Falk v Valuer General

Flack v Valuer General (1952) 18 LGR 157; Falk v Chief Commissioner of State Revenue [1999] NSWLEC 301; Segal and Anor v Waverley Council 2004 NSWLEC 363; Marcus Cornelius Noorbergen v Valuer General [2004] NSWLEC 243; CASES CITED: Brigenshaw v Brigenshaw 1938 60 CLR 336; Latoudis v Casey (1990) 170 CLR 534; Funtime Investments Pty Limited v Yass Valley Council [2004] NSWLEC 300; Brooks Maher v Cheung [2001] NSWADT 18; .

DATES OF HEARING: 30 March 2005 EX TEMPORE JUDGMENT DATE : 03/31/2005

LEGAL REPRESENTATIVES: RESPONDENT Mr G Bartley, barrister INSTRUCTED BY Crown Solicitor

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

This decision was given as an extemporaneous decision. It has been revised and edited prior to publication.

JUDGMENT 1 These proceedings arise from a series of statutorily based exchanges between the appellant, who is the proprietor of, amongst other locations, a property at 18 Sims Street, Darlinghurst (the site) and the Valuer General concerning the valuation of the site.

2 In the first instance, for the year base date 1 July 2003, the respondent made a valuation on 24 September 2003, a copy of which was served by notice of valuation on Mr Falk. The copy which was attached to the appeal papers is undated but notes that the last day for Mr Falk to lodge an objection to that valuation was 2 June 2004. 3 By letter dated 26 March 2004, Mr Falk lodged a written objection to the valuation of the site contending that the value set out in the notice, that is a land value of $170,000 as at 1 July 2003, was too high and that he proposed that the land value should be lowered to $130,000 as at that date.

4 By letter on the letterhead of the Department of Lands dated 16 July 2004, a delegate of the Valuer General wrote to Mr Falk disallowing that objection. 5 On 13 October 2004, exercising his rights pursuant to the Valuation of Land Act 1916 (the Act), Mr Falk commenced class 3 proceedings in the Court challenging that disallowance of his objection and, in the course of these proceedings asserted that the value of $170,000 should be substituted with a lower one, namely $120,000. 6 The statutory process arises from a number of provisions to the Act. The first is contained in s 29 of the Act, which requires that the Valuer General must provide an owner of a freehold estate in land with a notice of a valuation carried out for the purposes of Local Government rating. The section provides, in s 29(3A), that the person to whom such a notice is given may lodge a written objection to such valuation within the time period specified on the notice. There is no suggestion that Mr Falk failed to give such notice within the period specified.

7 The Valuer General and his delegates must, pursuant to s 35B of the Act, consider such objection and either allow or disallow the objection. In this instance, as earlier mentioned, the Valuer General's delegate disallowed the objection.

8 Mr Falk's right of appeal arises pursuant to s 37 of the Act which permits an appeal to this Court against the decision of the Valuer General or his delegate, that being a decision to disallow the objection. 9 The powers of this Court are set out in s 40 of the Act, and are in a number of alternatives. Firstly, I may confirm or revoke the decision to which the appeal relates; secondly, I may make a substituted decision for the decision to which the appeal relates or thirdly I may make a number of findings of fact but remit the matter to the Valuer General for his determination in light of those findings.

10 It is important in the present context to note that the Act specifically provides, in s 40(2), that, on an appeal, the appellant has the onus of proving the appellant's case. 11 The appellant's case in these proceedings is confined, as it is a matter of some importance to which I will return, to the submission that the valuation is too high and the appellant's case in no way comprehends any proposition that the valuation should be higher than that set out in the notice.

12 I had the opportunity of inspecting the exterior of the site and of inspecting the exterior of a number of properties in the vicinity of the site. I did so in company with the appellant and with those representing the Valuer General.

13 During the course of that inspection I raised two matters with the parties. The first related to the proposed comparable properties. The second related to the matter of the Valuer General's expert valuer, Mr Stibbard, nominating a significantly higher value as being appropriate rather than mere confirmation of that contained in the notice. 14 I turn to the first issue, that of comparable properties. I indicated to Mr Falk that I did not consider that the property that he had nominated in Windsor Street, Paddington, as being relevant for my consideration on a comparative basis, was in fact relevant, as it was sufficiently removed from the subject property to be outside what would be the relevant dominant sub-market for the site. I similarly indicated to the representatives of the Valuer General that I did not propose to accept the property proposed in Charlotte Lane, which is on the other side of Oxford Street and outside, in my view, the valuation catchment for the site for comparative purposes. 15 As a consequence, effectively the comparative property information whether on statutory valuations as at the base date as submitted by Mr Falk, or comparative sales information as put to me through the Valuer General's expert valuer Mr Stibbard, was confined to that triangular precinct bound by Flinders Street, South Dowling Street and Oxford Street at Darlinghurst.

16 It is clear to me that Mr Falk's sense of grievance at the valuation of his property arises from the matters set out on p 3 of his submission dated December 2004. That table sets out the valuation of four adjacent properties in Sims Street at Darlinghurst, being 12, 14, 16 and 18, the latter being the site which is the subject of these proceedings. Each of them has a Valuer General's base date valuation of $170,000. 12 and 14 have a land area of 63.2 sq m; 16 has a land area of 56.9 sq m and the site has a land area of 50.6 sq m. 17 From Mr Falk's oral and written material, it is clear that Mr Falk was unable to understand why identical valuations should be imposed on properties of differing sizes that are adjacent and facing the same street and subject to the same general development and other constraints that he contends exist in the locality.

18 During the course of Mr Stibbard's evidence, he conceded that he was unable to give a rational reason why identical valuations should be provided for the three other properties and conceded that there would be, although in his view minor, some appropriate variations if such valuation process were being undertaken on a detailed property by property consideration of matters.

19 In essence, Mr Falk's case is based on an analysis, to an analysis of those valuations and those sites. Although he brings other material to the proceedings those other matters are of a lesser emphasis, on my appreciation of his submissions.

20 The question, therefore, arises as to what role, if any, I might give to such statutory valuations. Mr Bartley, barrister on behalf of the Valuer General, has taken me to two earlier decisions, the first in the Land and Valuation Court is the decision of Sugerman J in Flack v Valuer General (1952) 18 LGR 157. The relevant matters for my consideration in these proceedings are set out at p 158 where His Honour says, that although he does not preclude some possibility of the use of earlier statutory valuations, "as a general principle when dealing with a specific site the appropriate approach to take is to undertake one of the more conventionally accepted methods of valuation, in that instance he is citing evidence of sales of comparable land."

21 I was also taken to a specific decision by Nott C between the same parties to these proceedings and also involving the site (see Falk v Chief Commissioner of State Revenue [1999] NSWLEC 301). 22 The critical matter for me in these proceedings is set out by Nott C in paras 4 and 5 where he notes that he had not as a matter of law excluded the evidence presented by the applicant - that being evidence of nearby statutory valuations - but where there were, in that case, expert valuation evidence and evidence of comparable sales, he adopted the proposition that it was appropriate to give no weight to the statutory land values of the subject land or of other properties. 23 Contrary to objections put by Mr Bartley, I have adopted the approach that Nott C followed in that I have not, as a matter of law excluded Mr Falk's evidence of other statutory valuations.

24 The question then follows as to whether or not I should adopt the approach of Nott C and give no weight to those statutory land values.

25 In Segal and Anor v Waverley Council 2004 NSWLEC 363, Lloyd J held that a Commissioner of this Court, dealing as such commissioners do with administrative discretionary appeals, is not bound as a matter of law to follow the decision of a fellow Commissioner in the relevant class of the Court's jurisdiction, on similar or identical factual circumstances. 26 However, it was Lloyd J's view that the normal principles of comity amongst decision makers apply (and his Honour sets out a significant degree of authority in support of that proposition), so that if the decision maker subsequent to the earlier decision wished to reach a conclusion of fact or principle contrary to that of the earlier decision maker, he or she would be obliged to set out specifically why that was occurring and the reasons for it so occurring. 27 In this case, mindful of the provisions of s 40(2) of the Act, I asked Mr Falk, why I should depart from the decision on that element reached by Commissioner Nott. Mr Falk put to me a number of matters which, properly interpreted in my view, explained why he was unable to understand the Valuer General's rationale for identical land valuations for non identical sites of which, of the four, his is on any view of the evidence, marginally the poorest of the four. 28 Indeed, he suggested that it was obvious that some illogical basis of valuation had been followed and that as a consequence of that I ought have regard to that illogicality. 29 In response, Mr Bartley put that what might be described as a broad desk based valuation approach which did not undertake a fine tooth comb site by site assessment of valuations was different from that undertaken in the present instance where specific comparable sales information was available.

30 I am not satisfied that Mr Falk has discharged the onus upon him in s 40(2) and established any reason why I should depart from the decision of Nott C on that point. As a consequence, I do not have regard to the comparable statutory valuations that he has put in evidence.

31 I therefore turn to the approach taken both as to proposed outcome and evidentiary base put to me on behalf of the Valuer General. 32 In doing so, I turn to the second matter that I raised on the site during the course of the view. This was to ask Mr Bartley what submissions he had instructions to make to me with respect to the valuation derived by Mr Stibbard of $275,000 on the basis of Mr Stibbard's interpretation of the comparable sales amounts. 33 Although, Mr Bartley was not able to obtain immediate instructions, he subsequently informed me and Mr Falk that his instructions were to contend that I should exercise my discretion pursuant to s 40(1)(b) of the Act and substitute a determination of $275,000 for that which had been made as part of the statutory valuation process. 34 Although general notice of the possibility that some higher valuation might be imposed was given to Mr Falk by letter dated 11 November 2004 under the hand of Mr Bartley's instructing solicitor, which effectively drew Mr Falk's attention to the provisions of s 40(1)(b) of the Act and to a decision of Watts C in Marcus Cornelius Noorbergen v Valuer General [2004] NSWLEC 243 where Watts C had substituted a higher valuation. 35 Mr Bartley properly conceded that at no time prior to the notification to Mr Falk and me that he was instructed to contend for a valuation of $275,000 was Mr Falk given any notice that such contention was specifically intended in these proceedings. 36 That is a matter which, although perhaps not specifically relevant to my assessment of Mr Stibbard's evidence, is a matter which is appropriate for me to consider both on my exercise of discretion pursuant to s 40(1) and on my exercise of the discretion invested in me (subject to the concurrence of the Chief Judge pursuant to s 69(8) of the Land and Environment Court Act 1979 (the Court Act) to propose for the Chief Judge's concurrence an order for costs pursuant to Pt 16 r 4(1)(C) and Pt 16 r 4(2) of the Land and Environment Court Rules 1996 (the Rules).

37 Mr Stibbard gave evidence both in writing and orally. His evidence encompassed both responding to material that was put by Mr Falk and to a number of comparable sales. 38 As I earlier indicated, I had disallowed, on the grounds of relevance, the evidence with respect to one of them as I did not consider that it was in a relevant specific market to the subject site. 39 Mr Stibbard also provided a further supplementary statement of evidence concerning one of the sites raised by Mr Falk about which there was sales material.

40 I also note, at this point, that Mr Bartley had objected to a deal of the material prepared by Mr Falk being admitted on the basis that Mr Falk was expressing opinions relating to valuations and he had no relevant professional qualifications to do so. 41 I admitted the material, which was compendious and did not merely confine itself to valuation matters, on two bases. It is not contested by the Valuer General that Mr Falk is a competent and qualified, indeed highly qualified town planner. I admitted those elements of his material, which went to town planning matters, on the basis that they were admissible as expert opinion on those subjects.

42 With respect to the material that that Mr Falk prepared concerning valuations, I admitted it not on the basis of it being expert valuation material, but on the basis of it being that prepared by a lay applicant appearing in person in this Court (as regularly happens in valuation cases). This is a matter to which I will return when dealing with the exercise of my discretion.

43 I am satisfied that, as a consequence of this, I have five properties before me where I have some information and analysis concerning them on a comparable sales basis. 44 They are 2 Sims Street, 10 Sims Street, 16 Sims Street, 40 Chisholm Street and 39 Taylor Street. 45 During the course of the view the parties inspected 2 Sims Street. It is a comparatively small allotment. It is, according to both Mr Falk and Mr Stibbard, subject to a zoning, which would permit a development of a one to one floor space ratio building upon it. It was Mr Stibbard's evidence that it was sold with a contract date of 19 February 2002, and a transfer date of 10 May 2002, for $385,000. It is a property of 44.3 sq m. He confirms that it is subject to the same zoning and FSR permitted for the site.

46 However, during the course of the view, it was obvious that since that sale, whatever structure had previously been on 2 Sims Street had been demolished and a new dwelling erected thereupon. That dwelling was a two-storey dwelling with a roof balcony on top with some form of light-well structure on the northern edge of the top storey - that is the edge towards Oxford Street. It was built boundary to boundary on each axis. Mr Stibbard properly conceded in the witness box that it clearly had a floor space ratio significantly in excess of 1:1. 47 Even making allowances for the fact that conventional calculation of the FSR would have one count stairways for one floor rather than both floors, it obviously had a floor space ratio intuitively of somewhat in excess at least of 1.7:1. 48 There is no evidence before me as to the basis upon which the property was purchased and whether, at the time of purchase, the purchaser had had any discussions with the consent authority and had any expectation that such a significant departure from the statutory floor space ratio would be permitted, nor is anything before me that sets out the basis of the consent authority for permitting such a floor space ratio.

49 The derived value per square metre that Mr Stibbard reaches for this property is ~ $9,600 per sq m which is approaching double the value contended for for any of the other comparable sales or contended for by Mr Stibbard for the site. I consider that I have sufficient difficulty in understanding that value per sq m or having any justification for it that I ought give no regard whatsoever to this sale as it is obviously aberrant compared to the remainder of the sales material.

50 The second property that I turn to is that at 10 Sims Street being a property contended for by Mr Falk and which includes in his material contained in his report of 1 March 2005, in reply to Mr Stibbard, a notice of the statutory valuation of $270,000 and information that this property sold for $680,000 with the transfer being affected on 17 July 2002, some one year prior to the base date. 51 I have considered whether or not I should attempt to undertake some calculation of adjustments by calculating the floor area of the dwelling on the site and make a time adjustment for the contract, there being a floor plan in Mr Falk's material. I consider that if I were to undertake such a calculation providing information on my doing so to the parties, I would be in breach of the rules of procedural fairness. Because the information is not before me and I do not consider it appropriate that I embark on such a course, I therefore consider that I do not have sufficient information with respect to 10 Sims Street to make a realistic determination of what weight I might give to it.

52 That leaves me with the valuations of the properties at 40 Chisholm, 16 Sims and 39 Taylor Street. 53 Mr Stibbard, although giving a slightly differing rate of depreciation for the existing structure on 39 Taylor Street, takes the value of the improvements on each of the properties; makes an adjustment for obsolescence; makes an adjustment for what he says is the appropriate rate for ground improvements and derives a rate per sq m, which he has regard to in concluding what he says should be the appropriate rate per sq m for the site. 54 As I understand Mr Falk's contentions with respect to Mr Stibbard's proposals, he suggests that Mr Stibbard is not making a sufficient and adequate deduction both by the process of depreciation of the improvements on the site and by the process of allowance for ground improvements and other features such as balconies and the like. 55 I have, therefore, undertaken some calculations, which are purely arithmetical in nature, to see what would be on the position for each of these properties by: - valuing the improvements at approximately $3,000 per sq m (which appears to be agreed between Mr Falk and Mr Stibbard) and seeing what would be the value adjusted for time assuming that the totality of the improvements on each of those three sites were taken as a deduction; and - taking as a deduction for other improvements, including the ground improvements and extra features of each comparable an amount of $40,000 (which I understand is, at least in two of the instances, contended for by Mr Falk and may be contended for in the third - his material being somewhat difficult to follow in this regard). 56 As a consequence, if I apply that process to 40 Chisholm Street in lieu of the derived value of Mr Stibbard of $5,214 per sq m, I calculate that the value would be ~ $4,290 per sq m. 57 Applying the same process to the sale at 16 Sims Street in lieu of $5,623 per sq m, the most advantageous calculation I could derive for Mr Falk would be ~ $3,514 per sq m. 58 Finally, applying the same process to the supplementary valuation provided by Mr Stibbard with respect to Taylor Street in lieu of the $5,430 per sq m contended for by him, I would come to a valuation of ~ $4,195 per sq m. 59 I am not suggesting by undertaking those calculations that those figures are the correct figures for those sites. What I have undertaken is to seek to establish, in my own mind, by applying Mr Falk's methodology as I understand it, what would be the most advantageous outcome to Mr Falk based on Mr Stibbard's comparable sales. 60 On my calculation they would come to a range between approximately $180,000 and $216,000 for the site. 61 I have not adopted those rates per square metre as being correct, I have simply sought to establish in my own mind, if I accept Mr Stibbard's approach (which is the approach consistently applied by this Court in considering comparable sales material) what would be the best range that is available to Mr Falk. It is clear from that range that Mr Falk's contention that a valuation of $170,000 is too high must necessarily fail.

62 I then turn to what should be the outcome in the exercise of my discretion pursuant to s 40 of the Act. 63 I have carefully considered the fact that Mr Bartley's instructing solicitor put Mr Falk on notice by letter of 11 November that an option available to me is to substitute a higher decision were I minded to do so. 64 The analytical process that I have so far set out is not based on what might be a correct valuation if Mr Stibbard's methodology were to be followed, but merely to establish what might be the best position in support of Mr Falk's case on Mr Stibbard's information. 65 I am satisfied that, although s 40(2) of the Act places the specific onus on the appellant of proving his case, his case in these proceedings is limited to a contention that the valuation in the notice of valuation is too high. 66 I am satisfied that as a matter of law, if the Valuer General proposes to contend for a valuation that is higher than that which is contained in the statutory notice, the provisions of s 40(2) do not apply to that contention and that the onus to establish a higher valuation shifts to the Valuer General. 67 That contention must be, if agreed with, found to the degree of satisfaction on the civil standard of proof that I would be required to have in conformingly with the decision of the High Court in Brigenshaw v Brigenshaw 1938 60 CLR 336, that is the degree of comfortable satisfaction given the consequences of the decision for the person about whom it is being made. 68 I am satisfied that the material that has been provided by Mr Stibbard is such that, as previously indicated, Mr Falk has not made out his case. 69 Mr Stibbard however was not able to visit any of the sites and undertake a specific assessment of the improvements contained thereupon. 70 As the lower end of the best range of valuations to Mr Falk of the comparable sales information on my calculations, is ~ $177,000, I am satisfied that that is not sufficiently disparate to that contained in the notice to cause me to substitute a higher valuation if I were minded to do so.

71 However, there is a more fundamental earlier hurdle. I do not consider it would be appropriate to impose a higher value for two reasons. The first is the very late notification to Mr Falk (despite the fact that he was offered an adjournment but did not accept the opportunity) and the lack of specific notice to him of that proposed higher valuation sought to be substituted. The second is the fact that there would, if I were minded so to do, be a result that was logically absurd in that three sequentially adjacent and superior properties would be left with valuations as at the base date of $170,000, whilst the site would have a valuation nearly double that. 72 The illogicality of that latter possibility causes me to reach the conclusion that the appropriate order that I should make in these proceedings is one pursuant to s 40(1)(a) and that is to confirm the decision of the Valuer General's delegate contained in the letter of 16 July 2004, that being a decision to disallow the objection. That approach is the approach taken by Nott C in the earlier matter to which I have been referred.

73 I am left, following that, with the application by Mr Bartley for costs in these proceedings. Although he has not been able to quantify those costs precisely he has indicated to me that they are of the order of $18,000. 74 Given that I have indicated, I was not be satisfied that Mr Stibbard had provided sufficient material to support a higher valuation and given that Mr Falk has failed in his contention that the valuation is too high, I am satisfied that each of the parties has failed in their contention for the positions advocated in these proceedings.

75 I note, however, in this context that by letter dated 15 December 2004 Mr Bartley's instructing solicitor specifically put Mr Falk on notice of the possibility or probability that there would be an application for costs if the Valuer General were successful. 76 Given the fact that Mr Falk was not given notice of the specific contention for the higher valuation contained in Mr Stibbard's report and the fact that the Valuer General has failed on this issue, I do not consider that it would be fair and reasonable as is the test in Pt 16 r 4 of the Rules for me to make an order for costs against Mr Falk in these proceedings. 77 There is no specific statutory guidance as to what might be those matters that I should follow. It is certainly a position that, unlike the principle laid down by the High Court in Latoudis v Casey (1990) 170 CLR 534 that costs should ordinarily follow the event, there is a higher threshold but it is not as high as the previously existing threshold of exceptional circumstances that had been applied in these classes of proceedings in this Court. 78 In a decision in mid 2004 I canvassed some of the matters arising out of a somewhat comparable position applying in the Victorian Civil and Administrative Tribunal that contains some statutory guidance to that Tribunal as to how costs might be awarded if it were reasonable to do so (see Funtime Investments Pty Limited v Yass Valley Council [2004] NSWLEC 300). 79 There is also a considerable degree of authority in the Administrative Decisions Tribunal of this State on a test which is somewhat more strict of compliance than the fair and reasonable test in these proceedings (e.g see Brooks Maher v Cheung [2001] NSWADT 18 re s 88(1) of the Administrative Decisions Tribunal Act 1997). 80 I am not satisfied that there is anything in Mr Falk's conduct that would constitute inappropriate procedural behaviour that would trigger me regarding his conduct as warranting the payment of costs. 81 His sense of grievance as I indicated earlier, and in this regard it is important to note that he is an applicant in person and (noting I upheld Mr Bartley's objection to the basis of part of his evidence) he is not a valuer and therefore his analysis of valuations has to be taken by me, as Mr Bartley properly drew my attention to in the objection, on the basis of it being a lay interpretation. I am satisfied that Mr Falk had and has a genuine sense of grievance on the basis of the comparable statutory valuations. Although this does not provide a legal basis for his appeal, I would therefore go so far as to say not only is it not fair and reasonable that there be an order for costs against Mr Falk, but that if I were to propose such an order to do so would be unfair and unreasonable.

82 The orders of the Court are, therefore, that: 1. Pursuant to s 40(1)(a) of the Valuation of Land Act 1916, the determination dated 16 July 2004 to refuse the objection to the valuation at base date 1 July 2003 of $170,000 for the property at 18 Sims Street, Darlinghurst is confirmed; 2. The exhibits are returned; and 3. No order as to costs.

02/05/2005 - Correct file number - Paragraph(s) Cover sheet

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.