Definition of capital value – market value and capital value – Rating Valuations Act 1998, ss 2, 20 and 21 – Local Government (Rating) Act 2002, s 13 – Rating Valuations Rules 2008 – valuation methodology – rating valuation SunGold kiwifruit orchard
Bushmere Trust v Gisborne District Council  NZCA 290.
Note: Councils set rates by multiplying a property’s rating value by a differential, a percentage. The rating value is done using the rules made by the Valuer-General under the Rating Valuations Act 1998. The valuation method is either the land value (LV) or the capital value (CV). All New Zealand councils use CV. The difference between the two methods is that CV includes a value for the improvements on the property and reflects the market value.
This is an unsuccessful appeal by Bushmere from a High Court decision upholding the council’s rating valuation of its SunGold kiwifruit orchard.
The Valuer-General approved a change in approach to the rating valuation of SunGold orchards in 2020. The change allowed the valuation to more closely reflect the market value by including the value of the Zespri licence that growers of SunGold must obtain. Previously, a deduction was made for the value of a licence, which reduced SunGold orchards’ value so it was in line with green kiwifruit orchards.
Bushmere’s orchard was in the Gisborne District Council’s area and was valued and rated by the council. Under the new approach, Bushmere’s orchard was valued at $4.1 million whereas, under the previous approach, the value would have been about $2.8m.
Bushmere successfully objected this new valuation in the Land Valuation Tribunal, but the decision was overturned on appeal by the High Court. In the Court of Appeal, Bushmere argued the High Court was wrong to have allowed the inclusion of a value for the licence because it was personal property rather than an improvement and not tied to the land. Further, the purpose of rating valuations is to maintain consistency for rating purposes, not to determine market values.
The council submitted that CV was a proxy for market value and that the sale price of the land would reflect the value of the licence. The Valuer-General, as an interested party, submitted SunGold vines were improvements and the licence was relevant to determining the CV.
Applicable principles: whether CV is generally similar (not synonymous) to market value – whether CV is limited to fee simple – Re Wright’s Objection  NZLR 920 – Valuer-General V Mangatu Inc 3 NZLR 641(CA) – Toohey’s Ltd v The Valuer-General  AC 439 (PC) – Re 110 Martin Street, Upper Hutt  2 NZLT 15 – whether improvements are part of CV – valuation of improvements unnecessary – improvement value equals CV less LV – Rating Valuations Act 1998, s 20(1) includes vines in CV – s 21 irrelevant – procedure for new value addresses market fluctuations – SunGold and green kiwifruit cannot have same value.
Held: Appeal dismissed. The SunGold vines are improvements for CV purposes and a CV for a SunGold orchard cannot be assessed without including the licence value. A CV is not a market value but is “generally similar to market value”.
Bushmere’s approach would mean SunGold orchards would be given the same value as green kiwifruit orchards, which would defeat the purpose of CV. It would also ignore the market reality that SunGold orchards are generally sold for a higher price.