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.
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).
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:
or opinion so based if directed to deciding what an amount is, could
equally be x, 2x or 5x.
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:
Initial price: $350 000/ha
Adjusted by reference to the second sale to about $600 000/ha
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
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
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.
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:
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.
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
J in the same judgment agreed with Moffit J. Concerning the
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
THE SEATAINER CASE
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