In re Taiinu Sections 2A and 2B2 [1984] CKHC 7; No. 40.1983 (17 August 1984)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(Land Division)

No. 40/83

IN THE MATTER

of TAIINU SECTIONS 2A AND 2B2, Ngatangiia

AND

IN THE MATTER

of a DEED OF LEASE dated the 7th December 1950

Mr McFadzien - for the Landowners;
Mr Clarke - for the Lessee.

Judgment delivered:- 17^th August 1984

This is an application by the present Lessee of the above land for the Court to determine its value as at the 30th November 1980.

The present Lessee is Jean Worthington who has had to apply to the Court previously for relief against the forfeiture of her lease by the owners for serious breaches of her obligations under that Lease. Suffice to say that through unusual circumstances both she and the land owners have suffered financial losses. The run of bad luck, if it can be called that, has continued even to this application since it is only now that the file, with the evidence and the supporting details of valuations, has been located and this Judgment completed. The Court apologies for the delay as a result of the file being misplaced.

This property comprises an area of 3 acres 2 roods 10 perches, located between the Main Road and Muri Beach. It has a Main Road frontage of. 69 metres; a beach frontage of 56.35 metres according to Mr Clarke; of 65.7 metres according to the evidence of Mr Tylor; and a depth of 172.5 metres.

Its location at Muri was extolled by Mr Tylor and conceded by Mr Clarke as "a superior site to Aorangi and to the Rarotongan Hotel site. Muri generally is superior to the Little Polynesian area but the beach area of the Little Polynesian reduces the overall difference." To be fair however Mr Clarke claimed that comparisons of beach and main road frontages with the Rarotongan Hotel; the Beach Hotel; the Edgewater Hotel; and the Little Polynesian Hotel all indicated that the present land "is far inferior" to those other Hotel properties just listed.

Mr Clarke then went on to categorise this land into areas of not usable or having very limited use or value as follows:

Taro area	1500	m2
Stream (½)	250	m2
Divided by Stream	1100	m2
Below vegetation	300	m2
	3150	m2

Relating those areas to comparative values Mr Clarke claimed that the total valuation should be $36,100. He arrived at this figure by valuing the beach area at $25,000 per acre; the main road and good land at $10,000 per acre and the Taro and low lying land at $3,000 per acre. The areas so valued I find difficult to reconcile with the total area. As I understand Mr Clarke's submissions he says –

Superior beach area		2000	m2
Remaining beach		1000	m2
Main Road and good land		8000	m2
Taro and low lying		1500	m2
	12500		m2

As I calculate the total area to be 14,250 m² the difference is 1,750 m². From the earlier division of limited use land referred to above, that is 3,150m², the balance over the Taro land is 1,650 m²? However I don't believe this discrepancy in the long run will affect the overall valuation I am required to make.

Mr Tylor referred to the Little Polynesian valuation of $30,000; the lease of the Marine Zoo area which was just outside that area he had marked as yellow on a plan produced showing the very desirable sections and locations fronting on to the Muri Beach; he referred to the 1,200m² section leased to South Pacific Consultants Ltd for $16,500 in 1982; another ½ acre section nearby leased to Mr Swoboda in 1982 at a premium figure of $20,000; and, again outside the area marked yellow on his map, a ¼ acre section leased to Mrs Nicholas in 1978 at a consideration of $10,000. However the important point stressed by Mr Tylor in his evidence was that the area marked yellow on his map was the prime area of Muri Beach; that Muri Beach was acknowledged as the best location in the whole of Rarotonga; and that this property was in the very centre of this prime area. This Mr Tylor claimed with some justification made this section one of the best on Rarotonga.

In arriving at his estimate of value for this property Mr Tylor valued the beach front at $30,000; the middle and road front at $40,000 and the low lying area at $1,000, a total of $71,000. He believed however that as a commercial proposition for hotel or motel development the section as a Block would be valued at between $90,000 and $100,000.

There is no doubt that this is a desirable section situated on the best beach frontage on Rarotonga; from a development point of view it has the added advantage of area uncluttered by occupation rights or other similar restrictions. Perhaps at this point I should observe that this value assessment relates to the second term of 30 years of the Lease in favour of Mrs Worthington. The rental for the first 30 year term of the lease was $14 p.a. as from 1st December 1950. This highlights the unfairness to Lessors of 21 of 30 year lease terms before any review of rental is undertaken. However now it will probably highlight the difficulties of the Lessee in trying to cope with a one residential section usage while paying a rental based on commercial property comparisons as have been submitted by both Counsel. The advantages to both parties in negotiating a new lease at this time would seem very desirable - the owners could have developed their land as a hotel or motel while at the same time giving Mrs Worthington a ¼ acre or less for the next 30 years or more as a residence. Now the probable outcome of any rental I fix will mean that the landowners will be receiving too little while Mrs Worthington will be paying too much. A negotiated arrangement would have corrected both anomalies which will flow from any decision I make. However these observations are an aside and I am required now to determine the valuation on the facts presented.

The comparative values may be summarised as follows:

1.	Rarotongan Hotel – 8 acres, 1 rood, 14 perches- Valuation 1982 - $20,000 per acre
2.	Edgewater Motel Valuation 1979 - $10,000 per acre
3.	Beach Hotel Valuation 1979 - $10,000 per acre
4.	Little Polynesian Hotel – 1 acre, 2 rood, 13 perches – Valuation 1979 - $20,000 per acre
5.	Tamure Hotel (adjoining site) Valuation 1981 - $9,600 per acre

Mr Clarke submits that the ratios of the depth of this section "to the beach frontage and main road frontage (where applicable) is far inferior to the other properties." Conceding that this may be so the acknowledged superiority of this site to Aorangi and the Rarotongan site is confirmed by Mr Clarke. He goes further and concedes that Muri generally is superior to the Little Polynesian area and this must of necessity offset any disadvantages based on ratios of depth to beach frontage. For these reasons the following comparisons of the established valuations of the Rarotongan Hotel and Little Polynesian Motel fixed in 1982 and 1979 respectively would be relative to this present exercise, viz:

(a)

Little Polynesian area

=

1a

2r

13p

x21/4

=

3a

2r

09p

The valuation of 1a 2r 13p = $ 30,000 x 21/4

= $ 67, 500.00

Thus, on a comparative area basis of this section of 3a 2r 10p i.e. 21/4 times the size of Little Polynesian – a valuation of $67,500 is arrived at.

(b)

Rarotongan Hotel area = 8a 1r 14p

The ratio to the present site is 33:14

The Hotel valuation was fixed at $166,666.00

166,666

x

14

=

$ 70,706.00

1

33

(c)

This land at Muri comprises 3a 2r 10p Valued at $20,000 per acre - the valuation fixed for both the Rarotongan Hotel and the Little Polynesian Motel - the total valuation is $71,250.00.

Thus related to these comparative areas, one the lesser, the other the larger, and calculated at $20,000 per acre the results approximate each other. Mr Clarke would no doubt contend that it is unreasonable to place an overall value on the total area which would mean a $20,000 per acre valuation on that area of swamp which he values at $3,000 per acre. On the other hand Mr Tylor would no doubt contend that it is unreasonable to use a $20,000 per acre figure for beach frontage which he values at $60,000 per acre. However those are areas in isolation, and the variation from $60,000 to $3,000 indicates the anomolies that could flow from this isolation valuation approach.

This is a comparatively large Block of land, sited on an attractive beach frontage. It is acknowledged as probably one of the best sites on Rarotonga. It seems reasonable that it should be related to valuations established on other comparable sites. The Rarotongan Hotel and the Little Polynesian Motel sites are comparable and the valuation dates of those properties are relevant.

I therefore fix the value of this land as at the 30th November 1980 at $71,250 and a consequential rental of $3,562.50 p.a. Costs of $150 to be paid to Mr McFadzien.

Judge