Challenger Listed Investments Limited v Valuer General

The Valuation of the Land

1. The facts recited below, in part drawn from the judgment of Biscoe J in Challenger, have been agreed to by the parties for the purpose of these proceedings.
2. Challenger owns land which is located at 6 Foray Street, Yennora ("the land"). It comprises a manufacturing and distribution facility constructed between the 1960s and 1980s. The land was improved with a substantial warehouse and a former manufacturing plant which was originally purpose built for Tetra-Pak. These improvements include two high clearance warehouse buildings of brick and metal clad construction, a detached cavity brick office, and additional office space. However, as the Respondent's Statement of Basic Facts filed 25 November 2014 indicates (again, not a matter of contention for the purpose of this hearing), the land is contaminated. It was declared as Significant Contaminated Land by the Environmental Protection Authority pursuant to s 11 of the Contaminated Land Management Act 1997.
3. The VG determined the land value of the land as at the base dates 1 July 2011, 1 July 2012 and 1 July 2013, to be, respectively, $7.83 million, $7.49 million and $7.050 million under s 6A of the Act. In doing so, the VG disregarded the contamination of the land. It appears that it did so pursuant to a Technical Instruction concerning the Identification and Valuation of Contaminated Land (v1.0) ("Instructions"). Those Instructions stated that land effected by contamination, comprising sites with an existing use with known or ongoing contamination where the land is an operating site, were to be valued on the existing use value of the site and that no allowance was to be made for the detriment of any contamination pursuant to s 6A(2) of the Act.
4. By reason of the remediation costs associated with the land (there has been no order to remediate the land, but costings undertaken on behalf of Challenger indicate that it would cost approximately $5.9 million to decontaminate it), Challenger obtained valuation evidence assessing the land value as at all three base dates as nil.
5. At the objection stage, the New South Wales Land & Property Information ("the LPI") wrote to Challenger on 12 August 2014, indicating that under s 6A(1) of the Act, contamination was to be taken into account resulting in a land value of approximately $2.583 million, but that under s 6A(2) contamination was to be disregarded, resulting in a land value of approximately $7.63 million. The higher value was adopted.
6. The VG dismissed Challenger's objections to the determinations. Challenger therefore commenced three appeals against the determinations to the Court. Challenger contends that the land had no value by reason of the contamination as at the base dates in large part because of the cost of remediation of the contamination.
7. Initially, as stated in its Statement of Basic Facts, the VG contended that the determined land value was supported by market evidence as to the current use of the land, but that the decision by Craig J at first instance in Fivex Pty Ltd v Valuer-General [2014] NSWLEC 27 placed doubt upon its reliance upon s 6A(2) of the Act in arriving at its determinations. The VG then sought to rely on Leppington Pastoral Company Pty Ltd v Valuer-General [2010] NSWLEC 1023 in support of an argument that the contamination of the land could, in any event, be ignored because it was brought about through the use of improvements to the land which were to be disregarded under the Act.
8. The chronology of correspondence after the appeals were filed on 17 September 2014, is as follows: 1. on 24 November 2014 the legal representatives for Challenger wrote to the Crown Solicitor's Office ("the CSO") attaching an opinion of Mr Peter Tomasetti SC regarding the correct application of s 6A. That opinion stated that the value of the land had to necessarily take into account the fact that it was contaminated, as any prudent purchaser or vendor to its hypothetical sale would have regard to the contamination and the requirement that the land be remediated. Because this was a question of law involving the correct construction of the Act, Challenger invited the VG to agree on a statement of relevant facts and to list the construction question as a separate question for determination before a judge. The question of law was stated as follows: 1. Having regard to the agreed facts, is the contamination of the land a matter to be disregarded in the determination of "land value" under the Valuation of Land Act 1916? 1. the CSO responded by letter dated 25 November 2014. The letter stated that the VG did not agree that there was a question of law that could be determined in advance of the hearing, and repeated that it would be relying on the decision in Leppington, and the fact that under s 6A of the Act, the hypothetical vendor is not the actual owner (in other words, the hypothetical vendor was not necessarily the polluter who would, initially at least, be responsible for remediating the contamination under the Contaminated Land Management Act 1997); 2. on 1 December 2014 Challenger wrote to the CSO stating, first, that the decision of Craig J in Fivex did not deal with the question of the valuation of contaminated land and did not "change the law in relation [sic] valuing contaminated land at all." Second, that the VG's reliance on Leppington would not assist it because that decision was wrong in law. The letter stated that the "decision is a decision by a non-legally qualified Commissioner of the Court and failed to have regard to the relevant decisions of Judges of the Land and Environment Court and decisions of the Court of Appeal. Furthermore Leppington is not binding authority for any other case under the Valuation of Land Act 1916". Third, the letter noted the irrelevance of the proposition that the hypothetical vendor was not the actual owner under s 6A of the Act. Finally, it stated that Challenger maintained its position that the matter should proceed by way of the separate determination of a question of law in the terms that it had previously expressed; 3. on 10 December 2014 CSO wrote to Challenger stating that the VG did not agree to a separate question being heard in advance of the substantive proceedings because such a question would not necessarily be determinative of the proceedings. It was, moreover, also unclear whether or not the separate question would absolve the parties of the need to adduce evidence on the question of contamination; 4. the CSO wrote again to Challenger on 18 December 2014, in response to the service of Challenger's notices of motion seeking the determination of a separate question in all three matters. It proposed the notices of motion be stood over until such time as the appeal in Fivex be heard and determined. The letter went on to state that although the VG resiled from its original position which valued the land on the basis that the assumptions in s 6A(2) of the Act were enlivened in its letter dated 25 November 2014, upon further reflection, if the appeal in Fivex was upheld then the valuation approach originally adopted by the VG was correct. It was for this reason that the VG would seek to have the proceedings stood over until after the appeal in Fivex was heard and determined. The final paragraph of the letter stated as follows: If the interpretation that my client wishes to place on s. 6A(2) meets with approval in the Court of Appeal, my client will be relying on: That decision; The Land and Environment Court's decision in Leppington; The argument that the hypothetical vendor is not to be regarded as the actual owner

Proceedings Before Biscoe J

1. In the hearing before Biscoe J, the VG's current position was expressed in the letter of 18 December 2014 referred to above. As summarised by his Honour, it was that contamination was to be disregarded under s 6A for three reasons (at [11]): (a) First, on the basis of s 6A(2). The VG accepts that the decision of Craig J in Fivex is to the contrary, although that case was not concerned with contamination. However, as I have mentioned, the VG has appealed that decision and the appeal is to be heard later this month. In Fivex at [25]Craig J cited Trust Company of Australia v Valuer-General [2007] NSWCA 181, (2007) 154 LGERA 437 at [83] where Campbell JA observed that there had been judicial recognition that the purpose of what is now s 6A(2) is "to ensure that if land could not be newly developed for its present use under the relevant planning scheme, but can continue to be used for its present use by virtue of an existing use provision in the planning scheme, it can be valued on the basis of its existing use". Craig J held that as the highest and best use of the land in Fivex at each base date was for purposes that were permissible under the relevant planning instrument, the assumptions identified in s 6A(2) were not engaged: at [31]. In the case before me the highest and best use of the Land is for industrial purposes, which is permissible under the relevant local environmental plan. The VG's published policy, evidenced by written instructions of Land & Property Information for the valuation of contaminated land, has been that under s 6A(2) where the land is an operating site the valuation will be based on the existing use value of the site and no allowance will be factored in for the detriment of any contamination. According to the VG, this is contradicted by Craig J's decision in Fivex and thus the VG'S appeal against that decision has to succeed before the VG can rely on s 6A(2) not only in the present proceedings but generally. Challenger foreshadows a response that even if the Fivex appeal is allowed, Fivex is distinguishable. (b) Secondly, the VG contends that the contamination in this case is to be disregarded under s 6A(1) on the basis of the decision of Parker AC in Leppington Pastoral Company Pty Ltd v Valuer-General [2010] NSWLEC 1023 that where the source of contamination is improvements on the land, then since under s 6A(1) the improvements are assumed not to have been made, the consequential assumption is that the contamination from the improvements is assumed not to have been made: at [24] and [27]. This decision favours the VG. However, Challenger contends that the decision was erroneous. (c) Thirdly, the VG contends cryptically that contamination is to be disregarded under s 6A because "the hypothetical vendor is not to be regarded as the actual owner". The reasoning is unclear. I gather from what I was told from the bar table that it has to do with a contention that under the Contaminated Land Management Act 1997 the hypothetical vendor is not the polluter who is responsible for remediating contamination.
2. His Honour went onto note that if an order were to be made for determination of the proposed separate question, the second and third of VG's reasons would fall for consideration, but that the first reason would not arise for consideration unless the Fivex decision was overturned on appeal (at [12]).
3. The VG's submissions opposing the making of a separate question order were summarised by Biscoe J as follows (at [13]): 13. The VG submits that it is inappropriate to make the proposed separate question order for the following reasons: (a) it will not bring the proceedings to an end no matter which way it is answered because valuation evidence will still need to be prepared; (b) there are complex intertwined issues of fact and law; (c) there can be no agreed statement of facts without a thorough factual determination including the effect of the contaminants on the land and the source. This reason seems to have evaporated during the hearing of the motion when the facts were agreed: see above at [2]. (d) the argument on whether contamination is to be taken into account will not extend the hearing beyond a day, but determination of the separate question may delay the proceedings if either party seeks and obtains leave to appeal against it.
4. His Honour ordered the separate question on the basis that if the determination of the proposed question favoured the VG, viz, that a determination that contamination was irrelevant for the purposes of the valuation exercise to be undertaken pursuant to s 6A of the Act, this would substantially narrow the field of litigious controversy since it was the main issue in the case; equally, if the determination was that the contamination was relevant, then the further expense and time involved in addressing land value on this basis would be avoided. In addition, he considered the resolution of the issue carried with it a strong prospect that the parties would be able to resolve their dispute without further litigation (at [15]).
5. The transcript of the hearing before Biscoe J makes it tolerably clear that the VG repeatedly submitted that it could not rely on the operation of s 6A(2) because of the decision by Craig J in Fivex (T48.10, T47.30 and T45.40). In this regard, his Honour observed that he "would have thought that the Valuer-General would be very hard pressed to put to me, pending an appeal, that I should depart from his Honour's decision" (T26.15), but he acknowledged that if the VG had a decision from the Court of Appeal in its favour "then that's a different matter" (T26.18). His Honour went further and stated that if the VG got a favourable decision on appeal "then of course what that would seem to do would be to make the exercise under s 6A(1) pointless" (T27.17, and see similarly T31.20 and T57.43).
6. Nevertheless, Biscoe J rejected the VG's submission that the motions be stood over until after the Court of Appeal delivered judgment in Fivex. This was because the appeal only related to the VG's first reason for its determinations whereas the answer to the separate question would, in his opinion, determine the VG's second and third reasons (at [17]).
7. Accordingly, Biscoe J made the order for the separate question quoted at the start of this judgment. It will be immediately apparent that the ordered separate question is not the same question as that formulated by Challenger as contained in its motions. The transcript reveals that the inclusion of the additional words, "and that the source of the contamination are the improvements on the Land or their operation" were specifically added by Biscoe J in order to engage the controversy surrounding the correctness of Leppington (T57.37-57.44).
8. Thus, the separate question was effectively in two parts, first, whether, as a matter of construction, s 6A(2) was enlivened and with it, a mandatory consideration of the contamination of the land, and second, whether Leppington was correctly decided and the contamination was a consequence of the improvements and therefore could be, in any event, disregarded under s 6A(1) of the Act.

The Court of Appeal's Decision in Fivex

1. A mere 11 days after the hearing date of the appeal in Fivex, the Court of Appeal delivered its judgment (on 17 March 2015) overturning the decision of Craig J at first instance in favour of the VG.
2. Despite Challenger's suggestions to the contrary before me, as foreshadowed by the VG in the hearing before Biscoe J, the decision proved to be highly relevant to these proceedings insofar as the Court of Appeal's clarification of the operation of s 6A of the Act.
3. The Court of Appeal's analysis of text of s 6A(1) and (2) yielded the following matters of operation (at [27]-[36]): 27. First, in addition to the (often counterfactual) assumption that there be no improvements on the land, s 6A(2) requires further assumptions to be made. Subsection (2) is expressed in mandatory language ("it shall be assumed"). 28. Secondly, subsection (2) is expressed in general language ("in determining the land value of any land"). 29. Thirdly, the opening words of subsection (2) ("Notwithstanding anything in subsection (1)") are hierarchical words serving but one purpose, which is to make it clear that the subsection prevails over any inconsistent approach reflected in subsection (1). 30. It would be no small thing for other textual or contextual considerations to displace the ordinary grammatical meaning of the words referred to above. There are aspects of the reasoning of the primary judge that might be read to convey that there were times when the assumptions in s 6A(2) did not apply at all. I have in mind what was said at [29] ("For reasons earlier stated, the provisions of s 6A do not mandate application in all cases of the assumptions identified in subs (2)") as well as the conclusions in [31] and [32] reproduced above. As will be seen below, that is not the correct legal construction of the subsection. 31. However, it is one thing for the assumptions in s 6A(2) to apply; it is another for them to be operative in the determination of land value. 32. Subsection (2) draws an important and careful distinction between "may" and "shall". On the ordinary grammatical meaning of the subsection, certain assumptions shall be made. However, those assumptions are consistently expressed to be permissive. They are assumptions that the land may be used, or may continue to be used, and that improvements may be continued or made in order to enable the continuation of the use. 33. If there were doubt about it, the permissive nature of the mandatory assumptions is confirmed by the closing words of the subsection, whose purpose is to confirm that regard may be had to some other permissible use for a purpose. That is to say, the closing words of subsection (2) make it clear that although making an assumption as to how land and improvements may be used is mandatory, it is not exhaustive and if there be some other purpose for which the land may be used and which does not require the improvements to have been made, then regard may be had to it. 34. Hence, although in every case the assumptions in s 6A(2) are required to be made, it is clear that because they are permissive they need not be determinative or even material to the determination of land value. The largely unstated major premise of the section is that the value of the hypothetical sale of the "fee-simple" may be affected by the various ways in which it may be lawfully exploited, and that regard may be had to a range of possible uses in the determination of value, so as to select the "highest and best use": Trust Company of Australia Ltd v Valuer-General at [32]. 35. Finally, each of paragraphs (a) and (b) and the closing words of subsection (2) refers to the land being used. Moreover, the references to land being used in paragraph (a) and in the closing words expressly refer to the purpose of the use. The word "purpose" is absent from paragraph (b), however nothing turns on this. Paragraph (b) refers to enabling the land to "continue to be so used", and the word "so" refers back to the use for a purpose in paragraph (a). 36. The issue, ultimately, is whether the concepts of "use" and "use for a purpose" which recur in subsection (2) confine the meaning of the permissive assumptions which are required to be made.
4. Relevantly, this analysis makes it presently unarguable that the fact of the contamination of the land must be taken into account under s 6A(2) of the Act, together with the land's coexisting use. The effect of the contamination (including any need for remediation) will, however, continue to be a matter of fact for the valuer to be assessed in the valuation exercise undertaken pursuant to s 6A.
5. The Court of Appeal's rejection of the submissions of Fivex in respect of the proper construction of s 6A(2) (at [44]-[51]), also raises doubts as to the continuing correctness of Leppington: 44. First, I discount the extent to which principles from planning law provide assistance. Those are "principles" in the sense identified in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259 at [31], derived from a body of case law based on comparable legislative provisions. I acknowledge that they inform the legal meaning of "use" and "purpose" in the subsection. But they are far from determinative. They are of limited assistance in the different context of valuing the unimproved value of land, especially where, as here, the question is whether the subsection has a legal meaning which is narrower than its ordinary textual meaning. It is one thing to determine whether an actual use and an actual purpose in the real world complies with the applicable planning regime. It is a very different thing to make stated real world assumptions in order to value the hypothetical and highly artificial sale of the "fee-simple" of land, stripped of its improvements. 45. Secondly, if as Fivex submits and the primary judge held, the assumptions were only applicable to capture an "existing use", then it might be expected that s 6A(2) would incorporate that language. "Existing use" has long been a defined term in planning legislation. It is now reflected in Division 10 of Part 4 of the Environmental Planning and Assessment Act 1979 (NSW), and was present in cl 32 of the County of Cumberland Planning Scheme Ordinance which was central to the decision in Wunderlich Ltd v Valuer-General. Yet s 6A(2) uses different language which is capable of bearing a broader meaning. I acknowledge that those first two considerations are of relatively limited weight. 46. Thirdly, and to my mind critically, there is paragraph (b) of s 6A(2). Paragraph (b) goes beyond the use of the land, and speaks in terms of the improvements on the land. The paragraph refers at least in part to improvements in the real world, as appears from the verb "continued", a point noted by Handley JA in Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78 at [26]. If the operation of s 6A(2) were exhausted by ensuring that an existing use is one to which the valuation exercise may have regard, then it is difficult to see why paragraph (b) is needed at all. Conversely, the presence of s 6A(2)(b) requires, in particular, an assumption to be made that the improvements as they exist in the real world "may be continued". 47. In particular, it is difficult to reconcile the presence of paragraph (b) with Fivex's submission that the subsection proceeds on the basis of a distinction between the purpose of a use, and the nature of an improvement. A mandatory assumption as to an existing building in the real world continuing is inconsistent with the subsection applying only to use for a purpose and eschewing regard to the nature of the use. 48. None of this is to deny that what is to be determined is the unimproved value of the "fee-simple", stripped of those improvements. Necessarily, the task required by the statute is a highly artificial one. However, the statute refers in terms not merely to the purpose of the existing use, but also to the actual improvements in the real world that enable that existing use to continue. 49. Fourthly, only limited assistance is available from reasoning based upon avoiding anomalous results when the question of construction is as artificial as the present. Even so, there are difficulties with Fivex's construction. Suppose a five storey office block has been lawfully erected on land whose highest and best use is as commercial office space, but also that the current planning regime only permits buildings which are three storeys high. In the absence of s 6A(2), it is easy to see why the unimproved land value of the land on which the five storey office block has been erected would be identical to the neighbouring materially identical block which could only ever sustain a three storey office block. However, given the mandatory assumption that "such improvements [as exist in the real world] may be continued", it seems unlikely that the exercise should ignore the capacity of one lot, but not the other, to sustain a five storey office block. That example is not qualitatively different from the present case. 50. Fifthly, my conclusion is also consistent with what was held in Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143; 74 NSWLR 700, where the Court unanimously held that heritage restricted land should be valued by reference to the improvements on the land in their actual condition, rather than in their pristine condition. That was a decision upon a determination of land value making the assumptions in s 14G(1), but it is clear that those assumptions are closely related to the approach required by s 6A(2). The operative words in s 14G(1)(b) which led to this construction were "that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued". There is not merely a close textual resemblance with s 6A(2)(b), but also a clear structural resemblance. In s 6A(2), there is a requirement to assume a particular use for a purpose, and then a further requirement to assume that improvements may continue in order to enable the continuation of the use. In s 14G(1) there is a requirement to assume that a particular use for a purpose is the only permitted use, and a further requirement, materially identical to that in s 6A(2)(b), that improvements may continue in order to enable the continuation of the use. The simple point is that if s 14G has been held to require attention to the actual condition of the building, why should not the same be true of s 6A(2), a provision in the same Act, and with much the same text and structure? 51. The conclusion that I have reached is consistent with the reservations expressed by Spigelman CJ and Santow JA in Commonwealth Custodial Services Ltd v Valuer-General, although I must acknowledge that my conclusion departs from what Tobias JA said in the same appeal.

Hearing of the Separate Question Before this Court

1. As it transpired, it is not necessary for this Court in these proceedings to determine the correctness, or otherwise, of Leppington. That task is best left to another judge to grapple with on another day. Suffice it to say, that it must be treated with extreme circumspection in light of Leeming JA's analysis of s 6A in Fivex.
2. From the outset it is important to correct a misconception held by Challenger, as evidenced by both the correspondence set out above, and statements made by Challenger's counsel in the hearing before me (T11.50). That is, that decisions of commissioners in this Court carry less weight than decisions of judges of this Court, or that the principles of comity do not apply in respect of judges following commissioners' decisions.
3. This proposition must be emphatically rejected. As was stated by Dixon C in Mac Services Group v Mid-Western Regional Council [2014] NSWLEC 1072 (at [52]-[61]): 52. Before I deal further with the contentions it is necessary to deal with the parties' submissions that I am "bound" or "obliged" to follow the decision of the Court in Maygood (2) to consider the provisions of the LEP 2012 in these proceedings under s 79C. 53. Ultimately, that submission is not fundamental to my determination as I do intend to give appropriate consideration to the new instrument. However, for reasons I will shortly explain I do not accept that I am bound or obliged by the Maygood (2) decision as a matter of principle, although I would, of course, pay due deference to that decision in accordance with the usual principles of comity. 54. The fundamental flaw with the submission is that it imports into the Land and Environment Court Act 1979 (the Act) a hierarchy of decision makers. In fact, the Act does not establish a hierarchy such that as a general proposition the Commissioners' are bound by the determination of a single judge sitting in the same class of proceedings (unless on a preliminary question in the same matter). Both exercise the jurisdiction of the Court when determining (relevantly) a Class 1 appeal. 55. Obviously, in the case of appeal under s 56A, the Commissioner determining the matter from which the appeal is brought is bound by the decision of the Judge hearing the appeal on remitter unless the Judge otherwise disposes of the appeal under s 56A(2). 56. The absence of any hierarchy of the kind to put an obligation on Commissioners generally to follow decisions of Judges emerges from a consideration of the legislation. Section 6 (1) provides: Single Judge to constitute the Court (1) All proceedings in the Court, and all business arising out of any such proceedings, shall, subject to this Act, be heard and disposed of before a Judge, who shall constitute the Court. (2) Subsection (1) does not affect the provisions of this Act and the rules concerning the hearing and disposal of proceedings and business before one or more Commissioners or other officers of the Court. 57. These are functions to be exercised in the name of the Court by either Judge or Commissioner. 58. Section 36(2) provides: Delegation to Commissioners (1) Where proceedings are pending in Class 1, 2 or 3 of the Court's jurisdiction (other than proceedings that are being dealt with under section 34A or 40), the Chief Judge: (a) except as provided by paragraph (b) or subsection (1B), may, of the Chief Judge's own motion or on the request of a party, direct that the proceedings be heard and disposed of by one or more Commissioners, and (b) shall, where the proceedings are proceedings: (i) arising under the Aboriginal Land Rights Act 1983 , and (ii) of a kind specified in Schedule 2, direct that the proceedings be heard and disposed of by a Commissioner. (1A) The Governor may, by regulation, amend Schedule 2 by: (a) adding thereto any matter, (b) altering any matter therein, or (c) omitting any matter therefrom, or may, by regulation, omit the Schedule and insert instead a new Schedule. (1B) The Chief Judge may not direct under this section that proceedings under section 29, 30 or 31 of the Access to Neighbouring Land Act 2000 are to be heard and disposed of by one or more Commissioners. (2) Subject to this Act and the rules, the Commissioner or Commissioners hearing and disposing of the proceedings pursuant to this section shall have and may exercise the functions of the Court (other than its functions under this section). (3) The decision of the Commissioner or Commissioners shall be deemed to be the decision of the Court. (4) Where proceedings are directed to be heard and disposed of by 2 or more Commissioners: (a) if the Senior Commissioner is one of the Commissioners hearing and disposing of the proceedings-the Senior Commissioner shall preside at the hearing of the proceedings, (b) if the Senior Commissioner is not one of those Commissioners-one of those Commissioners directed to do so by the Chief Judge shall preside at the hearing, and (c) if the Commissioners are divided in opinion as to the decision to be made on any question: (i) if there is a majority of the one opinion-the question shall be decided according to the opinion of the majority, or (ii) in any other case-the question shall be decided according to the opinion of the Commissioner presiding. (5) Proceedings that are before a Commissioner under section 34, or under this section, may be referred or removed for hearing and determination by a Judge in the same way as proceedings before an associate Judge may be referred or removed for hearing and determination by a Judge in the Supreme Court. (6) The power of a Commissioner to refer proceedings pursuant to subsection (5) is subject to any contrary order of the Chief Judge. 59. Where proceedings are pending in Class 1, 2 or 3 of the Court's jurisdiction the Chief Judge can direct that the proceedings be heard and disposed of by one or more Commissioners: s 36(1)(a). 60. The decision of the Commissioner is deemed to be a decision of the Court: s 36(3). 61. Having regard to the above provisions, there is no hierarchy under the Act which supports the proposition that a Commissioner is bound to follow the decision for a single judge in respect of an appeal under s 56A of the Act unless it is that matter on remitter (as noted earlier).
4. I respectfully endorse the Commissioner's reasoning. Statements made by me to the contrary in Maygood Australia Pty Ltd v Willoughby City Council (No 2) [2013] NSWLEC 142 (at [21]) are wrong and ought not be followed.
5. I would only refine the Commissioner's reasoning in Mac Services (at [65]-[67]) by noting that although a commissioner is not, as a matter of precedent, bound to follow a decision of a single instance judge of this Court, he or she should do so as a matter of comity unless in the opinion of the commissioner the judgment is plainly wrong (for a discussion of the scope and application of that test see Fullerton Cove Residents Action Group v Dart Energy Ltd (No 2) [2013] NSWLEC 38; (2013) 195 LGERA 229 at [278]-[284]). But if, in the opinion of the commissioner the judgment is plainly wrong, then the commissioner is entitled to depart from it and no error will result in doing so.
6. It follows from the Court of Appeal's reasoning in the Fivex decision that the s 6A(2) assumptions will be enlivened on the factual circumstances of this case. As a consequence, the VG must take into account the contamination of Challenger's land in its valuation of the land. The impact of that contamination and the asserted remediation costs will, however, to reiterate, nevertheless be a matter for the VG to determine on the evidence before him.
7. There is no doubt that it was for this reason that, as early as 9 April 2015, the VG conceded that it could not argue either at the hearing of the separate question, or any ensuing substantial proceedings, that the contamination of the land could be disregarded in the valuation exercise undertaken under s 6A of the Act. The VG also conceded (communicated to Challenger on 1 April 2015) that as a consequence of Fivex, it was also abandoning any reliance on Leppington, and moreover, that it was no longer necessary for it to press the argument that under s 6A of the Act the hypothetical vendor was not the actual owner. The VG did not go so far, however, as to concede that the separate question be answered in the negative, and therefore, in Challenger's favour.
8. When the separate question came before the Court for hearing, the VG applied to vacate Biscoe J's order that the separate question be heard and determined separately, on the basis that it had no utility after the recent Fivex decision which had, for all intents and purposes, already answered it in the negative. The application was rejected by the Court principally because it held the view that utility nevertheless continued to reside in answering the question in order to clarify the impact of Fivex in this context, and to sound a cautionary note in respect of any future application of Leppington.
9. The VG then formally, and correctly in my opinion, having regard to the Court of Appeal's decision in Fivex, conceded that the separate question should be answered in the negative, but qualified the answer, also correctly in my view, by asserting that while the existence of contamination was relevant to the valuation exercise, in considering the present use of the land, which by virtue of s 6A(2) could be assumed to continue, factual circumstances such as the contamination coexisting with the current use of the land and the effect of the contamination, if any, on the value of the land, were all matters that remained to be determined by the VG based on the available evidence.
10. It formally follows that the separate question should be answered "no".

Costs

1. In light of the VG's concession with respect to the separate question, resolving the determination of that question in Challenger's favour, Challenger sought its costs of the separate question proceedings and of the notices of motion before Biscoe J. In doing so, Challenger relied on a letter written by its legal representatives on 17 March 2015 to the CSO, where it advised the CSO that if it was successful at the hearing of the separate question, it would be seeking an order that the VG pay Challenger's costs of both.
2. The VG opposes any order for costs in Challenger's favour and relied instead on the presumptive costs rule contained in r 3.7(2) of the Land and Environment Court Rules 2007 ("the LEC Rules") applying to all Class 3 matters (see r 3.7(1)) which states that: 3.7 Costs in certain proceedings (2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances.
3. The discretion to be exercised by the Court is plenary, but some matters that the Court might (it is not required to do so) consider in determining whether the rule is displaced and whether it is fair and reasonable to order costs, are contained in r 3.7(3) of the LEC Rules: (3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following: (a) that the proceedings involve, as a central issue, a question of law, a question of fact or a question of mixed fact and law, and the determination of such question: (i) in one way was, or was potentially, determinative of the proceedings, and (ii) was preliminary to, or otherwise has not involved, an evaluation of the merits of any application the subject of the proceedings, (b) that a party has failed to provide, or has unreasonably delayed in providing, information or documents: (i) that are required by law to be provided in relation to any application the subject of the proceedings, or (ii) that are necessary to enable a consent authority to gain a proper understanding of, and give proper consideration to, the application, (c) that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings, (d) that a party has acted unreasonably in the conduct of the proceedings, (e) that a party has commenced or defended the proceedings for an improper purpose, (f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where: (i) the claim or defence (as appropriate) did not have reasonable prospects of success, or (ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable.
4. Challenger relied on the circumstances in r 3.7(3)(a) and (d), and on its contention that the VG had engaged in disentitling conduct by conceding the separate question and abandoning all of the arguments it had raised in opposition to the making of the order for the determination of the separate question before Biscoe J. It emphasised the words of Spiegelman CJ in Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 where his Honour opined that, "persons ought to be encouraged, by the prospect of receiving costs, to institute proceedings that could determine the whole case in a more expeditious manner" (at [95]).
5. But balanced against this sentiment is the policy consideration that parties ought not be encouraged to refrain from making concessions against their interests that will cause proceedings to end prematurely for fear of an adverse costs sanction.
6. Hindsight, as the epithet goes, is a wonderful thing. Although the VG was, quite properly, at pains not to criticise the decision of Biscoe J, it nevertheless raised in its defence to Challenger's costs application the fact that it had consistently maintained the position before his Honour that it was likely that the appeal in Fivex would have a significant bearing on the appeals more generally and, specifically, on the determination of separate question. As it transpired, he was right.
7. Having regard to the chronology of events detailed above and the history of these proceedings to date, it cannot rationally be said that the conduct of the VG amounts to disentitling conduct that would warrant a costs order being made against it. On the contrary, the VG acted with commendable candour and alacrity in changing its position upon the appeal judgment in Fivex being handed down. Its abandonment of the arguments agitated before Biscoe J were as a direct result of that decision. It ought not be criticised for doing so.
8. There being no disentitling behaviour on the part of VG, is there any other factor that would justify a rebuttal of the presumptive rule in r 3.7(2) of the LEC Rules? The answer is that there is not. In my opinion, the fact that the proceedings before both Biscoe J and myself involved, as a central issue, a question of law in the manner contemplated in r 3.7(3)(a) is, without more, insufficient. Were it otherwise, on every occasion that a separate question was raised for determination in proceedings in Classes 1, 2 or 3 of the Court's jurisdiction the presumptive rule in r 3.7(2) of the LEC Rules would be transmogrified into a 'costs follow the event' rule. This is neither consistent with the text nor the context (including purpose) informing r 3.7(2).
9. A survey of the more recent cases where a separate question has been ordered and determined by the Court in advance of the substantive hearing demonstrates, unsurprisingly, that there is no hard and fast rule concerning the award of costs in these cases and that each case turns on its particular facts.
10. In any event, in the present case, it is highly unlikely that the proceedings will be resolved all that expeditiously. As the VG indicated during the hearing before me, further expert evidence will be required not only as to the value of the land having regard to its contamination and its continuing industrial use, but also as to the cost of remediating the land. This evidence will be both costly and time consuming.
11. In my opinion, therefore, the presumptive rule in r 3.7(2) of the LEC Rules has not been displaced and there should be no order as to costs in respect of either the notices of motion before Biscoe J or the hearing of the separate question before me.

Orders

1. The formal orders of the Court are therefore that: 1. the answer to the separate question for determination below is "no": Having regard to the agreed facts that the Land is contaminated and that the source of the contamination are the improvements on the Land or their operation, is the contamination of the Land a matter to be disregarded in the determination of "land value" under the Valuation of Land Act 1916? 1. each party is to bear their own costs; 2. the exhibits are to be returned after the publication of these reasons on the internet; and 3. the matter is relisted for further directions before the List Judge on 24 April 2015.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 April 2015