Fivex Pty Ltd v Valuer-General

The Land 6The Land is located on the north western corner of the intersection of New South Head Road with Knox Street Double Bay. It has level street frontage to New South Head Road, Knox Street and to a side street known as Goldman Lane. 7The Land is irregular in shape and is best described as taking the shape of a parallelogram. It comprises Lot 11 in DP 608859 which shows the area of the Land to be 549.7m². The total lineal frontage to the three public roads that I have identified is 74.11m. 8At each relevant base date, the primary land use controls applying to the Land were those imposed by Woollahra Local Environmental Plan 1995 (the LEP). By operation of the LEP at each date, the Land was zoned 3(a) General Business. Development permissible with the consent of Woollahra Council on land within that zone included development for a broad range of retail and commercial purposes. 9The floor space ratio of new buildings, other than dwelling houses, the erection of which required development consent under the LEP was subject to the controls imposed by cl 11 of that instrument. Relevantly, cl 11(1) proscribes the erection of a building, other than a dwelling house or dual occupancy, on land to which the LEP applies if the floor space ratio of that building "would exceed the ratio indicated for that land on the density map". The floor space ratio indicated on the density map is 2.5:1. However, cl 11(3) operates by way of exception to that limitation. The subclause identifies, by street address, particular sites upon which a building may be erected in excess of the floor space ratio indicated on the density map if: "(a) the floor space ratio of the building or buildings does not exceed 3.0:1, and (b) the Council consents to the building or buildings having the floor space ratio." 10The Land is identified by its street address as being one of those sites to which cl 11(3) of the LEP applies. A floor space ratio of 3:1, applied to a site area of 549.7m², would allow a gross floor area (GFA) of 1,649.1m² for the Land. As will become apparent, the GFA is a critical multiplier when determining the land value of the Land. 11At each of the relevant base dates the modern four level building earlier described was standing on the Land. It had been constructed pursuant to a development consent granted by Woollahra Council. That consent had allowed the building to be constructed with a GFA of 2,012m². That GFA equates to a floor space ratio of 3.66:1, resulting in an excess of 362.9m² of GFA over that achievable for a building limited to a floor space ratio of 3:1. It is this difference in GFA that, in its practical consequence, renders important the debate between the parties as to whether a "6A(1) value" or a "6A(2) value" is to be applied.

The competing land values 12The primary evidence tendered in the proceedings comprised individual reports, together with a joint report, prepared by the expert valuers retained by the parties. Mr J Burney, whose reports became Exhibits A, B and C, was retained by Fivex while Mr D Hill, whose report became Exhibit 1, was retained by the Valuer-General. The joint report of the valuers was tendered as Exhibit D. The latter exhibit revealed extensive disagreement between the valuers. 13If land value is to be determined without recourse to s 6A(2), the competing values are: BASE DATE J BURNEY D HILL 2009 $3,550,000 $5,275,000 2010 $3,450,000 $5,275,000 2011 $3,350,000 $5,400,000

If land value is to be determined by applying the provisions of s 6A(2), reflecting the GFA of the existing building, the competing valuations of the experts are: BASE DATE J BURNEY D HILL 2009 $3,375,000 $6,235,000 2010 $3,275,000 $6,235,000 2011 $3,175,000 $6,435,000

14Notwithstanding the land values for which Mr Hill contends, the Valuer-General maintains that the land values should be those to which Fivex unsuccessfully objected. They are the land values that I have listed at [3]. As a consequence, they are the values that Fivex must establish as being too high. 15In hearing this appeal I have been assisted by Acting Commissioner Cowell: s 37(1) Land and Environment Court Act 1979 (NSW).

Issue One: the proper application of s 6A of the Valuation Act 16It will be apparent that the first issue between the parties focuses upon the proper meaning and application of s 6A of the Valuation Act. That section is the sole statutory provision addressing the concept of "land value". Relevant to the present issue between the parties, the section provides: "6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or required by the owner or the owner's predecessor in title had not been made. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made." 17Expressed succinctly, Fivex submits that where use of the Land for the purpose of retail and commercial development was permissible under the LEP at each base date, that being the purpose for which the Land was then being used, the assumptions identified in s 6A(2) were not engaged. Expressing the submission of the Valuer-General in summary form, he contends that for the purpose of determining land value, the assumptions identified in s 6A(2) must be made, it being assumed that the present building and its existing floor space can be continued, as it is only by so doing that the Land can continue to be used in the manner in which it was being used at each base date. 18Although not expressed in definitional terms, the provisions of s 6A(1) identify the manner in which "land value" is to be determined. The subsection discloses two elements that are involved in the process of determination. Reading the subsection as a whole, it is apparent that the first element to be considered, at least in a temporal sense, is that identified in the second part of the subsection. As applied to the circumstances of the present case, that element necessitates the assumption that at each base date there were no improvements upon the Land. (In the present case, it is accepted that there were no "land improvements" within the meaning of the Valuation Act that had been effected upon or to the Land.) 19Having made the assumption that the land is devoid of improvements, the second element requires that a transaction be hypothesised whereby a sum of money is realised upon a sale of the fee simple in the Land. In determining the sum that would be realised from the hypothetical or notional sale, it is assumed that the transaction is upon "such reasonable terms and conditions as a bona-fide seller would require" and, it must be interpolated, being such terms that a prudent purchaser would accept (Federal Commissioner of Land Tax v Duncan [1915] HCA 12; 19 CLR 551 per Isaacs J at 558-559). 20Reference in s 6A(1) to a notional sale on terms that a bona fide seller would require, implicitly assumes that the amount realised on that "sale" would reflect the highest price that a vendor could reasonably expect to obtain on the date on which the land value was being determined (Trust Company of Australia Limited v Valuer-General [2007] NSWCA 181; 154 LGERA 437 at [32]). For the purpose of determining "the capital sum which the fee-simple of the land might be expected to realise", s 6A(1) clearly requires that a determination of the "highest and best use" of the land be made only after all improvements, other than land improvements (if applicable) are notionally removed from consideration. In that context, Campbell JA (Beazley and Ipp JJA agreeing) observed in Trust Company of Australia v Valuer-General at [33]: "It is particularly important, for present purposes, that there is a particular order of operations that section 6A requires to occur in ascertaining the "land value". In carrying out the thought-task that section 6A(1) calls for, first, the "improvements" ... are notionally removed. Only then does the notional sale occur. And it is by reference to that notional sale that the highest and best use is determined. Thus, it is necessary to determine the identity of the improvements that are to be removed before the highest and best use can be ascertained." (Original emphasis.) 21It is in the context of determining the "highest and best use" of land that s 6A(2) is potentially engaged. Clearly, the subsection does not negate the element of subsection (1) requiring that a notional sale of the land, devoid of improvements, be the object of consideration. Rather, the subsection is directed to the use of the hypothetically vacant land for the purpose of deriving the highest price that the seller might reasonably expect to receive upon the notional sale of that land. So much is apparent from the terms of the subsection when one considers the assumptions identified in paragraphs (a) and (b) in the context of the concluding words of the subsection. Not only do those provisions allow a determination of value by reference to a purpose of use differing from that use contemplated by paragraphs (a) and (b), they also reiterate that improvements on the land are to be treated as having not been made for the purpose of determining land value. 22The fact that s 6A(2) allows an assumption of use for any lawful purpose when addressing the notional sale required by subsection (1), gainsays a submission that present use of existing improvements must be assumed for the purpose of determining land value. That assumption is only required and permitted if the present use, having been lawfully commenced, represents a higher order of use in attaching value to the land than would be achieved by reason of a legal constraint imposed upon the present use subsequent to its commencement. 23The conclusions that I have expressed as to the manner in which the inter-action between subsections (1) and (2) is to be interpreted is consistent with authority. Subsections (1) and (2) of s 6A replicate, in substance, the provisions of s 6 as it was prior to its repeal and replacement in 1981 by s 6A. The history of amendment whereby subsection (2) was added to s 6 in 1959 is the subject of extensive consideration by Campbell JA in Trust Company of Australia v Valuer-General and by Tobias JA (Santow JA agreeing) in Commonwealth Custodial Services Ltd v Valuer-General [2007] NSWCA 365; 156 LGERA 186. As each of their Honours accepted, the purpose of the amendment was to address the decision of Hardie J in Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50. In that case, Hardie J said (at 66): "Further, the anomalous position is created under which municipal rates and land tax, being assessed on unimproved capital value, are based upon a value determined, not by present user or by likely future user, but on a form of user having no relation to reality. The result is that industrial concerns established in residential areas which the town planning legislation seeks to transfer ultimately to areas reserved for industry would appear to be encouraged to remain residential areas, because of the favourable basis on which valuations are made and rates and land tax are assessed. The position thus arises that valuation and rating legislation operate in one direction and town planning legislation in the other." 24When introducing the Bill in 1959 that resulted in subsection (2) being added to s 6 of the Valuation Act, the Minister, in his Second Reading Speech, identified the need "to remove an anomaly relating to unimproved valuations that has been disclosed by a recent decision of the Land and Valuation Court." It is accepted that the reference there made was to the decision in Wunderlich. 25Both Campbell and Tobias JJA in their respective judgments reviewed various decisions of the Land and Valuation Court in which judges of that Court had considered the purpose of what is now s 6A(2) and the change that it effected in determining what was then the "unimproved value of land" and what is now "land value". I do not repeat the review of those decisions by their Honours. It is sufficient for present purposes to refer to the observations of Campbell JA in Trust Company of Australia v Valuer-General where his Honour said at [83]: "There has also been judicial recognition that that the purpose of the former section 6(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." 26In Commonwealth Custodial Services v Valuer-General, Tobias JA determined at [111] that the assumption in s 6A(2)(b) refers to the continuance of improvements existing upon land at the date of valuation "only for the purpose of enabling the land to be valued upon the basis, if it be the case, that its highest and best use is the continuation of its existing use as permitted by s 6A(2)(a)". His Honour continued at [112]: "The foregoing propositions are not only supported by the dicta of Campbell JA in the Trust Company case but also by the observations of Sugarman J in Ritchie ... that s 6A(2) was introduced into the Act to overcome the difficulty illustrated by the decision of Hardie J in Wunderlich that the assumption required to be made by s 6(1) as to the absence of existing improvements could result in the land being valued on the footing that it was not available to be used for the very purpose for which it was in fact being used where that use, where it was an existing use, was its highest and best use." The reference by his Honour to Ritchie is a reference to the decision in Ritchie v Valuer-General (1961) 21 LGRA 296; 92 WN (NSW) 960. The reliance by Tobias JA upon the observations of Sugarman J in Ritchie are repeated at [128]. His Honour there says that the continuance of improvements under s 6A(2)(b) is to be assumed only for the limited statutory purpose of ascertaining the highest and best use to which land may be put when determining its land value. 27While the Valuer-General accepts that land value is to be determined in the present case by first assuming the Land to be devoid of its present improvements, he submits that for the purpose of determining the result of the notional sale required by s 6A(1), the assumption identified in s 6A(2)(b) must be made. That assumption is required, so it is submitted, because "a more intense use" than is otherwise permitted under the LEP was taking place on the Land at each base date. The more intense use is said to be represented by the excess of floor space achieved in the building on the Land than would be the case if the Land was developed to a maximum floor space ratio of 3:1 in accordance with cl 11 of the LEP (Respondent's written submissions at [22]). 28The required assumption has the consequence, so it is further submitted, that the parties to the notional sale effected pursuant to s 6A(1) would agree on a "capital sum" that reflected the floor space of the existing building. The Valuer-General contends that to do otherwise would "fail the test" articulated by Isaacs J in Spencer v Commonwealth [1907] HCA 82; 5 CLR 418 at 441 where his Honour said: "To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration." 29While the test articulated in Spencer v Commonwealth is accepted as laying down the general principle by which a notional sale is to be determined, the application of that principle must necessarily take account both of the statutory provisions being considered and the circumstances of the particular case that bear upon the notional sale. For reasons earlier stated, the provisions of s 6A do not mandate application in all cases of the assumptions identified in subs (2). 30In the present case, the valuers agreed that the highest and best use of the Land at each base date was that use to which the Land was, in fact, being put, namely a use for retail and commercial office purposes. While Mr Hill opined in the valuers' joint statement (Exhibit D) that, in the alternative, ground floor retail with residential apartment development above would equally reflect the highest and best use of the Land, in oral evidence he accepted that use for retail/commercial development was to be preferred as the highest and best use. This was so, given the location of the Land at the busy New South Head Road and Knox Street intersection; the fact that the Land was in the centre of the Double Bay retail and commercial precinct together with the observation that there were no adjoining premises reflecting a retail/residential use. 31Having considered the totality of the evidence, I find that the highest and best use of the Land at each base date was for retail and commercial office space purposes. As a consequence of that finding, the assumptions identified in s 6A(2) are not engaged. The use that I have determined was the permissible form of land use under the LEP at each base date. No assumption is therefore required to be made as to the continuance of that use when determining its land value under s 6A(1). The provisions of s 6A(1) together with the judicial recognition given to the legislative purpose of s 6A(2) support that conclusion. 32For these reasons, I do not accept the submission of the Valuer-General that the assumptions identified in s 6A(2) are to be applied in the present case. Land value should be determined conformably with s 6A(1) on the basis that the highest and best use of the Land, assuming that the existing building had not been erected, is use for retail and commercial purposes. Although not determinative of the issue, I note that no evidence was given by either valuer stating that the highest and best use of retail/commercial was confined to the existing building. Their focus, conformably with subs (2), was upon the use of the Land.

Issues two and three: comparable sales and their adjustment 33It is convenient to deal with the second and third issues that I have earlier identified under the one head. The issues are interrelated. 34The expert valuers have agreed and I accept, at least in principle, that the most appropriate method for determining the land value of the Land is the direct comparison method. As applied to the present circumstances, this method involves the identification and analysis of sales of land, said to be comparable to the Land, in order to determine the rate per square metre deduced from those sales. Adjustment is then made to the rate or rates so determined in order to permit direct comparison with the land being valued. Factors that call for adjustment include differences in date between the sales transaction relied upon and the date upon which land value is being determined together with differences in location, land size, shape, land use zoning and development potential. As the valuers recognised, both the percentage adjustment and the number of adjustments required can affect the reliability of that sale for the purpose of comparison with the land being valued. 35Only one sale was common to each valuer at the time at which they prepared their respective reports. That sale was of an improved property at 465 New South Head Road Double Bay. It occurred on 18 April 2013, almost four years after the 2009 base date and almost 2 years after the 2011 base date. The difference in dates alone signals caution in utilising this sale. 36Additionally, between the 2011 base date and the date of the 465 New South Head Road sale, events occurred, apart from any general market movement, that had the potential to impact upon the price paid for that property. In November 2011 a joint venture was agreed between Woollahra Council and Woolworths Limited for substantial redevelopment of a large site adjoining 465 New South Head Road. 37The development then proposed by the joint venturers received development consent in June 2012. It is described as the "Kiaora Lands Development", estimated at a cost of $110,000,000, involving development of the site for national brand retailers as well as speciality shops, a retail arcade linking New South Head Road to Kiaora Lane, a large residential development, a new public library and a public car park accommodating 442 vehicles. When completed, the Kiaora Lands Development is likely to create a retail core for Double Bay in an area that is presently described by Mr Hill as being on the retail fringe. These factors again impinge upon the utility of this sale in determining the land value of the Land. 38Mr Burney relied upon six other sales of properties, mainly within the Double Bay retail centre, occurring between April 2009 and November 2010. However, five of those sales that had taken place within the Double Bay retail centre were for properties that were smaller in area than the Land, offering single and limited retail frontage and also in locations that were inferior to the Land. I will turn shortly to consider those sales and their comparability for the purpose of determining land value. 39Mr Hill sought to identify properties that had been sold on the basis that they were "development sites" or "lightly improved". In addition to the property at 465 New South Head Road, he analysed five other transactions that met his criteria for selection. One of those transactions occurred in 2006 while another was a transaction that included the Land together with an adjoining property, being a transaction that occurred in 2004. In all, three of the transactions upon which he relied occurred before the financial phenomenon known as the Global Financial Crisis (the GFC), some had land use controls applicable to them which differed from those applying to the Land and some had a residential component incorporated within the existing building on the sale sites. These are factors that I will shortly consider when addressing their comparability. 40Before turning to consider the evidence of the valuers, I record that, in company with Acting Commissioner Cowell, the legal representatives of the parties and the valuers, I inspected not only the Land in its presently improved state, but also the retail precinct of Double Bay and the properties identified by each valuer as being the site of a comparable sale. That inspection has better enabled me to evaluate the competing evidence of the valuers as to the utility and reliability of the sales on which they have each relied.

465 New South Head Road Double Bay 41While the sale of this property falls well short of a sale that would fulfil the usual requirements of a comparable sale transaction, in the context of all the available evidence from sales, it offers the best prospect of assisting the determination of land value. This is so because of its site area of 404.7m², its General Business 3(a) zoning under the LEP and the maximum floor space ratio of 3:1 imposed by cl 11 of the LEP applying to the site. Further, it is a site offering the prospect of three street frontages for retail purposes, having frontage not only to New South Head Road but also to each of Kiaora Road and Kiaora Lane. It was a sale accepted by both valuers as affording the most assistance in deriving a land value for the Land. 42The sale price indicated in the contract for sale entered into on 18 April 2013 was $4,867,500 (inclusive of GST). Erected upon that land at the date of sale was a part one and part two storey brick building with metal roof. The building improvements are described by Mr Hill as comprising a basic shell with the single storey section having an open span truss roof with the underside of the roof and all services exposed in this section of the building. The improvements are described as reflecting a "warehouse style of building". The building apparently met Mr Hill's criterion of land that was "lightly improved". 43The improvements on this land were described by Mr Hill as being "undercapitalised" and as no lease was registered on title, he concluded that the property was likely to be redeveloped "in the short-mid term". No doubt taking this fact into account, he valued the improvements in the sum of $750,000. 44For his part, Mr Burney assessed the value of improvements to be $1,140,000. He assumed that the use of the building would continue for some time, thereby attributing a higher component of the sale price to the value of improvements. 45The site inspection revealed that the building described as being on the site at the date of sale remained, with some refurbishment apparent so as to accommodate what was described on a sign board as a "Pet Barn" retail outlet. This suggests that the purchaser of the site may intend longer use of the existing building than was contemplated by Mr Hill. That circumstance supports a higher value for the improvements than was attributed to them by him. However, I consider that the value attributed to those improvements by Mr Burney does not reflect the warehouse style and structure of the building as distinct from what might be described as a higher end retail boutique. This has the consequence that the value of improvements that he attributed to the sale price was too high. 46For the reasons that I have indicated, the value to be attributed to the improvements on this sale site lies somewhere between the competing values that were assigned to those improvements by the valuers. Making the judgment called for in circumstances of this kind, I consider that the appropriate value to attribute to the improvements is $1,000,000. This results in an unadjusted value for the land at $3,867,500. In order to utilise that figure as a basis for deriving the value of the Land, it is necessary to make an adjustment for time between the sale date in April 2013 and its assumed value for the land at each of the base dates in 2009, 2010 and 2011. 47While acknowledging that such an adjustment was necessary, the evidence from the valuers as to the quantum of that adjustment was, to say the least, scarce. Mr Hill listed in Annexure 6 to Exhibit 1 properties that had been sold and then resold between 2004 and 2011. Each of these properties was said to be located on business zone land within the Woollahra local government area. When related party sales, residential sales and hotel sales were eliminated from the list as not being relevant to the purpose of assessment, the remaining transactions showed widely varying results, reflecting increases between 0% and 26% in that period. These results included one sale and resale suggesting that the property price was higher immediately after October 2008, when the GFC occurred, than the price paid some 12 months before the occurrence of that phenomenon. Notwithstanding the information contained in Annexure 6, Mr Hill accepted that the GFC had a depreciating effect on commercial property prices. He accepted a reduction in value of 10% between 1 July 2008 and 1 July 2009. 48Another sale and resale recorded in Annexure 6 of Exhibit 1 related to a property in Heeley Street Paddington. Between March 2010 and April 2011, the recorded prices showed an increase of 6%. Nonetheless, Mr Hill did not contend that the result of those two transactions reflected the general increase in commercial property prices in the Woollahra area between 2010 and 2011. 49Apart from these materials, the evidence for adjustment among the various years appeared to rest on the experienced intuition of the valuers. Ultimately, they agreed that the market was static between the 2009 and 2010 base dates. They also agreed that there was a small increase of 2.5% in the market between 2010 and the 2011 base dates. 50For the purpose of adjusting the sale price for the property at 465 New South Head Road Double Bay, the valuers disagreed as to the time adjustment to be made between the sale date and the 2011 base date. Mr Burney contended for a reduction of 10% while Mr Hill contended for a downward adjustment of 7.5%. In my view, Mr Burney's adjustment is to be preferred. At the time of sale, it must be assumed that, apart from general movement in the property market, the price reflected the likely benefit derived by that property from the approval that had been given to the Kiaora Lands Development that I have earlier described. The agreement between joint venturers, let alone the grant of development consent for that project, had not been achieved at the 2011 base date. At that time, the sale property was regarded as being on the fringe of the Double Bay retail area. It is for these reasons that I prefer the reduction of 10% in order to adjust the 2013 sale price back to 1 July 2011. 51In summary, it is convenient to record that the adjustments for time that I will make, not only for the sale at 465 New South Head Road but for all other sales, are as follows: 2009 - 2010: increase of 0% 2010 - 2011: increase of 2.5% A deduction of 10% will be made to reflect the difference in market price for 465 New South Head Road between April 2013 and 1 July 2011. 52Having regard to these adjustments, it is convenient to assess the land value by reference to all sales as at the base date of 1 July 2011 and then apply the appropriate percentage adjustments to determine the land value at the earlier base dates in 2009 and 2010. 53In applying an adjustment for time to the sale of 465 New South Head Road, the valuers differed as to the manner in which the percentage adjustment should be applied. Mr Burney took into account his 10% downward adjustment for time along with other adjustments that he made for location and size when seeking to derive a rate per square metre for the Land. After making the adjustments up and down, as the case may be, he applied a net adjustment to the 2013 sale price. 54I accept the evidence of Mr Hill that this course is inappropriate. It seems to me that the starting point for consideration when utilising this comparable sale is to adjust for time so as to reflect, at least hypothetically, the sale price on the assumption that the sale was effected on 1 July 2011. Having first made that adjustment, it is then necessary to make those adjustments considered appropriate in order to apply the sale price to derive a value applicable to the Land at the base date. Making the adjustment of 10% for time in that manner results in an assumed price for the sale of $3,480,750. 55Further adjustments are then required to be made to that figure to account for the locational and size differences between the sale property and the Land. Mr Burney considered that the Land was in an inferior location to 465 New South Head Road, applying a downward adjustment of 10% to the derived land value of the sale property. Mr Hill considered that the Land was in a superior location, given that it was central to the Double Bay retail precinct in July 2011. For reasons earlier indicated at that time, 465 New South Head Road was considered to be on the retail fringe. I therefore accept Mr Hill's assessment of an upward adjustment of 5% on account of location. 56As my earlier description reveals, the site at 465 New South Head Road had an area that was about 145m² less than the area of the Land. The valuers have agreed that a downward adjustment of the sale price was required in order to account for this difference in site area. The downward adjustment that I would allow equates to the upward adjustment accepted for location. 57Both valuers contended that an adjustment was required to the sale price of 465 New South Head Road on account of site, shape and frontage. However, the direction of their adjustments differed. Mr Burney contended that a downward adjustment of 5% should be made because the sale property was rectangular in shape with potential exposure of any building on it to three street frontages. Mr Hill contended that the price deduced from the sale property should be adjusted upwards by reason of the presentation of the Land to the three street frontages earlier identified. I do not accept that either adjustment should be made. While the Land has a parallelogram shape, given the street configuration and the angled exposure of the site to Goldman Lane from Knox Street, neither site suffers by comparison with the other in their potential for retail exposure to three street frontages. Accordingly, I make no adjustment on this account. 58In summary, the analysis of the sale at 465 New South Head Road requires only the 10% adjustment of the deduced land value to account for time. As the sale site was capable of development at a floor space ratio of 3:1 at all relevant times, it could have been developed with a gross floor area of 1214.1m². Dividing that figure into the adjusted land value results in a figure of $2,867/m² of GFA when applied to the Land.

Other sales relied upon by Mr Burney 59As I have earlier indicated, Mr Burney relied upon six further sales to derive a land value for the Land. (1) The property at 386 New South Head Road sold in November 2010 for $4,000,000 (excluding GST). It is a small site with a site area of 170.1m². The site accommodated a three storey building located within the General Business 3(a) zone. The property was sold subject to a five year lease to a major Australian bank with two five year options. Notwithstanding the contract price, Mr Burney assumed a sale price of $2,600,000 on the basis that the rent yield was considerably below that which could be expected for a "typical" retail tenant, as a consequence of which he concluded that a premium was paid for the fact that the lease was held by a bank. The estimated cost of improvements was then deducted from this lower figure resulting in an unadjusted land value of $1,697,000. To this figure Mr Burney applied downward adjustments of 35% in order to deduce a rate of $2,594/m² of GFA for the Land. I do not accept that this sale can properly be used for any purpose in seeking to derive a land value for the Land. The extent of adjustment made by Mr Burney to the contract sale price coupled with the fact that the sale site has an area that is only 30% of the site area of the Land, renders this sale lacking meaningful comparability. (2) The property at 324 New South Head Road Double Bay sold in June 2009 for the sum of $1,485,000. It has an area of only 113.4m². It is described as an "inside lot" meaning that it has a narrow single street frontage located between buildings accommodating ground level retail uses on either side. In an endeavour to utilise this sale, Mr Burney thought it appropriate to make downward adjustments for comparison to the Land of 45%. Once again, I reject this sale as being a comparable sale by reason both of its site area and the extent of adjustment required in seeking to apply the result of analysis to determine the value of the Land. (3) The third sale relied upon by Mr Burney related to the property known as 90 New South Head Road Edgecliff. Once again, it was an "inside lot", subject to a Special Business 3(b) zoning under the LEP with a permitted floor space ratio of 1.51. It is neither located in Double Bay nor in an area where retail shops are a permitted use. Given the dissimilarities with the Land, I do not regard the sale of this land as being comparable for the purpose of determining land value. (4) The property at 17 Bay Street Double Bay sold in April 2009 at a price of $2,500,000. The property is again an inside lot, located in a retail area of Double Bay, accommodating a refurbished part one and two level retail/commercial building. It has a site area of 202.3m², with a maximum GFA of 505.8m², given that the applicable floor space control is 2.5:1. Mr Burney determined the value of the improvements on this property at the date of sale to be $900,000 leaving an unadjusted land value of $1,600,000. Downward adjustment of 35% was made to this figure by Mr Burney to reflect individual adjustments for time, location and lot size. This resulted in a rate applied to the Land of $2,056/m² of GFA. This sale is of only marginal utility for present purposes in demonstrating a rate paid for small lots in the retail area. Accepting the unadjusted land value assigned to the property of $1,600,000, I would first apply an upward adjustment to that figure of 2.5% to allow for the marginal increase in the market between April 2009 and 1 July 2011. I have previously addressed the basis for that increase. After making upward adjustments to that figure for the superior location of the Land and its three street frontages, those adjustments would, to my mind, equate to the downward adjustment needed to be made to the sale property on account of the difference in lot size between that property and the Land. In the result, the only adjustment to be made is the 2.5% increase to account for time between date of sale and 1 July 2011, resulting in a land value of $1,640,000. On the assumption that a gross floor area of 505.8m² could be achieved on the property, this would yield a rate of $3,243/m² if applied to determine the land value of the Land. (5) The property at 9a Bay Street Double Bay also had an area of 202.3m². As its street number would suggest, it was in close proximity to the sale previously discussed at 17 Bay Street. The property sold in June 2009 for $1,985,500. Like number 17, it was located in the General Business 3(a) zone under the LEP with the same permitted floor space ratio yielding the same potential GFA of 505.8m². A two storey building of the Victorian era was constructed on the front area of the site with a cleared area at the rear accommodating parking for 6 vehicles. The improvements were valued by Mr Burney at $668,750, resulting in an unadjusted land value of $1,316,750. A net downward adjustment of 30% was made to this figure by Mr Burney to account for time of sale and lot size (negative adjustments) and location (positive adjustment) in seeking to apply a figure to the Land. I do not accept Mr Burney's adjustments. For reasons indicated when addressing 17 Bay Street, I consider it appropriate to make an upward adjustment of 2.5% to reflect the land value of the sale property at 1 July 2011. For the same reasons indicated in respect of number 17, no net adjustment would result from consideration of lot size, location and street frontage when seeking to apply the deduced rate from the sale to the Land. This analysis results in a deduced rate of $2,669/m² for GFA when applied to the Land. (6) The final additional sale considered by Mr Burney concerned the property at 389 New South Head Road Double Bay. That property sold in November 2010 for $3,050,000. The property was located in the General Business 3(a) zone under the LEP with a maximum floor space ratio of 2.5:1. With a site area of 325.5m² the maximum gross floor area calculates at 813.8m². The sale property was also an internal site with a narrow single storey shop frontage to New South Head Road. An attached three level building was constructed at the rear. These improvements were valued by Mr Burney at $795,000 resulting in an unadjusted land value of $2,255,000. Downward adjustments of 25% were made by Mr Burney on account of the time of sale and difference in lot size. This resulted in a rate when applied to the Land of $2,078/m² of GFA. Once again, I do not accept these adjustments. The time adjustment made by Mr Burney does not accord with that adjustment which I have earlier found to be appropriate. Given that the sale date is within the 2010-2011 period in which I have determined that some increase in the market was evident, an appropriate adjustment for date would be 2% resulting in a land value adjusted for time of $2,300,100. While a downward adjustment to reflect lot size between the sale property and the Land is required, upward adjustments are required to account both for the superior location of the Land and the capacity for any development upon it to afford retail frontages to three streets. A net upward adjustment of 20% is required. This results in a rate of $3,392/m² of GFA when applied to the Land. 60The three sales identified by Mr Burney that have any potential to provide assistance in determining the land value of the Land show rates per square metre of GFA of $3,243, $2,699 and $3,392. As the sale of 389 New South Head Road was closest in point of time to the base date of 1 July 2011 and had the largest site area of the three sales analysed, albeit only 60% of the area of the Land, it seems to me that the figure that best reflects the rate to be applied to the Land from these sales should be close to that deduced from 389 New South Head Road. I propose to adopt the figure of $3,300/m² for GFA from these sales. 61However, in so doing I recognise that consideration must be given to the fact that these sales were of land of small allotments with only single street frontage and, by comparison with the Land, offering limited potential for redevelopment. The rate that I deduce form these sales will need to be considered along with the rate that I have earlier deduced from the sale of the property at 465 New South Head Road as well as the rate deduced from those sales relied upon by Mr Hill that have the potential to offer assistance. It is to Mr Hill's sales that I now turn.

Other sales relied upon by Mr Hill 62As I have earlier recorded, Mr Hill selected sales that, in his opinion, represented development sites or "lightly improved" sites, implying that redevelopment was likely. (1) The sale of the land at 376-382 New South Head Road Double Bay in August 2004 is relied upon by Mr Hill. This sale involved the Land together with a small adjoining lot. Having regard to the fact that the area of land purchased exceeded the area of the Land; considering the date of sale and the fact that between that date and 1 July 2011 there were significant fluctuations in the property market, including those brought about by the GFC, as both valuers acknowledged, I do not regard the sale of this land as providing any basis for comparability. I do not intend to rely upon it. (2) The property at 733 New South Head Road Rose Bay was sold on 29 March 2007. Following the sale, the existing building was demolished and the site redeveloped with commercial and retail space provided at ground level and two residential levels above. The site inspection revealed that a number of the residential apartments would have views either to Sydney Harbour or across the adjacent Royal Sydney Golf Club course, an advantage no doubt appreciated and intended to be exploited by the purchaser when the site was acquired. The Land enjoys no such advantage. The sale occurred in a buoyant market some 12 months prior to the onset of the GFC. Moreover, the property is on the periphery of the Rose Bay retail area and while zoned General Business 3(a) under the LEP, is subject to a floor space ratio restriction of 2:1. In a retail/commercial context, the location bears little similarity to the location of the Land within the Double Bay retail precinct. All of these factors militate against the use of this sale as being in any way comparable to the Land. (3) The property at 29-33 Bay Street Double Bay sold for $5,100,000 in April 2012. The property had a site area of 455.4m² and was zoned General Business 3(a) under the LEP with a permitted maximum floor space ratio of 2.5:1 which would yield a gross floor area of 1,138.5m². Mr Hill considered the value of improvements to be $1,835,500. Although this sale had not initially been identified by Mr Burney as a sale upon which he relied, he ultimately accepted that the sale afforded some assistance in determining the value of the Land. He assigned a value to the improvements of $1,854.050 leaving an unadjusted land value of $3,245,950. The difference between the valuers in deducing a land value from the sale was only $18,550. The significant difference between the valuers concerned the adjustments that they made to the land value of the sale property in order to derive a rate to be applied to the Land. Each agreed that adjustments for time, location, lot size, lot shape, residential use potential and retail frontage should be made. For his part, Mr Hill first applied a downward adjustment of 2.5% to account for the difference in markets between the sale date in 2012 and the base date in 2011. Having made that adjustment the resulting figure was further adjusted upwards by a net 20% to account for the other factors that I have identified. This resulted in a rate of $3,355/m² for GFA. For his part, Mr Burney applied all adjustments, including that for time, to the unadjusted land value that I have earlier recorded. The net result of all percentage adjustments that he applied was a downward adjustment of 10%, resulting in a rate of $2,309/m² for GFA. Acknowledging the small difference between the valuers as to the unadjusted land value, I have adopted a figure that is near mid point between them of $3,255,000. To that figure I have applied a downward adjustment of 2% to allow for a lower market price in July 2011 than the sale price in April 2012. This results in a price adjusted for date in the sum of $3,189,900. After making upward adjustments for both location and retail frontage which the Land enjoys but a downward adjustment for size, a net upward adjustment of 5% to the sale price seems to me to be appropriate. This results in a rate of $2,942/m² of GFA when applied to the Land. (4) The property at 156 Edgecliff Road Edgecliff sold for $4,125,000 in May 2006. The property had an area of 809.3m² and was zoned Neighbourhood Business 3(c) under the LEP, with a maximum floor space ratio of 1.5:1. This would have allowed a maximum gross floor area of 1,337 m². The sale property is a corner site which, since the sale, has been developed by the construction of a three storey retail/commercial building with basement car parking. At best this sale can only be of marginal assistance. The sale date renders adjustment for it alone to be problematic given the subsequent occurrence of the GFC. In addition, the different zoning of the land coupled with the more restrictive floor space controls than those applicable to the Land, exacerbates the difficulty in making appropriate adjustments to the sale price in order to derive assistance in determining the land value of the Land. A further factor influencing any analysis of this sale is that the contract for sale provided for settlement to occur almost two and a half years after the contract date. The difficulty in utilising this sale is further demonstrated by the difference between the valuers in the analysed rate per square metre that they each derived. For his part, Mr Hill contended for a rate of $3,373/m² for GFA while Mr Burney contended on his analysis that the rate was $1,728/m² for GFA when adjusted for the Land. While I accept that they differed in their analysis of other sales to which I have referred, the magnitude of the difference is significant. I do not derive any assistance from the analysis of this sale. (5) The final sale upon which Mr Hill relied fares little better in the context of comparability. The property is located at 93-99 Bronte Road Bondi Junction which sold at a price of $5,250,000 in November 2009 The site area of the property is 904.6m², an area that is almost 65% larger than the area of the Land. It was zoned Business Special 3(a5) under a planning instrument applicable to the Waverley local government area. The sale site has a single frontage to Bronte Road with service access available from a rear lane. The surrounding development comprises a mix of older style two and three storey commercial and retail development as well as residential buildings of varying styles and age. The site could be described as being at the interface between commercial/retail uses on the one hand and residential uses on the other. That interface is reflected in fact that although the site has been developed with a retail or commercial facility at ground level, the upper levels of the redeveloped site provide residential accommodation. Mr Hill valued the improvements at the date of sale in the sum of $443,556. After deducting that sum from the sale price the unadjusted land value was $4,806,444. While the sale was disputed by Mr Burney on the basis that it was not comparable, he did not dispute Mr Hill's valuation of improvements. In seeking to apply that land value to the Land, Mr Hill first adjusted the price upwards by 2.5% in order to account for the market movement between November 2009 and July 2011. Having made that adjustment, upward adjustments were made for location, lot size, shape and retail frontage, reflecting the superiority of the Land, while making a downward adjustment of 2.5% to account for the fact that the sale site offered a slightly better opportunity for district views. In the result, the net upward adjustment he made was 32.5%, yielding a rate of $3,391/m² of GFA when applied to the Land. Mr Burney applied all his adjustments to the unadjusted land value from the sale site of $4,806,444. While an upward adjustment was made for time, retail frontage and lot size, significant downward adjustments for location, shape and residential potential were made, resulting in a net downward adjustment of 15%. This resulted in an analysed land value when applied to the Land of $2,228/m² for GFA. Apart from disagreeing with the application of all adjustments to the unadjusted land value for reasons earlier explained, I generally concur with Mr Hill's upward adjustments for location, size and superior retail exposure of the Land when compared with the sale site. I do not consider that any allowance should be made for shape while a downward adjustment of 10% would appropriately reflect the residential potential of the sale property when compared to the Land. This results in a net upward adjustment of 20%, yielding a rate of $3,070/m² for GFA. 63The only two sales relied upon by Mr Hill which I have determined offer any assistance in determining the land value of the Land show, on my analysis, rates of $2,808/m² and $3,070/m² for GFA respectively. I attribute far more weight to the analysed result of the sale at 29-33 Bay Street Double Bay than I do to the analysed result of the sale of 93-99 Bronte Road Bondi Junction. From these results I consider it appropriate to deduce a rate of $2,900/m² which reflects sale prices for sites falling within Mr Hill's selected categories of either development sites or "lightly improved" sites.

Conclusion on land values from sales evidence 64The preceding discussion identifies three rates upon which the land value of the Land might be determined: (i) $2,867/m² for the site at 495 New South Head Road Double Bay which most closely compares to the Land, albeit that the sale occurred several years after the relevant base dates; (ii) $3,300/m² from sales that occurred within the three year period in which base dates are to be determined but reflecting the value of sites that are very much smaller than the Land; and (iii) $2,900/m² from one sale within Double Bay and another sale in an area of only marginal comparability. Doing the best I can with the evidence available, I consider that the appropriate rate to apply is $2,900/m² for GFA. This figure gives due weight to the sale identified in (i), being the sale agreed by the valuers as being of greatest utility among all of the sales that they have identified. 65As I have earlier recorded, the maximum floor space attributable to the Land at a floor space ratio of 3:1 is 1649.1m². Applying the rate of $2,900/m² to that area results in a land value at 1 July 2011 of $4,782,390. I adopt a figure of $4,782,000. 66I have earlier accepted that there was an increase in value of 2.5% between 2010 and 2011 while the market was static between 2009 and 2010. Reflecting these adjustments to the 2011 figure of $4,782,000, the resulting land values (rounded) are: 2009: $4,665,400 2010: $4,665,400 67In the result, each of the land values that I have determined are measurably less than that determined by the Valuer-General as recorded in [3]. I am satisfied that the applicant has discharged the onus imposed by s 40(2) of the Valuation Act. Therefore, the appeal will be allowed in each case and the Valuer-General's determination revoked: s 40(1)(a) of the Valuation Act.

Orders 68For these reasons, I make the following orders: Proceedings 31101 of 2012

1. Appeal allowed.
2. Revoke the decision of the Valuer-General determining the land value of the land at 376-382 New South Head Road Double Bay for base date 2009 in the sum of $5,190,000.
3. Determine the land value for the land at 376-382 New South Head Road Double Bay at base date 1 July 2009 in the sum of $4,665,400.
4. Exhibits may be returned. Proceedings 31102 of 2012
5. Appeal allowed.
6. Revoke the decision of the Valuer-General determining the land value of the land at 376-382 New South Head Road Double Bay for base date 2010 in the sum of $5,350,000.
7. Determine the land value for the land at 376-382 New South Head Road Double Bay at base date 1 July 2010 in the sum of $4,665,400.
8. Exhibits may be returned. Proceedings 31103 of 2012
9. Appeal allowed.
10. Revoke the decision of the Valuer-General determining the land value of the land at 376-382 New South Head Road Double Bay for base date 2011 in the sum of $5,560,000.
11. Determine the land value for the land at 376-382 New South Head Road Double Bay at base date 1 July 2011 in the sum of $4,782,000.
12. Exhibits may be returned.

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: 28 March 2014