N489

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

STEAMSHIPS

V

VALUER-GENERAL

Waigani
Bredmeyer J

1 October 1984
12 October 1984

VALUATION OF LAND - "Unimproved value" - Market value - To be ascertained from comparable sales - Identity of purchasers not relevant.

Under the Valuation Act (Ch. No. 327) "unimproved value" is defined in s. 1 as meaning "the capital sum that the fee simple of the land might be expected to realise if offered for sale on such reasonable terms as a bona fide seller would require, assuming that the improvements on the land (if any), other than ground improvements did not exist at the date to which the valuation relates ...".

Held

(1) The unimproved value for the purposes of s. 1 is the market value of the land.

(2) The market value is properly ascertained from comparable sales of comparable blocks of land and the identity of the purchasers (as for example developers) is not relevant.

Cases Cited

McGeoch v. Federal Commissioner of Land Tax (1929) 43 C.L.R. 277.
Russell v. Federal Commissioner of Taxation (1934) 50 C.L.R. 182.
Taifalos, In the matter of a reference under s. 25(2), Valuation of Land Ordinance 1963-68 upon an objection of (Unreported decision of Blackburn J., Supreme Court, Northern Territory of 5 September 1968).
Tetzner v. Colonial Sugar Refining Co. Ltd [1958] A.C. 50 (P.C.); [1957] 3 W.L.R. 338.
Tooheys Ltd v. Valuer-General [1925] A.C. 439.

Appeal

This was an appeal against a valuation of land made by the Valuer-General for the purpose of assessment of land rates for the National Capital District Interim Commission.

Counsel

D. Houseman, for the appellant.
J. Goodman, for the respondent.
Cur. adv. vult.

12 October 1984

BREDMEYER J: This is an appeal against a valuation of the main store in Port Moresby of Steamships Trading Co. Ltd (Steamships). In March 1982 the Valuer-General valued the three blocks involved at K200 per square metre totalling K606,000. The valuation was done at the request of the National Capital District Interim Commission and is used for the purpose of assessing land rates payable to the Commission.

The valuation was made under the Valuation Act (Ch. No. 327) and is of the unimproved value of the land. That term is defined in s. 1 of the Act as follows:

"‘Unimproved value’, in relation to land, means the capital sum that the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements on the land (if any), other than ground improvements, did not exist at the date to which the valuation relates, less the Ground Improvements Allowance (if any) applicable to that land."

The respondent called a valuer of ten years’ standing to support the valuation. It will be noted that the definition speaks of the fee simple of the land. The valuer said that he arrived at the unimproved value of the land from comparable sales. Those sales were all of leasehold land and the valuer told of the method used to calculate a freehold value from a leasehold value.

The method used is as follows:

Unimproved value (of freehold) = value of leasehold plus value of Government interest

The value of the leasehold is taken from sales of leasehold land of comparable quality. The value of the Government interest is found by calculating the present capital value of the rents to be received by the Government for the unexpired term of the lease. This method of calculating an unimproved freehold value from a known leasehold value is taken from an unreported case of the Land and Valuation Review Tribunal of Northern Territory of Australia, In the matter of a reference under s. 25(2) of the Valuation of Land Ordinance 1963-68 upon an objection by A.G. Taifalos (Unreported decision of Blackburn J. Northern Territory, Land and Valuation Tribunal of 5 September 1968).

In order to ascertain the unimproved value of the land occupied by Steamships’ main store, Port Moresby, the Valuer-General had detailed information of four comparable sales of leasehold. He converted these figures to freehold figures using the method mentioned above. The details of those purchases and the freehold values calculated therefrom are as follows:

Description Sale price (K) Date Description of improvements Value of impts Deduced U.V. (Freehold) Remarks 1984 

Lots 18 & 19 Section 3, Granville Corner Champion Pde & Hunter St. Pt Moresby Area 1644m2 K275 000 28.1.81 2 workshops plus shed 2 temporary offices cyclone fence not in use before or after sale Nil K337 000 K205/m2 Now occupied by multi- storey office complex. 

Lot 20 Section 3, Granville Hunter St. Pt Moresby Area 885m2 K160 000 8.5.81 Old shop & warehouse storeroom. Not in use after sale. Adjoining Lots 18 & 19. Nil K197 600 K223.28/m2 Defence Force Provident Fund 

Lot 3 Section 16, Boroko Nita St Area 1012m2 K300 000 6.8.81 Old Nita Theatre Bldg demolished after sale Nil K329 200 K325.30/m2 Now occupied by office & shopping complex. No. 1 Finance House 

Lot 9 & 10 Section 2 Granville Musgrave St. Pt Moresby Area 2024m2 K400 000 3.7.81 Old Papuan Theatre and shop. Bought for re-development Nil K487 500 K240/m2 
The average freehold value of those four blocks was K248.39. The Valuer-General took a conservative value of K200/m2 for the site of Steamships’ store — a figure which seems generous to Steamships.

Mr Houseman, lawyer and counsel for Steamships, has not challenged the method adopted of arriving at a freehold unimproved value from a leasehold unimproved value. Neither has he challenged the sales used for comparison. Neither do I think that he can challenge them. They were all sales of "unimproved" land in the sense of land occupied by old buildings of negligible value to purchasers who intended to demolish them. The sales were close in time and were very obviously of land of comparable worth. Three of the sales were of prime land situated like Steamships’ store in the centre of Port Moresby, and the fourth was of prime land situated in the centre of the Boroko Shopping Centre at the back of Brian Bell’s modern store and office complex. Mr Houseman on this appeal has challenged the principle of comparable sales that was used.

Mr Houseman argued that the correct method of valuation is to value the land as bare land plus an extra sum for its proximity to amenities and facilities which have grown up around it. He says the valuer must ignore the fact that the land has an enhanced value to a developer who could build a store, an office block, or flats upon it. I have read the principal cases Mr Houseman has cited in support of his submission: Tooheys Ltd v. Valuer-General [1925] A.C. 439 (P.C.); McGeoch v. Federal Commissioner of Land Tax (1929) 43 C.L.R. 277; Russell v. Federal Commissioner of Taxation (1934) 50 C.L.R. 182; and Tetzner v. Colonial Sugar Refining Co. Ltd [1958] A.C. 50 (P.C.). I consider that none of those cases are really helpful to the present case. All were concerned with the unimproved value of improved land. Tooheys’ case concerned a hotel; Russell’s case a pastoral property; Tetzner’s case concerned a sugar mill in a mill town (in Lautoka, Fiji) where the mill had brought prosperity to the town. Each case presented problems valuing the whole as improved land and then deducting the value of the improvements. McGeoch’s case concerned another pastoral property where the owner had done non-visible improvements of keeping the land free from the noxious weed, prickly pear.

It seems to me that the Valuer-General did not fall into any of the errors exposed in those cases. He did not, for example, value the property as a highly successful store, and deduct from that the cost of the buildings, thus hiding in the unimproved value a sum for goodwill. That was the kind of error found in Tooheys’ case. On the principle of that case the valuer is not allowed to assume that the land as unimproved land would be used as a store but he need not exclude a value which may adhere to the land in respect of its suitability as a store site.

Mr Houseman is asking me to ignore the fact that any purchaser of this land, without the buildings on it, is likely to be a developer. He is asking me to assume that the purchaser would not develop it but just sit on it. I do not think I am required to assume that nor to ignore the developer purchaser. The section requires the valuer to estimate the sum that the freehold would bring "if offered for sale on such reasonable terms and conditions as a bona fide seller would require." The purchaser can be anyone such as a developer, a speculator, or a man whom Mr Houseman said just wanted to sit on it and enjoy the view or the passing parade. The valuer need not restrict himself to a category of purchaser and ask himself what would a developer pay for it; or what would a speculator pay for it? He need only ask: If this land is offered for sale what would it reasonably be expected to fetch? Four comparable blocks were all sold to developers, so one can assume that these blocks if offered on the market without buildings would also be sold to a developer. I do not think the identity of the purchaser matters at all. The comparable sales represent the market value of the blocks. It is artificial to value a block on the basis that the would-be purchaser does not intend to develop the land but simply to sit on it and enjoy it.

I consider that s. 1 of the Act is aimed at finding the market value, and that the market value of the land was K248m2, and that the company was lucky indeed to have the value fixed at K200m2. The appeal will be dismissed in relation to these blocks with costs to the respondent. I can see that different blocks, such as the Liquor Barn and the sports-ground, may have been valued on different bases. The appeal will remain on foot in relation to all blocks except the three covered by my decision.

Appeal dismissed.

______________________

Lawyer for the appellant: D. Houseman.
Lawyer for the respondent: L. Gavara-Nanu, Public Prosecutor.