In Leichhardt Council v Seatainer Terminals (1976) 24 The Valuer 500 the Supreme Court of NSW was another case where the court had the opportunity to use a method of valuation other than direct comparison of sales with opportunity cost adjustments. Again, the Court chose the more reliable sale evidence.

The land in question was raw land below the high water mark at Glebe Island and vested in the MSB by statute. The site was improved into a modern container terminal at great cost. Leichhardt Council appealed against the valuation of the site for property tax purposes on the basis that the site should have been valued by the "cost method" rather than the one adopted in the Land and Valuation Court; the use of a sale of industrial land with no water frontage at Botany Bay (the other side of Sydney).

The problem was that there were no sales of comparable lands available and it was basically a unique site. That was the reason that the cost approach was adopted by the lower court. Moffit J argued that the process of judicial decision is founded on reasoning based on facts which includes experience. This is the same for valuations:

Decision or opinion so based if directed to deciding what an amount is, could equally be x, 2x or 5x.

Moffit J used a sale at Botany Bay of industrial land with no water frontage in area not developed industrially to the same degree as the subject site. Therefore, the sale required extremely large adjustments to make it comparable to the subject site. The difference was arrived at by adjustment based on a sale in a highly industrialised area and having some water frontage but quite different in type, access location to the subject site. Then, a further adjustment was made to allow for the deep water frontage of the subject site. Both adjustments were substantial:

1. Initial price: $350 000/ha
2. Adjusted by reference to the second sale to about $600 000/ha
3. To this was added $100 000 and $120 000/ha respectively (the site was treated as two separate parcels of land) to allow for the deep water frontage.

The final adjusted figure was about twice the initial sum. In valuation practice it is hard to imagine such a sale as being "comparable". Why did the court reject the cost method despite the dearth of sale evidence?

It can only argue that there should have been resort to the cost method if, as a matter of law, for example the absence of evidence, the other methods were unavailable.

His honour went further arguing that the cost method involved the making of a judgment or an adjustment which is arbitrary in that it lacks support from any experience such as sales experience. the cost method must be subject to a judgment being made as to whether the price will bring to account cost or less than cost. It is difficult to determine the requisite discount on the actual cost particularly in the absence of sales evidence. Therefore, expressly and impliedly he has singled out two problems with the cost method:

1. Cost is only a reliable method for the valuation of buildings if those buildings represent the highest and best use of the site - Horn v Sunderland Corp.

2. If the buildings are the highest and best use then the accrued depreciation can only be reliably determined from comparable sales. This is a circular argument as if there are comparable sales then there is no need for the cost method and direct comparison can be used.

Ash J in the same judgment agreed with Moffit J. Concerning the comparable sale:

Quite unable to put these sales aside as being irrelevant or slightly relevant so that they should not be considered; and that view is only emphasized when an experienced valuer has currently applied his judgment to appropriate adjustments for the valuation of the subject lands.


The interesting thing about the Seatainer case is that it underlines the fact that there is no such thing as a lack of sales evidence. If the courts are prepared to accept a non comparable sale on the other side of the city requiring two adjustments to bring into line, then there can be no situation where there are no sales evidence.