HOTELS - STATUTORY VALUATIONS

In determining the assessed annual value or gross rental value of a hotel the perennial question arises about whether or not the value of the licence should be taken into account. However, it is now clear law that for improved values (which a rental value is), the "licensed premises" is valued which includes anything attributable to the licence. The following quotation from Caprel's case shows the appropriate valuation method:

Section 7 of the Valuation of Land Act defines assessed annual value. For the purposes of these proceedings I need only refer to subsection (I) which provides:

7. (I ) The assessed annual value of land is -
(a) nine-tenths of the fair average annual value of the land, with the improvements (if any) thereon; or
(b ) five per centum of the unimproved value of the land,

whichever the greater.

The parties accept that paragraph (a) provides the relevant measure and that the meaning of this provision established by existing authority: see Myerson v. The Valuer General (1933} SR (NSW) 82 and Tooth & Co Ltd v. The Valuer General (I953) I9 LGR I72.

(and later)

1. Should the assessed annual value reflect the enhanced value by virtue of the subject land comprising hotel premises licensed under the Liquor Act 1912?

In answering this question there is no need to refer in a detail to the evidence concerning the nature of the building layout and facilities of the Prince of Wales Hotel premises is sufficient to say that at the base date there existed on the subject land typical suburban hotel premises Licensed under the Liquor Act 1912. In my opinion the objector's contention is not supportable by principle or authority and must be rejected. I hold that in determining the assessed annual value of land comprising hotel premises licensed under the Liquor Act 1912 (and the position the same under the Liquor Act 1982) the fact that the premises are licensed under the Liquor Act is to be taken into account. This conclusion accords with:

(i) implicit assumptions and in some cases express obiter dicta found in a number of
Australian decisions;
(ii) English decisions on rating legislation based upon the annual value of rateable land; and
(iii) New Zealand decisions.

In appealing to New Zealand cases the objectors have unfortunately overlooked the important decision of the Court of Appeal in Dunedin City Corporation v. Hames (948) NZLR 962, a case involving the annual value of rateable property under the Rating Act I925, where the same argument that the objector in these proceedings has advanced was decisively and unanimously rejected. In Dunedin City Corporation, the argument which was founded on earlier New Zealand decisions, including In re Gilmer was succinctly stated by O'Leary CJ at 984:

"The argument was that these cases decide that an hotel licence is not an interest in land, but some special kind of property. That rateable value is determined on the rent of
rateable property - ie lands, tenements or hereditaments and, therefore the licence not coming within the definition of property, cannot be rated."

In expressly rejecting the argument, the Chef Justice held (at 984) that the earlier cases were decided under different legislation and had no bearing on the ascertainment of "rateable value" under the Rating Act (cf. Findlay) at 1001: "The cases on which the respondent relied have no application") and continued (pp. 984-5):

"The argument is further answered by this: that, in ascertaining the hypothetical rent, the Licence is not valued as property. It is no more valued as such than is, say, the situation of the property in a particular street. But in appropriate cases this last factor is taken into
account as an enhancement of the rental value, so also can the existence of a Licence and the goodwill attached be considered an enhancement increasing the rental value, though the licence as such is not itself valued.

I have therefore come to the conclusion that there is no difference in the law applicable in England ad New Zealand.

It follows that I am of the opinion that, in ascertaining the rateable value of hotel premises in the City of Dunedin, regard must be had to the existence of the licence and the goodwill attached thereto."

Of all the cases either cited in argument or researched by myself, I have found the decision in Dunedin City Corporation to contain the most direct, comprehensive and illuminating consideration of the question raised in these proceedings by the objector's contention. In my opinion its reasoning is entirely convincing and its conclusion directly in point to the question raised before me and I would respectfully adopt it in reaching the conclusion I have expressed.

So completely does the decision in Dunedin City Corporation answer the objector's contention that only brief reference need be made to reported Australian decisions where, except for the decision of
the NSW District Court in MacMahon v the Valuer GeneraI (1953) 5 LGA 131 (a case involving improved value), the objector's present contention does not appear to have been previously argued in the context of determining improved value or assessed annual value .

In MacMahon it was held, at I32, "that the fact that a person is licensed to sell Liquor on premises must be taken into consideration in arriving at the improved value of the land on which the premises stand.

In Any other cases, eg Tooth and Co Ltd v. The Valuer General (I953) 19 LGR 172; R. v Municipality of Devonport; Ex-Parte Ferrall (1949) Tas SR I65; and Cooper v. City of Perth (1960) 7 LGRA 396, various superior courts, in determining the assessed annual value of land comprising premises licensed under the relevant Liquor Act, have implicitly assumed that such value would reflect any enhancement due to the fact that the premises were licensed to see liquor. Obviously these decisions do not directly reject the objector's present contention because they did not encounter any similar contention. However, they certainly demonstrate a long history of judicial decisions in Australia
which are entirely inconsistent with the objector's contention and which, if the objector's contention be correct, must be regarded as having been decided per incuriam.

Additionally I would briefly refer to cases where obiter dicta are to be found expressing the opinion that in determining the improved value of land where that land comprises premises licensed under the Liquor Act, the effect on value of the licence is to be taken into account: see In re Land Tax Acts-, Wilson's case 392 VLR 399 at 404; Barsby v. The Valuer-General (I937) 13 LGR173 and Tooheys Limited v. The Housing Commission of NSW (I952) 20 LGR 236 at 255. Reference might also
be made to the decision of Knox J in Daniell v. The Federal Commissioner of Taxation (I928) 42 CLR 296

Finally I would refer to the English decision annotated in Ryde on Rating, 13^th Edn pp. 598-6I2 applying the principle that the valuation must be "rebus sic stantibus" in holding that the Liquor Licence applying to premises must be taken into account in determining the annual value of rateable property. The objector sought to avoid this long-established line of authority by asserting that the English rating system was relevantly different ho the Australian rating system. The New Zealand Court of Appeal in Dunedin City Corporation decisively rejected a similar argument in relation to the New Zealand rating system for the detailed reasoning set forth in their judgements which in my
respectful opinion is convincing and correct. In my opinion that reasoning is similarly applicable here and I would reject the objector's argument and hold that the reasoning of the English decisions in relation to the annual value of licensed premises is applicable to the determination under the Valuation and Act of the assessed annual value of land comprising licensed hotel premises.

As with the reasoning in Dunedin City Corporation, I likewise find the reasoning of the English decisions entirely convincing and respectfully adopt it.

Additional support for the conclusion I have reached on this question to be found in a source not addressed in the course of argument. The additional support (which is entirely separate from the reasons that have led to my conclusion) is found in the presence in the Valuation of Land Act of section 58AA inserted by the Valuation of Land Amendment) Act I984 (Act No 120). That section provides for "allowances for hoteliers" to be made in the assessed annual value of land including land "to which a publican's Licence related" as at relevant base dates occurring before 1 July 1983 (subsection (2)). The allowance provided by subsection (2) equal to:

(a) the licence fee last payable before the base date in respect of the granting or renewal as the case may require of the publican's licence; or
(b) 20 per cent of the assessed annual value.

whichever is the lesser.

Subsection (9) provides as follows:

Notwithstanding anything contained in this or any other Act, a rating or taxing authority referred to in section 47 in levying rates or taxes on the assessed annual value shay levy rates or taxes as the case may be upon the amount of that value after deducting therefrom the amount of any allowance referred to in subsection (2) (3) (4) or (5) and ascertained in respect of that value.

It is obvious that the scheme of section 58AA based upon the implicit assumption that the assessed annual value of land (to which a publican's licence under the Liquor Act 1912 related as at  the relevant base dates) reflect the enhanced value of the land by virtue of it comprising hotel premises licensed under the Liquor Act 1912. Since the legislature is not to be presumed to have
legislated in vain the enactment of section 58AA strongly promotes the construction of section 7(I) that the assessed annual value of licensed premises is properly to reflect any enhancement in value due to the existence of the licence. In the present state of the law, where the question raised by the  objector's contention appears not to have been authoritatively pronounced upon by the courts in Australia, the court, in encountering the contention for the first time should not interpret section 7(1) in a manner that ignores the legislature's understanding of section 7(3) or defeats the clear purpose of section 58AA: cf. Statutory Interpretation in Australia, 3rd edn by Pearce and Geddes, paragraphs 3.25 and 3.26.

Accordingly, for all the foregoing reasons I answer the first question by holding that the assessed annual value of the subject premises should reflect the enhanced value attributable to the fact that the land comprised as at the relevant valuation base date, hotel premises Licensed under the Liquor Act 1912.

It follows that I must reject M R's' valuation of 454,168 which ignores the fact that the subject land comprises hotel premises licensed under the Liquor Act 1912.

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