Friday 14 December 2007
COMMONWEALTH CUSTODIAL SERVICES LIMITED v VALUER GENERAL
Judgment
1 SPIGELMAN CJ: I have had the benefit of reading the judgment of Tobias JA in draft. His Honour sets out the facts, the issues, the submissions, the statutory provisions and extracts from the relevant judgments.
2 The critical matter to be determined is whether or not the reasoning of the Privy Council in Toohey's Limited v The Valuer General (1925) AC 439 continues to apply, as a matter of statutory interpretation, to a legislative scheme which differs in a pertinent respect. The relevant difference, as Tobias JA points out is the fact that s 6A(1) of the Valuation of Land Act 1916 which is, relevantly, in the same terms as the section under consideration by the Privy Council in the Toohey's case, has now been modified by the addition of s 6A(2) and, of direct relevance but of no different import, by the addition of s 14G. No such provision was contained in the Act under consideration by the Privy Council in Toohey's.
3 The scope and purpose of the Act, within which s 6A(1) must be interpreted, is the valuation of land for the full range of statutory purposes for which such valuation is pertinent. There are a number of different ways in which the task of approaching valuation can be undertaken, each of which is perfectly rational. More than one means may be adopted for the purpose of checking the value arrived at by any other means. This Court should be very slow to interpret legislation so as to exclude a rational mode of valuing land, particularly in view of the difficulties that may attend any single mode of valuation.
4 It is always necessary to start with the statutory scheme. Plainly, when the courts have authoritatively pronounced upon the interpretation of a particular legislative formulation, subject to reconsideration by higher authority, that interpretation should be continued. When, however, a relevant change occurs in the legislative scheme it is appropriate to reconsider the earlier authorities.
5 I repeat my observations in this regard in Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353:
"[35] Matters of valuation turn in large measure on the precise statutory scheme. These schemes differ from one area of discourse to another. It is always important to commence with the precise words of the statute. There appears to be a tendency to take a judgment about one statutory regime and classify its conclusion as a "valuation principle" which is applied to any process of valuation, no matter how different the statutory regime may be.
[36] The need to determine the value of assets arises in many different legal contexts. It is the context which determines the relevant principles of valuation to be applied. An assumption that there is in existence some abstract body of "valuation principles" applicable in all contexts, irrespective of the statutory scheme or contractual provision, is liable to lead to error. Judgments in one context may prove instructive by way of analogy when dealing with another context. Nevertheless, statutory differences must be borne in mind. The ultimate task must always come back to the application of the principles in the particular context …"
6 There are other examples of the courts excluding appropriate approaches to valuation on the basis of authority which, on closer analysis, was clearly based on the interpretation of the particular text under consideration in the foundation authority, but which has been characterised as some sort of "valuation principle" applicable in all contexts, irrespective of statutory differences. So Australian authority has long excluded offers to purchase property from consideration, even the very property which falls to be valued, on the basis of authority which was clearly based only on the specific statute. So far as I am able to determine, Australia is the only jurisdiction where offers of this character are excluded from the valuation, an exclusion which has been variously described as "absurd", "anomalous and unjust". (See MMAL Rentals Pty Limited v Bruning [2004] NSWCA 451; 63 NSWLR 167 at [84]-[102].)
7 In my opinion the reasoning in Toohey's is unconvincing. Indeed, I find it glib. The starting point was the following proposition:
"Words could scarcely be clearer to show that the improvements were to be left entirely out of view. They are to be taken, not only as non-existent, but as if they never had existed."
8 This proposition can no longer be sustained in the light of the introduction of s 6A(2), and subsequently of s 14G. Read in context, s 6A(1) can no longer be described in this manner.
9 The inclusion of express reference to improvements, as a relevant matter in the process of valuation, directly undermines the starting point of the reasoning of the Privy Council in Toohey's. It is no longer possible to treat the improvements "not only as non-existent but as if they never had existed". The valuer is now required to accept that the improvements did exist, but to value the land as if they did not.
10 In my opinion, the reasoning in Toohey's is an inadequate foundation for continuing to exclude a rational approach to valuation which is accepted as permissible by expert valuers. This is of particular significance, in a case like the present, by reason of the difficulty involved in valuing land in an urban environment, where unimproved land sales are rare, and even more so in the context of heritage listed property, where removing the improvements is impermissible.
11 As Tobias JA notes, and the High Court has affirmed in Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111, long practice accepts that it is perfectly rational to value unimproved land by valuing a site in its improved state and deducting the value of the improvements. However, on the authority of Toohey's, this rational method for valuing comparable sales is impermissible for valuing the land in issue.
12 As the authorities to which Tobias JA refers indicate, there is a distinction between the two situations because in one case there have been actual sales. That is a distinction but not, in my view, a pertinent distinction for purposes of permissibility, as distinct from weight. No doubt in many situations it will not be the preferable mode of proceeding. No doubt it will itself create a range of difficulties in estimation that are inherent in the artificial process which the statute requires the Court to undertake. All of these matters go to weight. They should not determine whether the technique is permissible at all.
13 I find the reasoning of Roper J in Estate of George James v The Valuer General (1942) 15 LGR 110, set out by Tobias JA, to be entirely convincing as to the validity of the mechanism of valuation in issue, albeit his attempt to distinguish Toohey's case is difficult to sustain.
14 The difficulty for present purposes is whether or not this Court can distinguish the decision of the High Court in the Valuer General v Fenton Nominees Pty Ltd (1982) 150 CLR 160 which at 165-166 expressly approved the analysis in Toohey's. Where, as here, there has been a material change in the statutory framework it is open to this Court to address the question afresh, as it did in Leichhardt Council v RTA supra.
15 However, this issue is, in my opinion, determined by the emphatic manner in which the High Court expressed its approval of Toohey's case by asserting that it was "well settled … that it is not permissible" to adopt the means of valuation in issue.
16 As Tobias JA points out and a number of authorities to which he refers have indicated, the purpose of the introduction of the predecessor of s 6A(2) was to overcome a particular problem that had arisen. However, the words chosen are not necessarily limited to that situation. The mischief rule is a valid approach to statutory interpretation so as to ensure that the purpose of the legislature is achieved. It does not necessarily lead to a reading down of general words, so as to confine the legislation to the mischief alone. Merely because a particular problem has been the trigger for a statutory amendment does not lead to the conclusion that the words are incapable of extending beyond the particular matter which caused the amendment.
17 Tobias JA also refers to the observations in the joint judgment of the High Court in Maurici at 120 [16] and Campbell JA in this Court in The Trust Company of Australia Limited v Valuer General [2007] NSWCA 181; 154 LGERA 437 at 446 [33], to what is described as 'steps' to be taken under s 6A, specifically the reference to the fact that "the second step is notionally to remove the improvements from the land". I do not regard the references to 'steps' as requiring a sequence of events. It is a useful metaphor but should not be interpreted as laying down a rigid sequence. The method of valuation in issue in this appeal also 'notionally' removes the improvements from the land. That is the statutory requirement, not the sequence of reasoning.
18 Nevertheless, with some reluctance, I have come to the conclusion that the force of the statement in the High Court's judgment in Fenton is such that, notwithstanding a relevant statutory change, this Court should follow it and leave it to the High Court to reconsider the issue if it wishes to do so.
19 Accordingly, I agree with the orders proposed by Tobias JA.
20 SANTOW JA: Subject to what follows, I agree with Tobias JA's comprehensive analysis of statute and case law and concur in the result. However I would join with the reservations expressed by the Chief Justice, whose additional observations I have had the benefit of reading in draft. I note that the Chief Justice agrees the orders proposed by Tobias JA, as do I.
21 As Tobias JA observes, Roper J in Estate of George James v Valuer General (1942) 15 LGR 110 at 112 addresses the issue of valuation and the logic informing it in these terms:
"… Further, if it appears that land is being devoted to its proper use from the point of view of exploiting its value, and that the improvements upon it are necessary and proper for that use, and that there is no element of value involved in the improved value other than the intrinsic value of the land and of the improvements, then there is in my view, no error involved in a valuer forming his opinion of the unimproved value of the land by deducting the value of the improvements from the improved value. Logically that method of valuation is just as supportable as the method which assumes that the land is unimproved, and then theoretically builds on it an imaginary building of precisely the same character as the actual one which has been assumed not to exist, in order to arrive at a valuation. In my opinion there is nothing in the judgment in Toohey's Ltd v Valuer-General which precludes the use of either of those methods. … In this case only two elements are involved, namely, the bare land itself, and the buildings constructed for and appropriate to the purposes for which they are used, which happen to be the purposes for which the land is most suitable. The result of the subtraction of the second ingredient from the total for the whole at least furnishes a guide to the unimproved value in this case."
22 Current High Court authority approving Tooheys Ltd v Valuer General [1925] AC 439, permits only the second of the two methods of valuation identified by Roper J. Yet as Roper J observes, either method is equally logical. Moreover the first method, as the High Court decided in Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111, is permissible when taking into account comparable sales of improved sites. But it is not permissible for the purpose of the notional sale mandated by s6A(1) insofar as it requires the assumption of no improvements (other than land improvements).