FERRCOM PTY LTD and ORS v ALOISIO; FERRARESE and ORS v ALOISIO [1997] NSWCA 107

FERRCOM PTY LTD and ORS v ALOISIO; FERRARESE and ORS v ALOISIO

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, POWELL and BEAZLEY JJA 11 September 1997, 24 September 1997

[1997] NSWCA 107

VALUATION OF LAND AND BUILDINGS — METHOD OF VALUATION — whether depreciated replacement cost method correct — capitalised net rental value method not appropriate given specialised use — HELD — depreciated replacement cost method appropriate — appeal dismissed — Fire and All Risks Insurance v Rousianos (1989) 19 NSWLR 57, Franke v C/C General Insurance Ltd (1994) 33 NSWLR 373 applied.

VALUATION — land and buildings specially constructed and used for specialised purpose in on ongoing business enterprise — choice between capitalised net rental value method and depreciated replacement cost method — former method assumed buildings used for warehouse purposes and paid no regard to specialised use or to the ongoing business enterprise — latter method held appropriate.

Fire and All Risks Insurance v Rousianos (1989) 19 NSWLR 57, Franke v CIC General Insurance Ltd (1994) 33 NSWLR 373 applied.

Gleeson CJ There are appeals from a judgment of Brownie J in the Equity Division, who in turn had before him, and who allowed, an appeal from Master Macready.

The issue that was litigated before Brownie J was much narrower than the issues litigated before Master Macready. It concerns the appropriate method of valuation of certain real estate, which in turn affected the value of certain shares in a company.

The respondent, Mr Aloisio, and the four personal appellants, Messrs Ferrarese, Vereran, Bizzanelli and Maccarone, were the shareholders in, and directors of, the appellant company, Ferrcom Pty Ltd. They each owned two of the ten issued shares in the capital of Ferrcom.

At all material times Ferrcom has carried on a business of steel fabrication, at South Penrith. The business is conducted from a factory, and an office building. erected upon three adjacent parcels of land. Two of those parcels are owned by a subsidiary of Ferrcom, and the third was owned by the individual shareholders of Ferrcom as tenants in common. The original factory premises were constructed in about 1980, with additions in 1982 or 1953. Further additions were commenced in 1985 but were not completed at the time. Subsequently, between 1989 and 1994 the factory was enlarged. It is common ground that the construction of the factory building was more substantial than would be necessary for an ordinary industrial building, and that the nature of the construction reflected the specialised needs of the enterprise.