Land and Environment Court of New South Wales CITATION : Bebrovo Holdings Pty Ltd v Valuer General [2009] NSWLEC 1144 APPLICANT Bebrovo Holdings Pty Ltd PARTIES : RESPONDENT Valuer General FILE NUMBER(S) : 31030 of 2008 CORAM: Parker AC KEY ISSUES: VALUATION OF LAND :- Land Value Land and Environment Court Act 1979 LEGISLATION CITED: Valuation of Land Act 1916 Hawkesbury Local Environment Plan 1989 Hillman v Valuer General [1938] LGR 14 CASES CITED: Flack v Valuer General [1952] LGR 18 Falk v Chief Commissioner of State Revenue [1999] NSWLEC 301 Falk v Valuer General [2005] NSWLEC 141 DATES OF HEARING: 16/03/2009 DATE OF JUDGMENT: 19 May 2009 APPLICANT Ms A. Pearman, barrister Instructed by Mr A Nicol, solicitor Mahony Dominic Lawyers LEGAL REPRESENTATIVES: RESPONDENT Ms M Carpenter, Barrister Instructed by Ms C Anthoney, Solicitor for Valuer General JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Parker AC 19 May 2009 31030 of 2008 Bebrovo Holdings Pty Ltd v Valuer General JUDGMENT 1 This is an appeal by Bebrovo Holdings Pty Ltd (the Applicant), under Section 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 Del Rio Riverside Resort, Riverside Drive, Webbs Creek (the subject property). Background 2 The Applicant was represented by Ms A Pearman, Barrister, instructed by Mr A Nicol, Solicitor, Mahony Dominic Lawyers. 3 The Respondent was represented by Ms M Carpenter, Barrister, instructed by Ms C Anthoney, Solicitor for the Valuer General. 4 The Land Value of the subject property at 1st July 2007 (the base date), was assessed by the Applicant at $1,940,000 and by the Respondent at $3,810,000. 5 The parties agree that the land value as at the base date of 128 hectares of steep bushland was $2,500 per hectare, equating to $320,000. 6 Accordingly, the land value of the balance of the site, being cleared and level riverside land, as at the base date is assessed by the Applicant at $1,620,000 and by the Respondent at $3,490,000 7 The matter was the subject of a conference under Section 34 of the Land and Environment Court Act 1979 but the parties were unable to reach agreement. 8 The matter was the subject of an on site inspection on 13th March 2009, followed by a hearing in Court on 16th March 2009. 9 Section 40(2) of the Act states: "On an appeal, the appellant has the onus of proving the appellant's case." The subject property 10 The subject property comprises an area of approximately 164 hectares, being approximately 128 hectares of steep bushland and approximately 36 hectares of cleared and level riverside land which is a large site used as an extensive resort, caravan park and water ski park being improved with residential cabins, common amenities, relevant sporting facilities and a boat ramp and jetty. 11 Significantly, the cleared and level riverside land is a long, thin parcel affording approximately 1.5-1.75kms of direct river frontage which I consider especially beneficial for a resort, caravan park and water ski park use. 12 The subject property is located in the remote rural locality of Webbs Creek, being highly tranquil but relatively inaccessible, requiring either use of the ferry from Wisemans Ferry or a considerably longer driving time by circuitous rural roads. 13 The subject property is flood liable in a 1:100 year flood but benefits from development consent for the existing resort regardless. 14 The subject property is zoned Environmental Protection, Mixed Agriculture (Scenic) 7(d) in the Hawkesbury Local Environment Plan 1989, a zoning within which use for tourist facilities is permissible with development consent. 15 The highest and best use of the subject property was agreed to be the current use. 16 The subject property comprises Lot 77 DP211935, Lots 51, 61 and 70 DP753828 Lot 2 DP1080830, Lot 1 DP1099922, License 383925 and License 328477. The evidence 17 Mr Bloore, Registered Valuer, tendered as evidence a valuation of the subject property dated 4th March 2009 and gave expert evidence on behalf of the Applicant. He concluded that the Land Value of the subject property was $1,940,000 as at the base date comprising $1,620,000 for the cleared and level riverside land and $320,000 for the steep bushland. 18 Mr Lunney, Registered Valuer, tendered as evidence a valuation of the subject property dated 3rd March 2009 and gave expert evidence on behalf of the Valuer General. He concluded that the Land Value of subject property was between $4,080,000 and $4,350,000 as at the base date and that the valuation assessed by the Valuer General of $3,810,000, comprising $3,490,000 for the cleared and level riverside land and $320,000 for the steep bushland, was too low and not supported by the available market evidence. 19 Mr Lunney's valuation of $4,080,000 was on the basis of a rate per caravan site with the valuation of $4,350,000 being on the basis of a rate per hectare land area. During the hearing, the Respondent withdrew the valuation of $4,080,000 leaving Mr Lunney's valuation as $4,350,000. 20 Mr Bloore and Mr Lunney submitted no common comparable sales, with Mr Bloore submitting five comparable sales and Mr Lunney submitting three comparable sales. 21 Mr Bloore submitted comparable sales at: 825 River Road, Lower Portland; 343 Pitt Town Bottoms Road, Pitt Town; 2720 River Road, Wisemans Ferry (Carinya Ski Ranch); 42 Triangle Lane, Richmond Lowlands; and 53 Triangle Lane, Richmond Lowlands, which were inspected externally. 22 Mr Lunney submitted comparable sales at: 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park); 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park); and 2488 River Road, Wisemans Ferry, which were inspected externally. 23 Mr Bloore's valuation of the subject property dated 4th March 2009 includes reference to a site of 7.945 hectares of flood free, cleared and undulating land known as the Hawkesbury River Village for which, following an objection process and independent valuation, the land value was agreed with the Valuer General at $650,000 equating to $81,812 per hectare as at the base date of 1st July 2007. 24 I note that in Flack v Valuer General [1952] LGR 18, at page 158, the Court held that an Applicants evidence may include expert opinion, sales of comparable lands, a combination of both or any other available method including a statutory valuation. 25 I also note that in Hillman v Valuer General [1938] LGR 14, at page 15, the Court held that the mere statement that a valuation was made does not constitute any evidence of its correctness. 26 I further note that in Falk v Chief Commissioner of State Revenue [1999] NSWLEC 301 at paragraph 4, Commissioner Nott considered the use of statutory land values of other nearby properties as evidence, determined that they should not be excluded as a matter of law but, where there is expert valuation evidence and evidence of comparable sales, no weight should be given to such statutory land values of other nearby properties. I further note that Commissioner Moore concurred with this approach in Falk v Valuer General [2005] NSWLEC 141 at paragraphs 23 and 30. 27 As there is both expert valuation evidence and evidence of comparable sales in this matter, I concur that the evidence comprising the statutory valuation of Hawkesbury River Village should not be excluded but should be attributed no weight. Consideration of the evidence 28 I note that the comparable sales are considered in the context of determining the land value of the cleared and level riverside land and that each of the comparable sales comprised either flat, gently sloping or gently undulating land of similar topography to the subject property. 29 Having regard to the date of sale, site area, current use, permitted use, extent of direct river frontage, location, accessibility and propensity for flooding, the eight comparable sales may be compared with the subject property as follows. 30 825 River Road, Lower Portland, submitted by Mr Bloore, is capable of use as a tourist facility. However, it is not constrained by inaccessibility, is partially flood free, was a sale after the base date, is a considerably smaller site, currently enjoys a rural use, has limited frontage to the river with access bisected by a trafficable road and is in a less tranquil location. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance. 31 343 Pitt Town Bottoms Road, Pitt Town, submitted by Mr Bloore, is flood prone but is not constrained by inaccessibility with the sale being after the base date, a smaller site, currently enjoying a rural use, not capable of use as a tourist facility, with limited frontage to the river and in a considerably less tranquil location. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance. 32 2720 River Road, Wisemans Ferry (Carinya Ski Ranch), submitted by Mr Bloore, was sold just before the base date, is a comparable current permitted use as a tourist facility and is prone to flooding. However, the site is not constrained by inaccessibility, is smaller, has a limited frontage to the river and is in a less tranquil location. Having regard to the comparability of this sale to the subject property, I consider the sale to be a directly relevant comparable sale. 33 42 Triangle Lane, Richmond Lowlands, submitted by Mr Bloore, is a large site and flood prone. However, it is not constrained by inaccessibility, was sold around 12 months before the base date, currently enjoys a rural use, is not capable of use as a tourist facility, lacks frontage to the river and is in a considerably less tranquil location. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance. 34 53 Triangle Lane, Richmond Lowlands, submitted by Mr Bloore, is a large site and flood prone. However, it is not constrained by inaccessibility, was sold around 18 months before the base date, currently enjoys a rural use, is not capable of use as a tourist facility, lacks frontage to the river and is in a considerably less tranquil location. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance. 35 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park), submitted by Mr Lunney, is a comparable current permitted use as a tourist facility, has considerable river frontage and is prone to flooding. However, the site is not constrained by inaccessibility, the sale is around 13 months before the base date, being considerably smaller and in a less tranquil location. Having regard to the limited comparability of this sale to the subject property, I consider the sale to be an indirectly relevant comparable sale. 36 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park), submitted by Mr Lunney, is a large site with a comparable current permitted use as a tourist facility, having considerable river frontage. However, the site is not constrained by inaccessibility and is less prone to flooding, the sale is around 21 months before the base date and is in a less tranquil location. Having regard to the comparability of this sale to the subject property, I consider the sale to be a directly relevant comparable sale. 37 2488 River Road, Wisemans Ferry, submitted by Mr Lunney, is capable of use as a tourist facility. However, it is not constrained by inaccessibility, is partially flood free, was sold after the base date, is a considerably smaller site, currently enjoys a rural residential use, has limited frontage to the river and is in a less tranquil location. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance. 38 I consider the comparable sales at 2720 River Road, Wisemans Ferry (Carinya Ski Ranch) and 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park) to be directly relevant comparable sales. 39 I consider the comparable sale at 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park) to be an indirectly relevant comparable sale. 40 I consider the comparable sales at 825 River Road, Lower Portland, 343 Pitt Town Bottoms Road, Pitt Town, 42 Triangle Lane, Richmond Lowlands, 53 Triangle Lane, Richmond Lowlands and 2488 River Road, Wisemans Ferry to be of limited relevance. 41 I note that Mr Bloore, in his valuation of the subject property dated 4th March 2009, analysed the directly relevant comparable sale at 2720 River Road, Wisemans Ferry (Carinya Ski Ranch) to deduce an amount of $54,000 per hectare. 42 I further note that Mr Bloore, in giving expert evidence, explained that the amount of $54,000 per hectare was determined following an adjustment of $700,000 for improvements. 43 The parties agreed that the sale of 2720 River Road, Wisemans Ferry (Carinya Ski Ranch) was a sale between related parties such that limited weight should be attached to the evidence of value from this sale. 44 I note that Mr Lunney analysed the directly relevant comparable sale at 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park) by deducting an allowance for improvements to deduce an amount of $2,400,000, net of goodwill, equating to approximately $112,045 per hectare. 45 I note that Mr Lunney analysed the indirectly relevant comparable sale at 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park) by making allowance for the freehold equivalent of the ground rent and by making deductions of allowances for goodwill, plant and equipment and improvements to deduce an amount of $2,000,000 equating to approximately $637,958 per hectare. 46 Having derived the amount of $54,000 per hectare from the analysis of 2720 River Road, Wisemans Ferry (Carinya Ski Ranch), Mr Bloore made a deduction of 17.5% to reflect the accessible location of the comparable sale compared to the subject property providing a rate of $45,000 per hectare for application to the level riverside land at the subject property to derive a value of $1,620,000 which, when added to the agreed value of the steep bushland of $320,000, provided a valuation of $1,940,000. 47 On the basis that Mr Lunney considered that 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park) is substantially smaller than the subject property, is in a superior location and represented a more intensive land use, he considered significant adjustment would be required to reflect same and so resolved not to apply the sale in the valuation of the subject property. 48 Having derived the amount of $112,045 per hectare from the analysis of the comparable sale at 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park), Mr Lunney applied this rate to the level riverside land at the subject property to derive a value of $4,032,000 which, when added to the agreed value of the steep bushland of $320,000 provided a valuation of $4,352,000 which Mr Lunney rounded to $4,350,000. Findings 49 Accepted valuation practice permits both explicit and implicit adjustment for differences, such as in location, area and time, to enable valuers to have evidentiary comparable values which, following adjustment, account for the various differences with the subject property. Such adjustment is generally based on a reasoning process drawing on the skill and experience of the valuer and undertaken to derive an opinion of value through a process of working forwards rather than a process of working backwards to justify an opinion of value previously formed. 50 Because properties are rarely identical, explicit and/or implicit adjustment for differences is 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, with too much adjustment potentially rendering the comparable sale unsafe to use. Caution is, therefore, required where large explicit and/or implicit adjustments are required, with particular caution required for large implicit adjustments. 51 I note that Mr Bloore made a deduction of $700,000 for improvements and a further deduction of 17.5% from the analysed rate per hectare to reflect the accessible location of 2720 River Road, Wisemans Ferry (Carinya Ski Ranch) compared to the subject property, providing a rate of $45,000 per hectare for application to the level riverside land at the subject property. Relative to the sale price of $1,290,000, I consider the adjustment of $700,000 for improvements to be both substantial and unsubstantiated in evidence. I further consider that the explicit adjustment of 17.5% for accessible location to be at the upper bounds of reasonableness of adjustment in this case. 52 I note that Mr Bloore did not make adjustment to the rate per hectare for the difference in area, river frontage and locational tranquility between the subject property and 2720 River Road, Wisemans Ferry (Carinya Ski Ranch). I consider that a downward adjustment for the difference in area and upward adjustments for river frontage and locational tranquility would be appropriate, with the upward adjustments potentially being greater than the downward adjustment. 53 I note that a significantly lesser adjustment for improvements and a lower adjustment for accessible location would result in a higher analysed rate per hectare for 2720 River Road, Wisemans Ferry (Carinya Ski Ranch), to which an overall upward adjustment reflecting the balance of difference in area, river frontage and locational tranquility would more closely approximate the average rate of $96,944 per hectare adopted by the Respondent in the valuation of the level riverside land at the subject property at $3,490,000. 54 I further note that the parties agreed the sale of 2720 River Road, Wisemans Ferry (Carinya Ski Ranch) was a sale between related parties such that limited weight should be attached to the evidence of value from this sale. 55 I concur with Mr Lunney that the level of adjustment required to the analysed rate per hectare of 2526 River Road, Wisemans Ferry (Torrens Waterski Gardens Caravan Park) for comparison to the subject property would render the comparable unsafe. 56 Concerning 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park), I note that Mr Lunney made no explicit adjustment to the rate per hectare for the difference in accessibility, flooding, date of sale and locational tranquility between the comparable sale and the subject property. 57 Concerning the date of sale, both Mr Bloore and Mr Lunney gave expert evidence regarding the change in the market between the date of contract for sale of 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park) on 5th October 2005 and the base date of 1st July 2007. 58 Mr Bloore considered that the market remained strong until mid-2005 and then fell by around 10% between October 2005 and the base date, suggesting that the sale price in October 2005 may be some 10% above the level that may have prevailed as at the base date of July 2007. 59 Mr Lunney considered that the market peaked in mid 2004 and was then flat between 2005 and 2007, suggesting that the sale price in October 2005 may approximate the level that may have prevailed as at the base date of July 2007. 60 I note that the expert evidence was inconsistent on the change in the market between the date of contract for sale of 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park) on 5th October 2005 and the base date of 1st July 2007, indicating a range between a fall of some 10% and no change. 61 Concerning adjustment to Mr Lunney's analysis of 7123 Wisemans Ferry Road, Gunderman (Rosevale Caravan Park), I consider that downward adjustments are required for inaccessibility and for being less prone to flooding and that upward adjustment is required for locational tranquility, with the downward adjustments potentially being greater than the upward adjustment. Such downward adjustments may be further increased for change in the market, but I note that the expert evidence on this point was inconsistent. 62 I note that such an overall downward adjustment of the rate of $112,045 per hectare adopted by Mr Lunney by 13.5% would equate to the average rate of $96,944 per hectare adopted by the Respondent in the valuation of the level riverside land at the subject property at $3,490,000. I consider an adjustment of 13.5% to be within the bounds of reasonableness of adjustment in this case. 63 Having regard to the evidence tendered, the cross examination and the summation presented, I consider that the valuation of the level riverside land at the subject property at $3,490,000 is supportable through the application of comparable sales evidence. 64 Having regard to the evidence tendered, the cross examination and the summation presented, I consider that Mr Bloore did not present an approach to the valuation of the subject property sufficient to prove the Applicant's case as required by section 40(2) of the Act. Orders 65 The orders of the Court: 1. The Appeal is dismissed. 2. The Land Value of $3,810,000 as at the base date of 1st July 2007 for the property known as the Del Rio Riverside Resort, Riverside Drive, Webbs Creek is confirmed. 3. No Order is made as to costs. 4. The exhibits are returned. ___________________ Dr David Parker Acting Commissioner of the Court DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.