Some obser­va­tions on the approach to val­u­a­tions, land tax claims and the ​‘actu­al use of land’

Some obser­va­tions on the approach to val­u­a­tions, land tax claims and the ​‘actu­al use of land’: Car­lewie Pty Ltd v Roads and Mar­itime Ser­vices [2017] NSWLEC 78

Why is Car­lewie important?

The Appli­cant ran some inter­est­ing argu­ments on val­u­a­tion approach­es in this mat­ter, and the Court has made it clear that sec­tion 56 of the Land Acqui­si­tion (Just Terms Com­pen­sa­tion) Act 1991 (JTC Act) envis­ages a sin­gle hypo­thet­i­cal trans­ac­tion, rather than com­pe­ti­tion between pur­chasers. The case also con­firms the approach to land tax claims. There is also some fur­ther com­men­tary on the con­cept of ​‘actu­al use of land’ which is made in the con­text of assess­ing whether an allowance for stamp duty can be granted.

The deci­sion

Car­lewie relat­ed to the acqui­si­tion of land for the con­struc­tion of the St Peters Inter­change sec­tion of ​‘West­con­nex’. The Appli­cant was the landown­er and the land was sub­ject to a num­ber of inter­ests, includ­ing a num­ber of leas­es. The val­u­a­tion of the land was also com­pli­cat­ed by a num­ber of fea­tures includ­ing her­itage mat­ters, con­t­a­m­i­na­tion issues, town plan­ning issues, a fire safe­ty order and costs asso­ci­at­ed with the replace­ment of the acquired land. Most of the land was leased at the date of acquisition. 

The Appli­cant said that it was in the posi­tion to advan­ta­geous­ly amal­ga­mate adja­cent parcels of land and that was an oppor­tu­ni­ty lost caused by the acqui­si­tion. The ​‘land bank’ char­ac­ter­i­sa­tion of the appli­can­t’s activ­i­ties was reject­ed by RMS. 

The Appli­cant adopt­ed a dif­fer­ent approach to val­u­a­tion and how to con­sid­er com­pet­ing expert opin­ions. The Appli­cant said that in any sale there will be more than one hypo­thet­i­cal pur­chas­er, and each will retain their own experts. A hypo­thet­i­cal pur­chas­er would receive advice sup­port­ing a high­er val­ue, so their offer, based on that advice, would ​“beat” oth­er poten­tial pur­chas­er offers. On this basis, the Appli­cant said the Court should pro­ceed in the posi­tion that is most favourable to the Appli­cant. The Court reject­ed this argu­ment. It dis­re­gards the func­tion of expert evi­dence, dis­re­gards that a hypo­thet­i­cal pur­chas­er would be ful­ly informed, it would not be igno­rant of com­pet­ing advice. Sec­tion 56 of the JTC Act envis­ages a sin­gle hypo­thet­i­cal trans­ac­tion, it does not imag­ine com­pe­ti­tion between purchasers.

The Appli­can­t’s claim for land tax was reject­ed on the basis that there was no evi­dence in the pro­ceed­ings that pay­ing land tax is con­sis­tent prac­tice in the mar­ket with respect to indus­tri­al land. The adjust­ment for pur­chase price for land tax is some­thing that is usu­al­ly nego­ti­at­ed indi­vid­u­al­ly between the actu­al pur­chas­er and vendor.

On the issue of the ​‘actu­al use of land’, to qual­i­fy for a stamp duty allowance on the pur­chase of replace­ment land, the Court con­sid­ered cas­es on actu­al use where land bank­ing was demon­strat­ed, or where it was shown the own­er was not a pas­sive investor. The Court found that in this case there was noth­ing more than a vague and unstruc­tured pro­pos­al to devel­op the land, poten­tial future use was not an actu­al use. The actu­al use was under­tak­en by the ten­ants in this case, as there was no evi­dence that land was being held for rede­vel­op­ment or land bank­ing later.