Australian Postal Commission v Melbourne City Council [2005] VSCA 295

10 Of course Mr Brown did not suggest that market value of the GPO was nil. In cross examination he accepted that it might command a price of some millions of dollars, even as damaged. But his point was that market value reflects the potential for change of use and improvement over time, and he said in effect that, as he construed s.2(8), he considered he was bound to value the land as if there could not be any change in use or improvement over time.

11 Mr Buckley did not disagree with the logic of Mr Brown's thesis. In cross examination he conceded that it would be illogical to purchase a burnt out post office and spend $12 million on repairs if its value following repairs would be only $8 million. But he made the point that there is a market for Heritage listed properties which may be demonstrated by comparative sales value data, and he said that it is so because, despite the restrictions which Heritage listing imposes, buyers perceive heritage listed properties to have potential for change in use and for improvements and hence for development over time.

12 Mr Buckley said that, as he construed s.2(8), it did not exclude potential for change in use or improvement over time and it followed, in his opinion, that the most appropriate method of valuation was to establish a capital improved value by direct comparison to sales of comparable heritage listed properties (and then to determine the site value by deducting the estimated value of the improvements in their damaged condition). He explained that his analysis of sales of comparable heritage listed properties yielded a capital improved value of the total site (including the GPO in its fire-damaged condition) of $2.86m, from which he then deducted a sum of $570,000 representing the value of the fire-damaged improvements, resulting in a total site value of $2,290,000 and a site value for the GPO (after excluding the contiguous Chelsea House building) of $1,930,000. Mr Buckley added that the approach which he had adopted was the approach ordinarily used in Council valuations of Heritage listed properties and he said that in his opinion it provided an accurate reflex of the effect of Heritage listing.

13 VCAT accepted Mr Buckley's valuation and thus confirmed the supplemental assessment.

The construction of s.2(8) of the Valuation of Land Act

14 In as much as s.5A begins with the words: "Unless otherwise expressly provided," it suggests that the principles of valuation adumbrated in s.5A(1) were intended to yield only to any express contrary provision. But, because s.2(8) begins with the words "despite anything in this Act", we read s.2(8) as prevailing over any inconsistency, express or implied.[1] It follows, as a matter of the plain and ordinary meaning of the words of the two provisions that, to the extent of any express or implied inconsistency between ss.5A and 2(8), s.2(8) should prevail.

15 Counsel for the applicant submitted that there is evident inconsistency between s.2(8)(a)(i) and s.5A(3)(a) in respect of which s.2(8)(a)(i) must prevail. As he put it, the requirement in s.2(8)(a)(i) that land be valued on the basis that it may be used only for the purpose for which it was used at the date of valuation means that any higher or better use and any other potential use of the kind referred to in s.5A(3) must be excluded from consideration. He contended that the words of s.2(8) are to be construed according to their plain and ordinary meaning and that as so construed they leave no room for any other interpretation.

16 Counsel for the respondent accepted the first part of the applicant's contention, but not the second. He agreed that the effect of s.2(8) is that land which is subject to heritage restrictions must be valued as such. But he submitted that s.2(8) does not exclude from the valuation such potential as there may be for the restrictions one day to change. As he put it, there is plainly a market for heritage listed properties and, as the evidence shows, they change hands at prices which reflect their potential for change. And, he submitted that, in as much as it may be supposed that the purpose of the Valuation of Land Act is to produce valuations that are a true reflex of the value of property, it should not be thought that s.2(8) was intended to exclude that potential for change.

17 In our opinion the applicant's contention is correct. Under s.5A the determination of the value of land on the basis of the highest and best use of land requires that the land be considered with all its attributes, existing and potential, at the relevant moment for assessment of value. One must consider the potential uses to which it might be put assuming the restrictions to which it is subject at the time of valuation.[2] Therefore, putting aside the effect of s.2(8), a valuer of Heritage listed land would be required to value it on the basis of all potential uses to which the land might be put under the existing heritage restrictions and consequently would have to take into account any uses to which the land was not being put but might lawfully be put under existing restrictions. Under s.2(8), however, one is expressly directed that the valuation of Heritage listed land must be undertaken on the basis that the land may be used only for the purpose for which it was used at the date of valuation, and so, according to the plain and ordinary meaning of the terms of s.2(8), the valuer would not be permitted to take into account any other use to which the land might be put under existing restrictions. Furthermore, whereas under s.5A a valuer is directed also to take into account "any potential use", which we take to mean any use to which the land might be put in future if existing restrictions were altered in a way which at present seems conceivable, under s.2(8) the valuer is expressly directed that the valuation is to be undertaken on a basis which excludes any use other than the existing use, and therefore, as it seems to us, which necessarily excludes any potential for change to existing restrictions.

18 Counsel for the respondent adopted by way of contrary submission the decision of the Land Valuation Board of Review in Brenchley Gardens Pty Ltd & Ors. and City of Caulfield.[3] In that case the Board was concerned with the valuation of a heritage listed property called "Rosecraddock" under Part X of the Local Government Act 1958 and, in particular with the effect upon the valuation of s.254(4A) (which was in terms substantially identical to s.2(8) of the Valuation of Land Act). As in this case, the dispute was whether the section excluded from the valuation any potential for a change in use, and the Board held that it did not. As they put it:

"... the starting point is the registered building in its actual state (frozen, so to speak) at the particular point in time... and excluding any potential for any higher or better use which, at that time, depended upon something being done to the building for which a permit from HBC would have been necessary. (Were it otherwise, there would be no (or very little) room for such potential to be captured under s.258(2)(db)(iii). At the same time, we believe there has to be some recognition of any chance there may have been (and here we find there was such a chance) of an application to HB for a permit to carry out works consistent with, or for the purpose of the continuance and maintenance of, the current use being likely to succeed. In other words, premises such as these (in contrast to a ruin destined to be preserved untouched forever) need not be valued as if condemned to remain in their physical state at the relevant time, but as (in appropriate cases) offering or embodying whatever potential there may be to make some application to HBC for a permit..."[4]

19 With respect, however, we do not find that persuasive. We acknowledge that to construe s.2(8) in the fashion which we have suggested produces a result which is remarkably beneficial to the ratepayer. One may wonder why Parliament should have thought it appropriate to value and rate heritage properties at values below market - unless perhaps it was to discourage applications for changes in restrictions and consequent re-development of such properties. But the words of s.2(8) seem to us so clearly to exclude consideration of uses other than the existing use that it is not reasonably open to construe them as allowing for any potential for change.[5] To do so would necessitate reading words into s.2(8) which are not there, and given the clarity of the language of the section and the apparent lack of contrary purpose, we do not think that is permissible. In terms of the three part test propounded by Lord Diplock in Wentworth Securities Ltd v Jones:[6] it is not possible to determine from a consideration of the Act read as a whole precisely what "the mischief" was at which s.2(8) was directed (except of course that it was intended to allow for temporary concessional treatment in the case of heritage properties in relation to valuation for matters such as municipal rates, as a trade-off against the stringent restrictions which become applicable in relation to alterations, modifications and removal of buildings once they are entered on the Victorian Heritage Register); it is not apparent that the draftsman and Parliament have by inadvertence overlooked and so omitted to deal with an eventuality that required to be dealt with if the purpose of the Act were to be achieved; and, on any analysis, it is not possible to state with certainty where the additional words would have been inserted by the draftsman and approved by Parliament.[7]

20 Moreover, unless s.2(8) is read according to its ordinary and natural meaning, and thus in the sense in which we have construed it, we are unable to see what function it would serve. As matters stand, the sort of valuation that was produced by Mr Buckley, which takes account of existing heritage restrictions but allows for the potential for change and development over time, is exactly the sort of valuation to which a valuer should come under s.5A in the absence of s.2(8). More specifically, the terms of s.5A would be sufficient in themselves to ensure that a heritage property was valued to market (in the way that Mr Buckley has valued the GPO) and so therefore that the valuation ascribed to it accurately reflected the restrictions upon use and development which the existing heritage controls may impose. Consequently, unless s.2(8) be construed as providing for something further and different, it would be otiose. It is, however, a basic principle of statutory interpretation that words in a statute are not ordinarily to be construed as superfluous or insignificant. And that rule applies with greater force where, as in the case of s.2(8), the provision in question has been added by amendment.[8] Given, therefore, that the plain and ordinary meaning of the words of s.2(8) yields a result which is different to the unqualified terms of s.5A and that, although remarkable,

that result is neither irrational or capricious or otherwise contrary to any apparent purpose of the legislation, we see no basis to construe the section otherwise than as the applicant would have it.

21 It follows in our judgment that the application for leave to appeal should be allowed. The appeal should be taken to have been heard instanter and allowed and the decision the subject of appeal should be set aside. In lieu thereof we would order that the applicant's objection against the supplemental assessment be allowed and that the supplemental assessment be reduced to nil.

22 The applicant contended that that the cost of repairing the site, at $9.2m[9] would exceed the 2001 market value of the property of $8.5M (discounted to cash) which was based on an intact and restored GPO. To demolish the remaining burnt out frame and re-build the GPO was estimated to cost between $49M and, as at 2002, $58M. Thus, so it was submitted, no rational and fully informed purchaser, would be interested in purchasing the property unless there was a reasonable prospect of altering the use to which the property might be put. That possibility, so the applicant contended, was the very factor which s.2(8) of the Valuation of Land Act 1960 expressly prohibited being taken into account by the valuer. The Tribunal wrongly acted on the opinion of the valuer Mr Buckley, whose opinion that there was a market for the building in its burnt out condition was inappropriately predicated on the possibility of altered use.

23 The question then is this. Was the opinion as to site value provided by Buckley one which gave primacy to s.2(8), in particular, by calculating site value on

the basis that the land could be used only for a GPO and that only such improvement as had been on the land as at the date of the fire could be continued or maintained thereafter on the land? The applicant contends that it did not and that Buckley's valuation was predicated upon a market comprising willing purchasers who must have had regard to the possibility of being able to vary the usage from that to which the land was presently restricted.

24 When questioned about his approach Buckley said that the reasonable purchaser considering buying this fire-damaged GPO with its limited usage "would consider its alternative uses and the other potential within the property". He expanded on that by reference to the development under a 99 years lease between the applicant and Melbourne GPO Pty Ltd that had been agreed before the fire. Under that agreement the developer was to refurbish the GPO building for retail/commercial purposes, demolish the Chelsea Girl building and carry out some new construction work over the Little Bourke Street courtyard[10].

25 Buckley said that some flexibility ought to be allowed for the concept of use as a post office. He said that as with the development proposed under the 99 year lease "there's other development, there's other potentials in the site". He was asked whether he valued the site by assuming "other potentials" but denied that, saying, "No, we valued it pretty much as it was but we took a general view in relation to the evidence that we had on the subject property". He said that a potential use could not be something as radical as, say, usage as a backpackers' lodge, but he added:

"Well, like Mr Brown, I've valued post offices in various locations and they do get used and in fact it has been their practice to lease out parcels for retail use and I can't see that that, even artificially, can be taken out of it by the Act. It's not meant to be that tight I wouldn't think, but I might be wrong in making that assessment ... what my assumptions would have included was that other uses can be reflected under the use of a general post office which is essentially retail on the ground floor and offices on other levels. As Mr Brown mentioned, a

form of industrial or storage uses in other areas where the other uses in the building would be used."[11]

26 The applicant's valuer, Mr Brown, did not disagree with Buckley that as at the date of the valuation in question there was a market for the burnt out shell of the GPO. In his evidence Brown agreed that, while it would be difficult, a buyer might be found, even though the investment might be an unwise one. He said that there were people around who had a passion for heritage buildings, and some people had purchased heritage property, especially residential properties, and spent considerable sums of money without regard to recouping their investment. When discussing such heritage enthusiasts Brown implied that their interest in such property was not predicated on the possibility of altered land use, but he was not clearly asked that question, nor did he volunteer that those interested in purchasing a heritage property such as the GPO, rather than residential property, might be equally disinterested in the potential for varying the land use to which the property was presently restricted.

27 The applicant contends that Buckley's approach is prohibited by s.2(8); that that provision does not permit any use other than the use as the General Post Office which was permitted at the time of the fire. Accordingly, the market on which he based his valuation was one which could not exist if s.2(8) was given its proper primacy, and what Buckley was in fact doing was applying the broader notions of "potential use" under s.5A(3)(a), which consideration was expressly rendered inapplicable because, in the terms of s.5A(1) that was a factor as to which s.2(8)(a)(i) "otherwise expressly provided", thus no account was to be taken of it.

28 There is, of course, a degree of absurdity in the notion that the GPO site, whatever be the state of the building above it, might have a nil site value. That sense of absurdity must give way, however, if the clear terms of the legislation require that result. In any event, as the Tribunal noted in its reasons, the mechanism for the valuation and supplementary valuation of property has a certain artificiality about it anyway, requiring for example, that a valuation of land be made as at 1 December 2000 of a damaged site, that damage not having occurred until after that date.

29 Furthermore, the nil valuation might be an appropriate outcome when regard is had to the circumstances that attend the restricted usage of heritage properties. It is inevitable that the restrictions imposed under the Heritage Act 1995 would have a pronounced impact on capital improved value, net annual value and site value of land. Thus, there is a logic in s.2(8) expressly requiring that those calculating such values do so solely on the basis of the restricted usage imposed over the land by the Act. Counsel for the applicant submitted, therefore, that it would be appropriate that the owners of heritage property, being so limited in the use they could make of it, might at least gain some trade-off for their contribution to the heritage of the community by way of reduced rates.

30 Even allowing for the unique situation of the burnt out GPO building, the terms of s2(8), in my opinion, do not expressly deny the application of Mr Buckley's wider understanding of what might constitute use as a post office. Put another way, reference to the potential use of the property as a post office is not expressly denied by the terms of s.2(8), in my opinion. In those circumstances, I am not persuaded that the Tribunal was obliged to ignore the market which was identified by Buckley as the basis for his valuation. Accordingly, I am not persuaded that the Tribunal fell into error in its interpretation and application of s.2(8) when adopting the opinion of Mr Buckley.

31 The applicant made other complaints as to the evidence of Mr Buckley, in particular that there was no foundation for his adoption of a figure of $100 per square metre in valuing a damaged heritage-listed building shell. The Tribunal held that he had relevant expertise and experience to make that assessment. Counsel for the applicant submitted that there was no foundation for this evidence, as Buckley had not inspected the improvements upon which he applied his $100 figure; he had no expertise as a quantity surveyor or as a builder; he merely adopted the untested opinion of another valuer, who had also failed to inspect the property; and he had made unjustified assumptions as to the extent of damage to the second and third levels of the building.

32 In my opinion, these criticisms go only to the question of weight. As Mr Pizer submitted, no objection was taken to the qualifications of Mr Buckley, who had thirty years' experience as a valuer. Although he made use of the calculations of Council employee and valuer Linda Boyd, cross-examination revealed that she had made detailed notes of the fire damage. Whilst he had not inspected the fire damage himself at that time, he had subsequently done so. Buckley was challenged as to the justification for his $100 figure but maintained its appropriateness, whilst acknowledging that a valuation was no easy task for fire-damaged property. In adopting the figure reached by Ms Boyd he thereby reduced the figure that he had intended to apply, and did so to the benefit of the applicant.

33 The Tribunal was not bound to apply the rules of evidence[12] and this Court must make allowance for its expertise as the specialist tribunal concerned with land valuation issues. In my opinion, it was open to the Tribunal to accept this evidence.

34 Other complaints were made as to Buckley's calculations in reaching his site valuation. He acknowledged that he had made an error in calculating the building area, having adopted a much lower gross building area of 5727 square metres rather than the correct 8844 square metres. That had the effect of reducing the amount of rates payable by the applicant, and the respondent did not seek to revalue the liability of the applicant by reference to the correct building area. The applicant contended that the error demonstrated why Buckley's evidence ought not have been accepted but it was open to the Tribunal to conclude, after hearing his explanation for the error, that it did not affect his methodology nor the reliability of his evidence.

35 In my opinion, the grounds of appeal have no reasonable prospect of success and leave to appeal ought be refused.

[1] Cf. Bland Bros. and Council of the Borough of Inglewood (No. 2) [1920] VicLawRp 95; [1920] V.L.R. 522 at 533.

[2] Equity Trustees Executors and Agency Co Ltd v MMBW [1994] VicRp 39; [1994] 1 VR 534 at 542

[3] Appeal No.91/A32, 11 October 1991; (which we were told has since been followed on a number of occasions by the Land Valuation Board and more recently VCAT).

[5] cf. R v. Young [1999] NSWCCA 166; (1999) 46 N.S.W.L.R. 681 at 687-8, per Spiegelman, C.J.

[6] [1980] A.C. 74 at 105-6.

[7] See also Newcastle City Council v. GIO General Ltd [1997] HCA 53; (1997) 191 C.L.R. 85 at 113, per McHugh, J.A.

[8] Project Blue Sky Inc v. Australian Broadcasting Authority [1998] HCA 28; (1998) 194 C.L.R. 355 at 382[71]; Transport Accident Commission v. Treloar [1992] VicRp 31; [1992] 1 V.R. 447 at 462; Pearce and Geddes, Statutory Interpretation in Australia 5th Ed. at [2.22].

[9] The earlier 2001 estimate had been $11.5M to $12M.

[11] In his evidence Brown agreed that at the time of the fire the land was being used as a post office, for retail sales and for offices.

[12] S.98(1) Victorian Civil and Administrative Tribunal Act 1998