.[19] The Tribunal does not have the development agreement and does not know what the Lessor Contributed Infrastructure comprises.

1. The respondent's Chief Executive Officer Mr Stephen Edwards gave evidence for the respondent.
2. Mr Edwards said that the respondent had spent many millions of dollars placing infrastructure and associated assets on the subject land.[20] This included about $195,000 in total for each of the accommodation cabins, inclusive of construction, transport and connection costs.[21] Mr Edwards indicated that a common commercial lease in a caravan park would involve the lessee bringing their own cabins to the park.[22]
3. Mr Edwards said that a caravan site would ordinarily measure 10 metres by 10 metres and contain a powerhead for electricity, a potable water tap and sometimes a sullage disposal area for grey water.[23] He said that a cabin site would measure 10 metres by 15 metres, inclusive of the cabin (which is significantly larger than a caravan) and also fire separations.[24]
4. He said that, in terms of the underground infrastructure to a site, it is exactly the same whether it is a powered caravan site or a cabin site, although there is a little more plumbing to be done underneath a cabin, and that is why it is easy to convert powered sites to cabins and back, should it be needed.[25]
5. He said that if the respondent had not had 23 cabins on the site in 2022, it would have been able to fit 33 caravan sites in their place.[26]
6. He agreed that a cabin site is more profitable and would generate more revenue than a caravan site.[27] He agreed that cabin revenues were about 70% of park revenues.[28] He estimated that, in 2022, accommodation charges for a cabin would range from $130.00 to $235.00 per night depending on the size of the cabin and that it would have been $35.00 per night for a caravan site.[29] He said that, at that time, the park occupancy rate was around 30%, or maybe "a tad over that".[30]
7. When asked by counsel for the Valuer-General whether the respondent would "rip up the cabins in order to put in powered sites", Mr Edwards answered that "depending on the type of cabin, its age, its popularity. We have done that in the past".[31]

1. In his determination of the valuation review, Mr Montgomerie had available to him a submission from the Valuer-General that comprised a valuation undertaken by Mr Darren Rasmus of Land Services SA.[32] As Mr Montgomerie referred to this submission in the decision under review, it is useful to provide a brief summary of it here.
2. Mr Montgomerie observed that he had not been provided with a formal submission by the landowner.

1. Mr Rasmus opined that the capital value of the subject land as at the date of valuation is $2,100,000.
2. He found that the highest and best use of the subject land was its existing use as a caravan/holiday park. He conducted his valuation on the basis that the "cabins on the property are to be treated as chattels" and they were not included in the valuation.
3. The sole method of valuation employed by Mr Rasmus was the capitalisation of net income. Mr Rasmus opined in his "Market Commentary" that "the strong performance of the industry has resulted in a firming of yields for parks given their positive cash flow and growth potential".[33]
4. Mr Rasmus ignored the actual rent paid by the respondent at the date of valuation. He determined a notional market rent based on a percentage of historical turnover for the Waikerie Holiday Park business in 2017/2018, indexed to the CPI. The turnover thus estimated by Mr Rasmus as at the date of valuation was some $901,852, which he noted was conservative given the strength of the industry. Mr Rasmus observed that the recognised percentage range within the industry of rent to total turnover was 17.5% to 22.5%, dependent on a variety of factors. He selected 17.5%, which he considered was appropriate where a lessee owned the accommodation cabins on the caravan park. The notional market rent assessed by Mr Rasmus was $157,824 per annum, which he indicated was conservative.
5. Mr Rasmus identified three sales of freehold interests in caravan parks in regional South Australia to determine a suitable yield to apply to the rental income. They were the sales of the Riverbend Caravan Park at Renmark in October 2018 (market net yield 8.5% to 9%); the Shoreline Caravan Park at Port Augusta West in September 2019 (market net yield 8.94%); and the Port Lincoln Caravan Park in January 2018 (market net yield 9.73%). He found that these three properties were generally inferior to the subject land and that the subject land would achieve a firmer yield. Mr Rasmus adopted 7.25% as the yield for the subject land. He referred also to the sale of the freehold of the Wallaroo Beachfront Tourist Park in November 2022 for a return of 6.6% as "further evidence of the strengthening of the market for this category of property".[34]
6. On the basis of the notional market rent of $157,824 per annum and a yield of 7.25%, Mr Rasmus assessed capital value to be $2,175,000. He opined that the capital value of $2,100,000 determined by the Valuer-General was well supported by the market evidence and recommended that it be upheld.

1. The decision under review is relatively brief.[35] This is not a criticism but an explanation of the limited information set out in this section.
2. Mr Montgomerie confirmed in his oral evidence that, unlike Mr Rasmus, he did not use the turnover figures that included cabin income in preparing his valuation.[36]
3. Mr Montgomerie found that the highest and best use of the land was its "current use".[37]
4. Like Mr Rasmus, he set out a "Market Commentary". This is not significantly different from that of Mr Rasmus in that Mr Montgomerie opined that "this asset type provides high returns".[38]
5. Mr Montgomerie considered the sales evidence in the Rasmus valuation and undertook an additional search for sales evidence to determine if there were any other sales which may bear comparison to the subject land. However, he noted that there were no other sales that he considered to be relevant as at the date of valuation.
6. Mr Montgomerie referred, without any apparent difference of opinion, to the capitalisation of net income methodology employed by Mr Rasmus and his determination of a notional market rent in lieu of the actual rent paid by the respondent on the date of valuation.
7. Mr Montgomerie noted the terms of reg 10(1)(a) of the VOL Regulations. Critically, Mr Montgomerie said:

It is my experience that a notional lease for a property in this market sector should include in the Special Conditions an "Ownership of Improvements" which would specify the Lessor owned improvements and the Lessee's Equipment. It has already been established in the report[39] that the cabins are to be treated as Lessee's chattels, therefore it follows that the imputed income derived from the cabins should be disregarded when calculating a market rental.[40]

8. Mr Montgomerie also employed the capitalisation of net income methodology. He adopted a net imputed market income of $92,000 per annum, that he capitalised at a firmer rate of 6.75%, which he said was reflective of the quality of the park compared to the sales evidence.[41] He found this to equate to a rounded market value of $1,360,000.
9. He thereupon decreased the capital value from $2,100,000 to $1,360,000.

1. In a letter to the Valuer-General dated 16 January 2024, Mr Montgomerie set out the information required by s 35(2) of the SACAT Act. He also included some undated file notes, which include references to phone calls made to representatives of the parties. The file notes, in particular, seem to flesh out the reasoning behind Mr Montgomerie's review decision that did not explicitly appear in the decision itself.
2. Briefly, Mr Montgomerie noted in this material that, in accordance with the Valuer-General's instructions, the cabins on the land were to be treated as chattels, not fixtures.
3. He referred to an email from Mr Anthony Smit, Deputy Valuer-General, who submitted to him that:

The methodology of imputing a rental as a percentage of turnover in this case is for the right of the operator to occupy the land. It does not reflect a rental that an operator would expect to pay to occupy the land and to use the cabins as part of their business. As a consequence it is incorrectly assumed that as the rental is imputed as a percentage of the turnover, that we are treating the cabins as fixtures.[42]

4. Mr Montgomerie described in his file notes the manner in which he employed the capitalisation of net income methodology in his decision.[43]
5. He stated that his "calculations are based on an imputed turnover which excludes the revenue from the cabins".[44] He said that, to calculate gross revenue from the caravan sites on the subject land, he had referred to occupancy statistics from similar tourist parks. He adopted an average occupancy rate of 45% and an average daily rate of $35 for the caravan sites on the subject land. Mr Montgomerie thereby arrived at a total imputed turnover of $450,242 per annum for the 74 caravan sites on the subject land and other sundry income (such as shop sales and laundry income).
6. He said that it is industry convention to apply benchmark percentages to the turnover for each profit centre and that it is generally considered acceptable to apply rental rates of between 20% to 25% to the accommodation revenue[45] and 5% to 10% to the other income (such as the shop sales, etc). He indicated that the variances in the percentages took into account the standards offered by a particular park and that those parks with significant guest amenities and good economies of scale will attract higher rent to turnover ratios. He adopted the range of 20% to 22.5% for the accommodation revenue and 7.5% to 10% for the other income having regard to the location and quality of the park. Applying these percentages to his imputed total turnover of $450,242 for the 74 caravan sites and sundry income, he arrived at a net imputed market income of $92,000 per annum.
7. Mr Montgomerie said that he agreed with the sales evidence analysed by Mr Rasmus, however he considered that a firmer (lower) capitalisation rate of 6.75% was warranted, reflecting the higher quality of the Waikerie Holiday Park in comparison to the sales evidence. Applying that capitalisation rate to the net imputed market income of $92,000 per annum equated to the rounded market value of $1,360,000.

1. On 23 June 2024, Mr Montgomerie was instructed by the respondent's legal representatives to prepare a supplementary valuation (Valuation Advice). The Valuation Advice was subsequently provided to the Tribunal.
2. Mr Montgomerie's Valuation Advice was prepared on the assumption that the 23 cabins on the subject land did not exist at the date of valuation and instead were replaced by 33 powered caravan sites (i.e. in addition to the existing 74 caravan sites, for a total of 107 caravan sites). He was instructed to assume that 13 of those 33 hypothetical sites were located on the waterfront and would attract a higher daily rate, with the remaining 20 sites not located on the waterfront. He was asked to assess what the higher rate would be for the 13 waterfront caravan sites. Mr Montgomerie was instructed to include the imputed income from the 33 hypothetical caravan sites to that of the existing 74 caravan sites.
3. Mr Montgomerie completed his Valuation Advice on 9 September 2024. He qualified his Valuation Advice. He said that "this is an advisory desktop letter report and, therefore, does not include the detail which would normally be contained within a full report".[46] He also made a particular point of stating that:

1. My opinion is provided without a full inspection of the subject property. It is also based on an assumption of 33 powered sites replacing 23 cabins. My opinion does not extend to any relevant costs that may be incurred in this assumption. It also does not extend to whether Development Approval would be granted for this assumption; > > 2. I am not an expert on building or infrastructure costs which may be relevant in the assumption of 33 powered sites replacing 23 cabins nor whether Development Approval could be obtained for these sites; > > 3. I consider my statement of evidence is incomplete as to the matters contained within (1) and (2) above; and > > 4.Costings to convert the 33 powered sites would be required for me to reach a more reliable conclusion.[47]

4. Mr Montgomerie again employed the capitalisation of net income methodology. He excluded revenue from the cabins. Having regard to occupancy statistics from similar tourist parks, Mr Montgomerie adopted the daily rate of $45 for the 13 hypothetical waterfront caravan sites and $35 per day for the 94 caravan sites that were not on the waterfront, i.e. the 20 hypothetical caravan sites and 74 existing caravan sites. He assumed an average occupancy of 35% for all 107 sites. He arrived at annual turnover of $495,032 for accommodation revenue, or $521,032 per annum inclusive of sundry revenue.
5. To this notional annual turnover, Mr Montgomerie applied the same ratio of rent to turnover that he did in the decision under review, i.e. 20% to 22.5% for accommodation revenue and 7.5% to 10% for other revenue.[48] On this basis, he assessed the notional market rent to be $113,000 per annum. Applying his 6.75% capitalisation rate, he opined that the capital value as at 1 January 2022 on the hypothetical basis in his instructions was (rounded) $1,670,000.

1. Mr Kemp was instructed to provide an expert valuation report by the Valuer-General. He inspected the subject land on 2 December 2024. It would appear that he had been given a copy of the s 35 documents and Mr Montgomerie's Valuation Advice. Mr Kemp's subsequent valuation report was comprehensive and detailed.
2. His valuation indicates that it was based on the instructions he received that the cabins on the subject land were not fixtures.[49] However, Mr Kemp undertook an assessment of the lessor's ability to generate a profit on the subject land, including from offering it to a lessee who might place cabins on the land.
3. Like Mr Montgomerie, Mr Kemp found the highest and best use of the subject land to be the "existing use".[50]
4. Similar to Mr Rasmus and Mr Montgomerie, Mr Kemp observed that the "growth across the industry resulted in the market for caravan/tourist parks increasing substantially over recent years with values increasing, yields tightening and the emergence of strong institutional demand for larger, well located and operated parks".[51]
5. Mr Kemp employed the capitalisation of net income methodology and direct comparison methodology on a rate per site to determine the capital value at the date of valuation. As an alternate check method, he considered the value of the property as a hypothetical freehold going concern and apportioned the value of the hypothetical lessor's and lessee's interests. In his evidence, Mr Kemp indicated that it is common in the valuation industry to use two methodologies, one as a check of the other.[52]
6. As noted earlier, he opined that the capital value of the subject land as at the date of valuation was $2,275,000.

1. On the basis of the capitalisation approach, Mr Kemp adopted an annual rental income of $165,000 and a capitalisation rate of 7.25%. This produced a capital value of $2,275,862 which Mr Kemp rounded down to $2,275,000.
2. Like Mr Rasmus and Mr Montgomerie, Mr Kemp also ignored the actual rent paid by the respondent on the date of valuation and determined a notional market rent for the subject land.
3. Using the historical trading figures made available to him for the park, Mr Kemp adopted a gross annual revenue of $964,500 (inclusive of $30,000 per cabin site, $4,250 per caravan site, and sundry income). He estimated the net operating profit after expenses to be $480,000, which he opined was within market parity for a tourist only park.[53]
4. Mr Kemp analysed the revenues and rents of 14 other tourist/caravan parks in South Australia, Victoria and New South Wales, all of which were parks where, like the respondent, the lessees owned the cabins located on the park.[54] Mr Kemp said in his evidence that the caravan park industry is quite similar across all of the eastern States, South Australia and Tasmania.[55]
5. The rental data ranged from 2019 to 2022. The number of sites on these 14 parks ranged from 32 to 234. The range of annual rents was $104,404 to $320,000.
6. He found that the proportion of rent to gross profit ranged from 15.5% to 30.1% and that the proportion of rent to net operating profit ranged from 26.3% to 48.6%.
7. He found that the range of rents per site across these 14 parks was $641 to $6,579, and opined that the lower range reflects a property with a large number of basic sites and the high range represents a park with a very high proportion of cabins to total sites.
8. Taking into account factors such as the overall trading history of the park, revenue and profitability, location, size, tariffs, presentation and competition, Mr Kemp determined rent for the subject land would be:

(a) 17% of adopted gross revenue of $964,500 (total assessed rent $163,965); or

(b) 35% of adopted net operating profit of $480,000 (total assessed rent $168,000); or

(c) $1,700 per site per annum (total assessed rent $164,900).

1. Mr Kemp adopted the rental of $165,000 (excl GST).

Capitalisation approach - Mr Kemp's counterfactual

1. Mr Kemp also estimated gross and net revenues on the counterfactual basis that there was no income derived from the 23 cabin sites and that instead those 23 sites were used as caravan sites in addition to the 74 existing caravan sites.
2. He allowed $4,750 per (notionally former) cabin site per annum, noting that they are primarily in superior positions within the park, and $4,250 per existing caravan site per annum. He adopted an adjusted gross revenue of $403,750 and adjusted net operating profit after expenses of $222,063. He opined that this level of profitability reflected the reduced operating expenses and staffing required for a facility with only caravan sites.[56]
3. On the basis of Mr Kemp's counterfactual assumption applied to the 14 parks elsewhere in South Australia and in Victoria and New South Wales (i.e. that all sites were caravan sites), Mr Kemp found the proportion of rent to adjusted gross revenue ranged from 27.5% to 82.2% and that the proportion of rent to adjusted net operating profit ranged from 42.3% to 132.6%.
4. Taking into account factors such as the overall trading history of the park, revenue and profitability, location, size, tariffs, presentation and competition, Mr Kemp determined rent for the subject land would be:

(a) 40% of adjusted gross revenue of $403,750 (total assessed rent $161,500); or

(b) 75% of adjusted net operating profit of $222,063 (total assessed rent $166,547).

1. It would seem that this was part of the reasoning that Mr Kemp relied on to ultimately support adopting a rental of $165,000 (excl GST) for the subject land.
2. Mr Kemp was criticised in cross-examination for finding that a caravan park lessee would pay rent of 132.6% of net operating profit. In closing submissions, counsel for the Valuer-General Stated that this line of cross examination fundamentally misconceived the exercise undertaken by Mr Kemp.

1. Mr Kemp analysed freehold sales of seven caravan parks in South Australia, Queensland, Victoria and New South Wales between October 2018 and November 2022, i.e. where the park business was not also being sold with the land as a going concern sale.[57] Mr Kemp gave evidence that all of these parks had lessee-owned cabins located on them and that the cabins were not transacted as part of those sales.[58]
2. Mr Kemp said that this sales evidence indicates a yield range of 6.6% to 11.1%. He opined that the appropriate market rate for the subject land was 7.25%.
3. On the basis of the notional market rent of $165,000 and a capitalisation rate of 7.25%, Mr Kemp determined the capital value to be $2,275,862, rounded down to $2,275,000.

1. In respect of the seven freehold sales referred to earlier, Mr Kemp set out in his report the value per site located on the park ($9,735 to $99,342). The higher number is attributable to a caravan park that Mr Kemp said had an extremely high number of cabins so, excluding that park, the range was significantly narrower ($9,735 to $40,857).
2. On the direct comparison approach, Mr Kemp attributed the value of $23,500 for each of the 97 sites on the subject land. The value of all 97 sites together was $2,279,500, which Mr Kemp rounded down to $2,275,000.

1. As noted above, as an alternate check method, Mr Kemp considered the value of the property as a hypothetical freehold going concern, apportioning the value between the lessor's and lessee's interests (where the lessor's interest reflects the capital value (land and improvements) and the lessee's interest reflects the business value (including plant, cabins, furniture, transportable structures, equipment, business name, goodwill etc)).[59]
2. He adopted a hypothetical freehold going concern value on the date of valuation of $3,840,000. This was on the basis of his analysis of freehold going concern caravan park sales throughout regional Australia, and

(a) his adoption of a capitalisation rate of 12.5% from the sales evidence applied to the adopted net operating profit for the park of $480,000 (value = $3,840,000); and

(b) his adoption of a direct comparison rate of $40,000 per site from the sales evidence applied to the 97 sites located on the subject land (value = $3,880,000).

1. Mr Kemp apportioned the lessor's interest as $2,275,000 and the lessee's interest as $1,565,000. He opined that the apportioned lessee's interest reflects a yield of 20.1% which is within market parity. He said that the alternate check method supported his assessment of capital value.

1. Both parties urged me to find that the other party's valuer's evidence should be discounted or rejected on account of what was described as their evasiveness during their oral evidence.
2. The Valuer-General also submitted that, unlike Mr Kemp, Mr Montgomerie necessarily did not bring an entirely independent and impartial analysis as he is the decision maker of the decision under review in these proceedings. This was refuted in the respondent's submissions where it was stated that any suggestion that Mr Montgomerie is not independent could not withstand scrutiny particularly as it was the Valuer-General who first engaged and instructed Mr Montgomerie for the purposes of preparing the decision under review.
3. I am satisfied that Mr Montgomerie and Mr Kemp are each land valuers of many years standing with experience in conducting valuations of caravan parks. Both of their resumés indicate that they specialise in the valuations of caravan parks.[60] I accept that they both have appropriate expertise to assist the Tribunal in this matter.
4. I find that Mr Montgomerie and Mr Kemp each endeavoured to assist the Tribunal to the best of their abilities and neither showed any partisanship. Mr Montgomerie was clearly hampered by the limitations of his instructions and the fact that, unlike Mr Kemp, he had not been asked to prepare a comprehensive valuation of the subject land. Mr Montgomerie frankly disclosed the limitations of his instructions in his Valuation Advice and in his oral evidence.[61]
5. Mr Kemp was scathingly criticised as a highly argumentative and evasive witness, who would not make appropriate concessions nor accept obvious and logical propositions when put to him. I disagree with this characterisation of Mr Kemp's oral evidence. Mr Kemp confidently withstood robust cross-examination. Simply put, he did not agree with propositions put to him by counsel in cross-examination.

1. Briefly, the major points of difference between the parties are whether the valuers correctly applied reg 10(1)(a) of the VOL Regulations and whether Mr Kemp's notional market rent should have taken into account the costs of a lessee bringing chattels (such as accommodation cabins) on to the site.
2. The respondent submitted that the Tribunal should either affirm the decision under review (capital value is $1,360,000) or Mr Montgomerie's alternative valuation (capital value is $1,670,000). The Valuer-General submitted that the decision under review should be set aside and the Tribunal should substitute the valuation determined by Mr Kemp (capital value is $2,275,000).
3. The parties' written and oral submissions are summarised below, with additional references made elsewhere in these reasons.

1. It was submitted that the Tribunal should accept and rely on Mr Kemp's report as the only comprehensive, independent and factually based valuation opinion on the appropriate capital value for the subject land. Mr Kemp's valuation, it was submitted, is the only report before the Tribunal that consists of an actual inspection of the subject land, considered relevant trading accounts, and included a valuation assessment based on the capitalisation of net rent and direct comparison on a rate per site, with a check method of a hypothetical freehold going concern.
2. In respect of Mr Montgomerie's valuation evidence, it was submitted that it lacks the level of critical analysis and consideration found in Mr Kemp's report, was produced after only a kerbside inspection, did not have the benefit of the relevant trading accounts and contained limited independent analysis to support the conclusions reached.
3. It was also submitted that the decision under review is fundamentally flawed in that it only considered the revenue associated with the caravan sites and other sundry income and failed to take into account the revenue that can be derived through the use of cabins and other ancillary improvements such as the manager's quarters, playground and jumping pillow. It was submitted that the decision under review erred by misapplying reg 10(1)(a), which does not preclude the taking into account of the additional value that may be imparted to the land from the benefit by way of rental that can be received to allow the use of cabins and other improvements on it to generate revenue.
4. It was submitted that the assessment of capital value must necessarily take into account the ability to lease, licence or otherwise utilise the subject land for profit, because to do otherwise would be to ignore the reality of the marketplace.
5. The Valuer-General submitted that a valuation requires an assessment of the features of the subject land as at the date of valuation and that consideration of some future, hypothetical feature or circumstances is irrelevant. It was submitted that Mr Montgomerie's Valuation Advice is based on a set of assumptions that critically depart from the circumstances and nature of the subject land as at the date of valuation. It was submitted that a valuation opinion based on what could have been on the land bears no relevance to the exercise before the Tribunal, namely what was on the land.
6. In the Valuer-General's written closing submissions, it was asserted that a fundamental premise of Mr Kemp's analysis was that the hypothetical purchaser of land comprising a caravan park would consider the highest and best use of that caravan park, which necessarily involves the use of that caravan park with cabins. It was submitted that this premise is sound for two reasons: first, that it is wholly consistent with the legal principles as to valuation; and secondly, that it is wholly supported by the independent and unchallenged market evidence referred to by Mr Kemp in his report. It was submitted that to ignore the potential income that can be derived from using cabins on the land is explicitly to ignore the reality of the marketplace.
7. It was submitted that Mr Kemp's analysis was comprehensive, evidence based, internally consistent, well-reasoned and not undermined nor successfully challenged in any meaningful sense in cross-examination. It was also submitted that his analysis stands as the only comprehensive, evidenced-based valuation opinion before the Tribunal and that the Tribunal should accept and adopt his analysis and his conclusions.
8. The conclusions reached by Mr Montgomerie, it was submitted, were significantly lacking in detail and reasoning and stand in stark contrast to the comprehensive, evidence-based approach taken by Mr Kemp. It was submitted that Mr Montgomerie's opinion on value fundamentally fails to state or reveal the process that led to the opinions being held in a way that could be tested and a judgement made about their reliability. Mr Montgomerie's reasoning is patently not evident on the face of the materials or in evidence.

1. The respondent submitted that, in determining the capital value of the subject land, it is necessary to disregard the cabins on the land and any income derived from them, such that the most appropriate way to value the subject land is on the assumption that it only generates income from the caravan sites.
2. The respondent noted that the decision under review ignores any imputed income that could be derived from the cabins on the subject land in determining market rent and that therefore the primary issue before the Tribunal is whether a valuer, in determining capital value, is to have regard to the imputed income that could be generated from removable cabins on the subject land.
3. The respondent disputed that Mr Kemp's inspection of the land was superior to that of Mr Montgomerie and submitted that, given the nature of the valuation under consideration, there is no reason why a valuer would materially benefit from an actual inspection in arriving at capital value.
4. The respondent observed that by Mr Kemp taking into account the trading accounts in arriving at his valuation, he took into account the income generated from the cabins which is a point on which the parties fundamentally differ in approach. The respondent submitted that it is inappropriate and impermissible to have regard to the income that might be derived from the respondent's removable cabins in determining capital value, including under the capitalisation of net rent methodology. It was submitted that this is because reg 10(1)(a) explicitly proscribes a valuer from having regard to a tenant's improvements, such as the cabins. The major thrust of the respondent's criticisms of Mr Kemp's valuation, either on the main capitalisation of net income approach or the direct comparison approach, is that he took into account income from cabins on the subject land.
5. It was further submitted that, putting to one side reg 10(1)(a) and looking at the practical realities of the situation where it is known that cabins are to be removed by a lessee at the end of the lease, no hypothetical tenant would have regard to the income generated from them in negotiating and bargaining for a fair market rent. The respondent repeatedly referred to the actual rent agreed by the respondent and the council as support for the contention that the incoming hypothetical tenant would bargain on the rent to reflect its costs in acquiring and installing cabins on the land.
6. The respondent submitted that, on the assumption that there are no cabins on the subject land, insofar as it is permissible to have regard to the ability to acquire and install cabins on the subject land and thereby generate income from them, it is necessary also to have regard to the impact on value of the significant cost of such acquisition an installation, including in relation to the depreciatory effect that would have on calculating and capitalising market rent.
7. It was submitted that Mr Kemp did not properly disregard the respondent's cabins and income and otherwise ignored entirely the effect on value of the costs of acquiring and installing cabins, such that his evidence is fundamentally flawed and should be rejected entirely. It was submitted that, in contrast, Mr Montgomerie disregarded the cabins and properly valued the subject land on the assumption that there are only caravan sites.

1. The frequently cited definition of value is that contained in Spencer v Commonwealth, in which Isaacs J said:

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.[62]

2. The meaning of the phrases "might reasonably be expected to realise" and "upon sale", which are found in the statutory definitions of capital value and site value, was addressed by Wells J in CSR Ltd v Valuer-General. His Honour said of the former phrase that:

This passage directs the valuing authority to assess the value according to what, at the date of sale, the land could fairly be expected to realize having regard to the market of the day, disengaged on the one hand, from unduly sanguine hopes or fancies, and on the other, from unfounded despondency or pessimism. The extent and strength of the potential market is to be judged according to how a prudent and informed man of commerce would judge it.[63]

It predicates a market in which the supply, the demand, and the price fixed, are such that the sale would go through. It is impossible, in my view, to contemplate other than a willing seller and a willing buyer; and because the price is 'reasonably to be expected' it excludes an anxious or eager buyer or seller. No particular form of sale is designated, so the valuer (and the court) is to suppose that both principal forms of sale are open public auction and private treaty. > > It is to be observed that the expression contains nothing explicit that describes the person who is to sell or the person who is to buy. What is contemplated is a notional sale, but a sale that is thought of as taking place in the actual circumstances that obtain at the valuation date, not in hypothetical circumstances. No identity or character is to be attributed to the seller other than what I have set out above. No particular qualities are attributed, either, to the imaginary purchaser, but the nature of the subject property, coupled with the potential market for it, determines who would, or might, be interested in purchasing.[64]

4. The notional sale is for the highest and best use to which the land may be put, that is, "the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential"[65] or, in other words, "the most profitable use having regard to the physical, economic and legal constraints on the use of the land".[66]
5. The land must be valued in the condition in which it existed at the relevant date of valuation.[67]
6. The principle that premises must be assessed as they stand is qualified by reg 10(1)(a) of the VOL Regulations.[68] As the respondent noted, Justice Debelle observed that the "substance of that regulation gives effect to the common law principles relating to tenant's trade fixtures".[69]
7. A tenant's "trade fixtures" are a reference to those fixtures on the land, which under the doctrine of fixtures become part of the land and are owned by the landowner, but which the tenant has a right to remove at the expiration of the term of the lease, thus converting them back into chattels.[70]
8. With the greatest respect to the esteemed judge, reg 10(1)(a) applies more broadly in that it can apply to machinery, plant or equipment owned by the landowner, including those that may not be fixtures per se. However, it does not seem necessary to pursue that point further for the purposes of this decision.

1. I accept the matters on which Mr Montgomerie and Mr Kemp agree.
2. I accept the agreed position on the highest and best use of the land. However, I should not be taken as accepting that the highest and best use is that suggested by the Valuer-General in closing submissions, i.e. a caravan park with cabins. There is no evidence in support of that conclusion. All of the valuers (Messrs Rasmus, Montgomerie and Kemp) opined that the highest and best use of the land was its "current" or "existing" use. Although a highest and best use can be expressed with a degree of either generality or precision,[71] none of the valuers articulated the highest and best use in the relatively more precise and narrower way referred to in the closing submissions.
3. I accept that the capitalisation of net rent methodology was appropriate to use to determine the capital value of the subject land.
4. I also accept that it was correct to ignore the actual rent under lease over the subject land, as it was not a market rent, and instead to determine a notional market rent for the purposes of the capitalisation methodology.[72]
5. There does not appear to be any dispute of real substance over the capitalisation rates of 6.75% adopted by Mr Montgomerie and 7.25% adopted by Mr Kemp. Mr Kemp said in his evidence that, if he had adopted 6.75%, that would have resulted in a higher valuation of the property.[73] When the difference in the rates was put to Mr Kemp in cross-examination, he said that 6.75% was within the range of what is reasonable, although he did note that he had not seen the underlying evidence for Mr Montgomerie adopting 6.75% so could not "pass judgement really".[74] Later, in his oral evidence, Mr Montgomerie said "I'm on the firmer end, lower end than Mr Kemp because I'm not taking into account revenue income from the cabins. So, it's pretty well a lower price point. So, that means there is more [purchasers] being interested in a property like that".[75]
6. There also does not seem to be any real dispute in respect of the rent to turnover ratios employed by Mr Montgomerie and Mr Kemp in respect of the notional market rents each had assessed. On the 17% that Mr Kemp applied to the adopted gross profit, Mr Montgomerie indicated that he thought it was at the lower end of the range but generally did not have any problems with it.[76] In respect of the 35% that Mr Kemp applied to the adopted net operating profit, Mr Montgomerie said that these percentages can come anywhere from 30% to in the 40% range and that it was a realistic percentage "if we are including cabins".[77]
7. In respect of Mr Kemp's adjusted gross revenue and adjusted net operating profit, Mr Montgomerie opined that he did not think someone would pay 40% of gross revenue in rent for a site without cabins nor would they pay 75% of adjusted net operating profit for a site without cabins.[78]
8. I agree also that it was correct to ignore the effect on capital value of the accommodation cabins present on the land (and other items that were "machinery, plant or equipment") because this is mandated by reg 10(1)(a). I say more about reg 10(1)(a) below.

1. As noted above, Mr Montgomerie did not take into account the potential revenue that might be generated by a hypothetical tenant from the 23 cabin sites on the subject land when determining the notional market rent that might be agreed by the hypothetical landlord and hypothetical tenant.
2. Mr Montgomerie confirmed to me at the hearing that neither the decision under review nor his Valuation Advice took into account the income derived from the cabins on the site nor did they take into account that a lessee may pay, as part of the rent they have agreed to pay, for the ability to bring up to 23 cabins onto the site.[79] When I asked him to explain why his valuations do not do that, he replied that "the clause is in there to say that we disregard any of the lessee's improvements for a market ... rent".[80]
3. This error by Mr Montgomerie seriously undermined the decision under review and is of the sort referred to in the Ardoch decision cited by the Tribunal President that requires that the decision be set aside. As I will explain, the approach taken by Mr Montgomerie is in excess of what is required by the proper application of reg 10(1)(a) and it is inconsistent with a number of long-standing valuation principles enunciated by the courts.
4. For the same reasons, Mr Montgomerie's Valuation Advice cannot be given significant weight. I note also its highly qualified, and in fact speculative, nature. This would, in any event, reduce its cogency and reliability in these proceedings. Also, the Valuation Advice fails to take into account the likelihood or otherwise of the hypothetical landlord being willing to agree to converting 23 sites capable of accommodation cabins to 33 capable of accommodating caravans.

1. I reject the contention that reg 10(1)(a) requires that income potentially able to be generated by a lessee's accommodation cabins on the subject land must be disregarded in determining the notional market rent that would be agreed by the hypothetical landlord and hypothetical tenant, or in determining the capital value of the subject land. I disagree with the respondent's interpretation of reg 10(1)(a).
2. Regulation 10(1)(a) mandates only that the "items" not be taken into account, that is, the individual items of "machinery, plant or equipment". They are to be ignored: in other words, taken to have effectively vanished or to have been removed from the land. However, reg 10(1)(a) does not mandate that a valuer must not take into account the ability of the lessor to lease the land to a tenant who will generate income from the land from which the cabins were (hypothetically) removed. I find that reg 10(1)(a) is not open to that construction, either expressly or by necessary implication.
3. In Players v City of Adelaide (Players), his Honour Justice Debelle noted that:

If improvements are effected by the owner of land or buildings, they will, as a general rule, be reflected in both a higher capital value of the premises and a greater capacity to earn rent. Equally, when improvements are effected by a tenant they will, as a general rule, also result in a higher capital value and therefore a higher annual value.[81]

4. I accept that the purpose of reg 10(1)(a) is that the existence on the land of certain items of machinery, plant or equipment is to be ignored so as not to have that appreciatory effect on capital value.
5. However, it is one thing to ignore the direct effect on capital value of machinery, plant and equipment situated on land, which is what is required by reg 10(1)(a). It is entirely another thing to ignore the ability of the landowner to generate income from the land on which those items are situated, but which by reg 10(1)(a) are taken to have notionally vanished from the land.
6. For this reason, I consider that it was not impermissible for Mr Kemp to take into account the revenue generated by the respondent's 23 cabins on the subject land nor to take into account revenues generated by other caravan parks with a mix of cabins and caravan sites. In fact, it was appropriate and necessary for him to do so in order to arrive at a notional market rent and, in turn, a proper capital value for the subject land.

1. The rating decision of the English Court of Appeal in Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee (Robinson's Case) concerned the rent to be determined for a public house, the White Lion Hotel.[82] In the leading judgement, Scott LJ (with whom Slesser LJ agreed) said of the valuation task:

(1.) The hereditament to be valued under s. 22 of the Act is always the actual house or other property for the occupation of which the occupier is to be rated, and that hereditament is to be valued as it in fact is - rebus sic stantibus. (2.) Where the particular hereditament is let at what is plainly a rack rent or where similar hereditaments in similar economic sites are so let, so that they are truly comparable, that evidence is the best evidence, and for that reason is alone admissible; indirect evidence is excluded not because it is not logically relevant to the economic inquiry, but because it is not the best evidence. (3.) Where such direct evidence is not available, for example, if the rents of other premises are shown to be not truly comparable, resort must necessarily be had to indirect evidence from which it is possible to estimate the probable rent which the hypothetical tenant would pay. (4.) This kind of estimating is a skilled business, and it is here especially that the role of the skilled valuer comes in. His employment is plainly contemplated by all the rating statutes of the last hundred years and has always been the practice in all disputes upon quantum of assessment, but, above all, wherever resort to indirect sources for assessing value is necessary. (5.) In weighing up the evidence bearing upon value, it is the duty of the valuer to take into consideration every intrinsic quality and every intrinsic circumstance which tends to push the rental value either up or down, just because it is relevant to the valuation and ought therefore to be cast into the scales of the balance before he looks to see the resultant figure on the dial at which the pointer finally rests. (6.) A skilled valuer is a professional man and must be left free to inform his mind of all relevant facts. It is only where it can be shown that he has had regard to some fact which is legally irrelevant or vice versa that his valuation is open to legal attack. (7.) When the assessing tribunal, whether assessment committee or quarter sessions, has to make its own valuation in a contested case about a gross assessment, the tribunal, not being itself professionally skilled in valuation, must necessarily act on evidence, including expert evidence, and that evidence must be relevant; but, wherever the direct evidence test is not available, no fact which would in all the actual circumstances of the case tend to raise or lower the amount of rent likely to be given by probable competitors can be either irrelevant or inadmissible.(8.) The rent to be ascertained is the figure at which the hypothetical landlord and tenant would, in the opinion of the valuer or the tribunal, come to terms as a result of bargaining for that hereditament, in the light of competition or its absence in both demand and supply, as a result of "the higgling of the market." I call this the true rent because it corresponds to real value. (9.) This true rent is often called "market value," but I hesitate to use that expression, as it seems to me prone to mislead, for it gives rise to the notion of something absolute, something having an objective existence, independent of all the various particular sources of demand, which together constitute the totality of demand. The phrase "market value" is not used in the special case, but it was used in the judgment below ... to describe the lower measure of value stated in para. 2 (f) of the present special case and the higher figure there mentioned as attributable to the competition of brewers is spoken of as something over and above "market value." This, in my view, is an economic paradox. The only conceivable purpose for which the metaphor of "market value" can properly be used in cases where there is in fact no market test of actual rents is to describe the real value (expressed in terms of the statutory test) which s. 22 requires the assessment committee to ascertain. If this be so, then to speak of a hereditament possessing both a market value of £X and a higher value of £X plus £Y due to a special factor of demand is a contradiction in terms. In my opinion, the higher value is, in that event, the market value in the only sense in which that phrase can properly be used in such a case. ... (11.) On such an inquiry every factor, intrinsic or extrinsic, which tends to increase or decrease either demand or supply is economically relevant and is, therefore, admissible evidence for the assessment committee or its valuer or the quarter sessions on appeal to consider.[83]

The task of the assessment committee in the present case was to ascertain "at what figure the hereditament in question" - that is, the White Lion Hotel, Houghton-le-Spring - "might reasonably be expected to let from year to year" - on the assumptions of the definition. Whilst the tenant is hypothetical and the landlord who is to let to the tenant is necessarily also hypothetical, the hereditament is actual - namely, the hereditament described in the valuation list with all its actualities. Two consequences follow. All the intrinsic advantages and disadvantages must be considered and weighed. It is just that particular hereditament which is supposed to be in the market with all its attractions for would-be tenants, to whatever kind of human emotion or interest or sense of duty they may appeal - economic, social, aesthetic, political (for example, in order to perform a statutory duty) - and also with all its imperfections and drawbacks which may deter or reduce competition for it. ... The second consequence is that the totality of opposing forces of demand and supply must be assessed and weighed in order to hit off the point at which the two opposing negotiators are to be deemed likely to strike their bargain.[84]

3. Robinson's Case was affirmed by the House of Lords.[85] Its principles were adopted by judges of the Supreme Court of South Australia.[86]
4. Players, a decision cited in the respondent's written closing submissions, concerned the determination of annual value under the VOL Act of the former Planet nightclub and Pescatore restaurant. His Honour Justice Debelle said:

55. The hereditament to be valued will in each case be the premises for the occupation of which the hypothetical tenant is to be rated and that hereditament is to be valued as it in fact is, a principle expressed in the maxim rebus sic stantibus, which means things being as they are or, more literally, things being as they stand: see generally, Robinson's Case (supra) at 468. Lord Buckmaster expressed the principle in these terms in Port of London Authority v Orsett Union Assessment Committee (supra) at 305: > > "The actual hereditament of which the hypothetical tenant is to be determined must be the particular hereditament as it stands, with all its privileges, opportunities and disabilities created or imposed either by its natural position or by the artificial conditions of an Act of Parliament." > > The rateable quality of land is not to be determined by what it once was, or what it may hereafter become, but by what it is at the time when the rate is made: Port of London Authority v Orsett Union Assessment Committee (supra); Assessment Committee of Kingston Union & Anor v Metropolitan Water Board [1926] AC 331 at 348. > > 56. In Halsbury's Laws of England (4th edition) Vol 39(1) para 657, it is stated that the hypothetical rent is calculated with reference to the hereditament in its existing physical condition and to the manner in which it is actually used. With respect, I believe that the second part of that proposition is stated in terms which are too absolute. In Townley Mill Co (1919) Ltd v Oldham Assessment Committee (supra) at 436 - 437, Lord Maugham expressed the exercise to be undertaken in these terms: > > "Thus there was a hypothetical tenant and a hypothetical rent, but I think a real and concrete hereditament. It was necessary to take into account all possible tenants, including the actual occupier and even the owner. The hypothetical tenant was assumed to be a tenant from year to year with a reasonable prospect of continuing in operation; but the hypothetical rent which the tenant could give was estimated with reference to the hereditament in its actual physical condition (rebus sic stantibus), and a continuance of the existing state of things was prima facie to be presumed." > > I believe that his Lordship's observation that a continuance of the existing state of things was a prima facie presumption expresses more accurately the task confronting the valuer and the court in that it allows for those instances where the tenant might possess attributes or assets which are personal to the tenant and do not form part of the hereditament, and should therefore be excluded when assessing what a hypothetical tenant would pay as rent. I would therefore restate the manner in which the assessment of rental is made in these terms: > > "The rent is calculated with reference to the hereditament in its existing physical condition and a continuance of the existing state of things is prima facie to be presumed."[87]

5. When closely considered, it is clear that the decision under review proceeds on the implicit and entirely artificial assumption that the land on which the hypothetically removed cabins are situated has not been developed and adapted for use as sites upon which a lessee park operator's cabins might be placed if they so chose. Mr Montgomerie confirmed that his valuation had not taken into account that there are 23 sites that have been developed to accommodate a cabin.[88] In other words, the decision under review proceeds on the basis that those particular areas of the subject land are undeveloped sites and fails to recognise that the rental negotiated between the hypothetical landlord and hypothetical tenant should include the opportunity afforded to the tenant to put cabins on the subject land.
6. By not taking into account the ability of the council to obtain a market rent that reflects the ability of the lessee to generate income from the subject land that is (by reason of reg 10(1)(a)) notionally vacant of cabins, the decision under review and Mr Montgomerie's Valuation Advice do not accord with the principles in Robinson's Case that the land is to be valued "as it in fact is", taking into account every intrinsic quality and every intrinsic circumstance and all its actualities.
7. The decision under review and the Valuation Advice also do not give full regard to what is required in the fundamental task of valuing an estate of fee simple. I refer to what was said by his Honour Justice Debelle in respect of estates in fee simple:

... one of the potential advantages of an estate in fee simple in land, as the most ample estate which can exist in land, is the ability to lease the land for profit.[89]

8. I agree with submissions made by Mr O'Flaherty that the ability to profit from land must be taken into account when valuing the land and that Mr Montgomerie made the fundamental error of ignoring the profitability of the land. I agree that it is not appropriate to disregard 70% of its profitability. I agree with that a valuer has to take into account the ability to put cabins on the land because Mr Kemp's analysis reflects the fact that this is, in fact, how the market behaves.
9. For these reasons, the approach taken in the decision under review and in Mr Montgomerie's Valuation Advice is "divorced from reality and proceed[s] in manner which is quite artificial and unrealistic", which is something "that should be avoided unless clearly required by the language of the Act".[90] That approach is not required by the language of reg 10(1)(a) and is inconsistent with established principles.

1. Robinson's Case concerned whether a valuer should take into account competition from brewers in determining the rent of the White Lion Hotel. It was accepted that competition from brewers would have an appreciatory effect on the rents offered.[91] Greer LJ said "the value of any property may reasonably be expected to depend on the rent that would be produced by allowing all the contestants to bid against one another in the market".[92]
2. Scott LJ said:

... wherever the rental value has to be ascertained by reference to the opportunity of profit afforded by the occupation of the hereditament, every source of profit, direct or indirect, must be taken into account, for the simple reason that it must affect the mind of the hypothetical applicant for a tenancy. > > ... > > If the hereditaments are such as to afford peculiar facilities for carrying on any kind of business, that facility does, beyond all question, enhance the value of the occupation; but though the profits which may be reasonably expected to arise from such a business no doubt form an element in estimating the enhanced value of the occupation of the premises, the actual profits made do not form any element, except in so far as they afford evidence of what might be reasonably expected to be made from the occupation of premises affording facility for carrying on such a business.[93]

3. His Lordship observed that "demand must put up value and cannot be irrelevant to valuation" and suggests that a valuer who "shuts out evidence which must in the very nature of the problem be vitally relevant" acts in error.[94]
4. The decision under review and Mr Montgomerie's Valuation Advice are inconsistent with the principle that the valuer must take into account evidence of all likely demand for the notional lease. His valuations do not take into account "all the contestants" as he excludes those caravan park operators who would compete with each other to be able to secure the subject land to generate revenue from at least some cabins on the site. He has assumed that only those operators who would be content to generate income from 74 or 107 caravan sites would compete for a lease over the subject land. Mr Montgomerie has thereby not taken into account the potential that competition from the excluded caravan park operators may have had an appreciatory effect on the hypothetical rent. In fact, there is a strong inference to be drawn from the evidence before the Tribunal that competition from those caravan park operators (like the brewers in Robinson's Case) would likely have driven up the hypothetical rent.
5. Similar observations may be made about Mr Kemp's counterfactual. In fact, the counterfactual was the subject of extensive attack in cross-examination for different reasons. However, I regard the counterfactual as a non-essential part of Mr Kemp's valuation and do not need to comment further about it.

1. I disagree with the respondent's contention that Mr Kemp did not have regard to the costs of a hypothetical tenant acquiring and installing cabins on the subject land. It is clear that Mr Kemp did in fact have regard to that matter. However, he did not consider that it was a factor that would lead to a tenant demanding a discount to the notional market rent of $165,000 that he had adopted.[95]
2. It was clearly, confidently and repeatedly confirmed by Mr Kemp in cross-examination that a hypothetical tenant would pay $165,000 rent per annum even if they had to source and install cabins on the subject land. When the position was put to him that a lessee would "being paying a lot less in market rent if they had this big cost of having to put the cabins in", Mr Kemp replied "Not necessarily, no. The market doesn't say that".[96] Elsewhere, Mr Kemp said:

I don't necessarily think they would pay less rent because the incoming experienced caravan park operator would [look] at the site and see that they have the ability to install 10, 20, 30 cabins and generate the revenue and profitability that they see fit, and the rental would be negotiated on that basis.[97]

3. He indicated that the market rents analysed in his report were negotiated on the basis of the lessee being able to operate the caravan park with a mix of sites, including the number of cabins that fit their business scenario.[98] He opined that a cabin in some locations would generate between $30,000 and $60,000 per annum, which would be a fair return on a cabin installed for between $150,000 to $250,000.[99] Later in his evidence he said:

... if you're going to spend 4 million dollars on cabins, you would hope you might get a million dollars revenue per year out of those cabins, and it becomes a sort of 4-year payback your cabins over a 20-year lease period. That's quite sound business sense, which people do do.[100]

4. Mr Montgomerie disagreed with Mr Kemp's opinion in this regard. Mr Montgomerie opined that an incoming lessee would factor in the cost that they would incur in putting new cabins on the site and that they would negotiate for a lesser rent than that assessed by Mr Kemp.[101]
5. Mr Guthrie repeatedly pressed Mr Kemp to accept that the respondent negotiated a low rent to reflect its costs of developing the site and to support the respondent's contention that the hypothetical lessee would negotiate a discounted rent to account for having to supply and install cabins on the subject land. However, I consider that it is somewhat of a distraction to relate the negotiations of a hypothetical tenant with the respondent's actual negotiations of its lease terms with the council. The latter occurred in circumstances where the subject land was a relatively underdeveloped camping ground on which the respondent intended to install extensive infrastructure and services to use the land as a caravan park, not just the installation of cabins, and indeed has spent millions of dollars in doing so. This is not an apples with apples comparison.

1. As Mr Montgomerie candidly and repeatedly disclosed, he had not undertaken a comprehensive valuation exercise and had not analysed the market data. Mr Kemp did so in a detailed and comprehensive manner and found that the market confirmed his opinion.
2. I have closely examined Mr Kemp's valuation report. I agree that Mr Kemp's valuation took an evidence based and logical approach. It is not obvious to me that Mr Kemp made any errors of the nature that would require that I discount or exclude his evidence. I agree with Mr O' Flaherty's submission that Mr Kemp has used considerable objective evidence to ascertain the value of the subject land and that he has ascertained what the market has dictated, which is that rentals for caravan parks take into account the valuable opportunity that park operators have in terms of installing cabins on the site.
3. I agree with his submission that this analysis does not fall foul of reg 10(1)(a) and that Mr Kemp has at no point valued the cabins.
4. For all these reasons, I place substantially greater weight on Mr Kemp's valuation. It must be preferred to the decision under review and Mr Montgomerie's Valuation Advice which, as I noted, are both seriously compromised.
5. For all of the foregoing reasons, I consider that the correct or preferable decision is that the decision under review should be set aside and the Tribunal should substitute the capital value of $2,275,000 determined by Mr Kemp.

[1] Section 11 Valuation of Land Act 1971.

[2] Section 5(1) Valuation of Land Act 1971.

[3] Section 25C(3)(b) Valuation of Land act 1971.

[4] Section 34(6) and (7) South Australian Civil and Administrative Tribunal Act 2013.

[5] Section 37 South Australian Civil and Administrative Tribunal Act 2013.

[6] Section 25C(3)(c) Valuation of Land Act 1971.

[7] Bargwanna Pty Ltd & Anor v Valuer-General for the State of South Australia [2011] SASC 67 at [6] per Kourakis J (as he then was).

[8] [2006] SASC 217 at [33].

[9] Minister for Environment v Florence (1979) 21 SASR 108.

[10] Valuer-General v Fenton Nominees Pty Ltd [1982] HCA 46; (1982) 150 CLR 160.

[11] Bosnakis & Ors v Valuer-General [2024] SACAT 46.

[12] Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157 at 161 per Dixon CJ and Kitto J.

[13] Minister for the Environment v Florence (1979) 21 SASR 108 at 116-117 per Wells J.

[14] Bosnakis & Anor v Valuer-General [2017] SASC 158 at [93].

[39] I understand Mr Montgomerie to here be referring to the Rasmus valuation as the "report".

[43] See generally Book of Documents, pp 31-32.

[45] In his oral evidence, Mr Montgomerie said this range was derived from sites that included cabins: Transcript pp 98 - 99.

[48] There is a typographical (but not arithmetical) error in these calculations on page 8 of the Valuation Advice.

[49] Kemp valuation, p 35. He later confirmed in his oral evidence that he had also assumed that the Lessee's Equipment had also been removed from the site: Transcript, p 89.

[60] Valuation Advice, p 8; Kemp Valuation, p 47.

[62] Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418 at 441.

[63] CSR Ltd v Valuer-General (1977) 17 SASR 446 at 450.

[64] CSR Ltd v Valuer-General (1977) 17 SASR 446 at 451.

[65] Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at 415 per Jacobs J.

[66] ISPT Pty Ltd v City of Melbourne [2007] VCAT 652 at [63].

[67] See Yates Property Corporation Pty Ltd v Darling Harbour Corporation (1991) 73 LGRA 47 at 65 - 66 per Handley JA.

[68] Players Pty Ltd v City of Adelaide [2001] SASC 369 at [57].

[69] Players Pty Ltd v City of Adelaide [2001] SASC 369 at [59]. At that time, reg 10(1)(a) was, in substance, the same as the present provision.

[70] Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd [2009] FCA 742 at [65] - [66].

[71] See generally Hyam, The Law Affecting Valuation of Land in Australia (6th ed, 2020) pp 215 - 221.

[72] Robinson Brothers (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee [1937] 2 KB 445; Players Pty Ltd v City of Adelaide [2001] SASC 369 at [53] - [54]; Trust Company of Australia Ltd & Anor v Valuer-General; Perpetual Trustee Company Ltd & Anor v Valuer-General [2008] SASC 169 at [112] per Bleby J with whom Duggan and Anderson JJ agreed; Capaldo v Capaldo [2011] SASC 28 at [21] - [22].

[81] Players Pty Ltd v City of Adelaide [2001] SASC 369 at [58].

[82] Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee [1937] 2 KB 445.

[83] Robinson Brothers (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee [1937] 2 KB 445 per Scott LJ at pp 468-471.

[84] Robinson Brothers (Brewers) Ltd v Houghton and Chester-le-Street Assessment Committee [1937] 2 KB 445 per Scott LJ at p 474.

[85] Robinson Brothers (Brewers) Ltd v County of Durham Assessment Committee (Area No 7) [1938] AC 321.

[86] Players Pty Ltd v City of Adelaide [2001] SASC 369 per Debelle J; Capaldo v Capaldo [2011] SASC 28 at [20] per Kourakis J (as his Honour then was).

[87] Players Pty Ltd v City of Adelaide [2001] SASC 369.

[89] Perpetual Trustee Co Ltd & Anor v Valuer-General; Trust Co of Australia Ltd & Anor v Valuer-General (No 2) [2007] SASC 340 at [43].

[90] Trust Company of Australia Ltd & Anor v Valuer-General; Perpetual Trustee Company Ltd & Anor v Valuer- General [2008] SASC 169 at [114] per Bleby J with whom Duggan and Anderson JJ agreed.

[91] Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee [1937] 2 KB 445 at p 468.

[92] Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee [1937] 2 KB 445 at p 462. See also Scott LJ at p 468.

[93] Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee [1937] 2 KB 445 at p 476, 477-478.

[94] Robinson Brothers (Brewers) Ltd v Houghton and Chester-Le-Street Assessment Committee [1937] 2 KB 445at p 485.