In Adam Pty Limited v Valuer General

Land and Environment Court (NSW)|2010-09-22|Before: Mr J

CITATION : In Adam Pty Limited v Valuer General [2010] NSWLEC 1262

APPLICANT In Adam Pty Limited PARTIES : RESPONDENT Valuer General

FILE NUMBER(S) : 30791; 30792; 30793 of 2009

LEGISLATION CITED: Valuation of Land Act 1916 s 14G

CASES CITED: Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143; (2009) 74 NSWLR 700

APPLICANT Mr I Hemmings, barrister INSTRUCTED BY Hones La Hood Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr J Maston, barrister INSTRUCTED BY Crown Solicitor's Office

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30791, 2 and 3 of 2009 In Adam Pty Limited v Valuer General

JUDGMENT 1 COMMISSIONERS: On two occasions, judges of the Court have considered appeals against statutory valuations of the Sydney City Council recognised heritage building occupied by the Commonwealth Bank on the northern side of Martin Place in Sydney's Central Business District. The building is easily recognised as the structure upon which that bank's iconic children's moneyboxes were modelled. Indeed, in the various pieces of litigation concerning the building's valuation, the building has been referred to as the Moneybox.

2 Each of the two judicial valuations in this court was appealed to the Court of Appeal. In the more recent of those appeals (Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143; (2009) 74 NSWLR 700) (we will refer to this decision as Moneybox 2), two of the judges, when considering the then terms of s 14G(1) of the Valuation of Land Act 1916 (the Act) - this provision being the relevant valuation provision relating to heritage recognised buildings under local environmental plans - adopted the position, contrary to the long-standing valuation practice of the Valuer General, that an allowance should be made for the condition of the building at the time of valuation rather than assuming a building in pristine condition.

3 The process, or sequence of reasoning, that was approved by the more recent decision of the Court of Appeal involved three elements. These were: o the establishment of a base land value in conformity with the provisions of s 6A(1) of the Act; then o considering what the consequences for that value would be as a result of the operation of s 14G of the Act; and o as part of the second element, making such allowance as might be appropriate to reflect the actual condition of the heritage restricted building or structure that was imported into consideration by virtue of the provisions of s 14G of the Act.

4 In response to this decision, a legislative amendment inserted an additional provision in s 14G(1) of the Act - s 14G(1)(b1). The overview in the explanatory note to the Valuation of Land Amendment Bill 2009, with respect to this amendment, said: The object of this Bill is to amend legislation relating to the valuation of land that is heritage restricted (including land listed on the State Heritage Register) to restore the previous practice of the Valuer-General in relation to that land before the decision of the Court of Appeal in Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143. Land value is ordinarily determined on the general assumption that there are no improvements on the land and that the land can be used for any purpose for which it is being used or could legally be used. Valuations of heritage restricted land are reduced by provisions that require the Valuer-General to assume that the land can only be used for the purpose for which it is being used and that the only improvements that can be made and continued are those that are on the land at the relevant date of valuation. The Valuer-General's practice (which the Court found was not supported by the current provisions of the legislation) has been to treat any improvements on the land as new improvements without making any deductions because of the current condition of the improvements (such as deductions for repairs or future maintenance). The Bill reverses the Court decision and confirms the previous practice of the Valuer-General in respect of the valuation of heritage restricted land. 5 The specific commentary in the Explanatory note concerning the insertion of s 14G(1)(b1) was in the following terms: Schedule 1 [1] amends s 14G (in relation to heritage restricted land other than land listed on the State Heritage Register) to give effect to the object outlined in the Overview above.

6 In the second reading speech of the Parliamentary Secretary who introduced the legislation, the following passages appear: It goes without saying that a building of heritage significance will never be in a new condition. However, the assumptions provided by s 14G are designed to assist a valuer to properly determine the highest practical use of heritage restricted land, as required by the Act. The actual building itself is not assessed for value. The building is considered only for the purpose of determining the nature of use and the extent of development allowed on the land. The Court of Appeal in Valuer General v Commonwealth Custodial Services Pty Ltd considered that the current wording of s 14G requires that the current condition of the building must be taken into account in the valuation assessment. The court stated that the cost of maintenance of a heritage building impacts upon its marketability and available return, and the potential cost of refurbishment should therefore be factored in.

The Valuer General has never valued heritage-restricted land in this way. To undertake a heritage valuation in the manner that the court has stated would be disastrous for the valuation process in New South Wales. Most land in New South Wales is valued using a mass valuation process. This procedure enables like properties to be considered together and valued in groups called components. The properties in each component are similar, or are likely to change in value in a similar way. Within each component, at least one representative property is valued individually each year to measure how the much the value has changed in the previous year. The change in value is then applied to all properties within the component to determine their new value. If, as the Court of Appeal has suggested, s 14G required that the Actual condition of the heritage building be taken into account, separate inspections would need to be made for every heritage property in the State.

The purpose of this bill is to maintain the status quo and to clarify the purpose of the assumptions in s 14G. To achieve this the bill proposes to introduce a further assumption that clarifies that when valuing property under s 14G all improvements on the land are, and will continue to be, maintained without the need to make any allowance for the building's actual condition. This amendment will ensure that a valuer need not take into account the Actual condition of the building when the valuation is made. 7 We now set out, in its entirety, the terms of s 14G(1) of the Act: 14G Valuation subject to heritage restrictions under EPI

(1) Land that is "heritage restricted" on the date by reference to which its land value is to be determined is to have its land value determined on the basis of the following assumptions: (a) that the land may be used only for the purpose, if any, for which it was used when the value is determined, (b) that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued, (b1) that all improvements referred to in paragraph (b) on that land are new (without any deduction being made because of their actual condition), (c) that no improvements, other than those referred to in paragraph (b), may be made to or on that land.

8 The provision in s 14G(1)(b1) is that which was inserted by the legislative response to Moneybox 2 - the decision to which earlier reference has been made. 9 We have set out the above history as it provides a framework defining process we consider is fundamentally informative of that which we are required to follow in addressing each of the three statutory valuation appeals that we are determining in these proceedings. The appeals 10 These three proceedings are appeals against the statutory valuations as at the base dates of 1 July 2006; 1 July 2007; and 1 July 2008. The valuations all relate to the site in Darlinghurst described below. 11 The statutory valuations for each of the relevant base dates are as follows: 1 July 2006 $6.47 million 1 July 2007 $7.5 million 1 July 2008 $7.25 million

12 Underpinning our consideration of these appeals is how s 14G(1)(b1) influences the outcome of the process. 13 The revised statutory valuations, for each base date, contended for by the applicant, are:

1 July 2006 $2.8 million 1 July 2007 $3.15 million 1 July 2008 $1.9 million

The site 14 These appeals relate to a mixed use commercial and retail building located at 223-225 Liverpool Street, Darlinghurst (the site) and having this street as its primary frontage. The site also has a pedestrian overbridge linkage and secondary street frontage to Oxford Street. 15 The building is recognised as a local heritage item by Sydney City Council. It is not on the State Heritage Register. The building on the site has five levels - the lower two of which are used for retail showroom purposes and the upper three of which are used for an eclectic range of commercial offices or professional suites. The two showroom levels and the first two of the commercial levels are part of the original fabric of the building whilst the uppermost level is a new level that has been incorporated as part of an adaptive reuse of the original warehouse building.

Inspection of the site and comparable valuation buildings 16 On the first morning of the hearing, we inspected the site and undertook a walking tour to view the exteriors of a number of other premises in Darlinghurst, Kings Cross and Potts Point - sites that were referred to by the two valuers, Mr Dempsey, on behalf of the applicant, and Mr Ferdinands, on behalf of the respondent. During the course of this walking tour, we heard informal evidence from them about each of the other sites that were visited.

17 After the conclusion of the walking tour, we undertook a drive-by inspection, accompanied by Mr Hemmings, barrister for the applicant, and Mr Maston, barrister for the Valuer General. The sites that were observed during this drive-by inspection were located in the Central Station precinct and to the east of the station.

The issues 18 In addition to the usual valuation appeal issues as to: o what should be the relevant comparable property analyses; o what should be the nature and extent of any adjustments made to them and; o as a consequence, what should be the analysed land value pursuant to s 6A(1) of the Act to be derived for the appeal site, these proceedings also involved us considering how the provisions of s 14G of the Act impact on such a valuation and what is the effect of the legislative intervention to insert s 14G(1)(b1) into the Act in response to the Court of Appeal's decision in Moneybox 2.

19 With respect to this final point, we are venturing into uncharted waters faced with two significantly different approaches advanced by Mr Hemmings and Mr Maston to the (now) terms of s 14G(1).

What is the effect of the insertion of s 14G(1)(b1)? 20 The competing positions concerning the effect of the insertion of s 14G(1)(b1) can be stated simply. On one hand, Mr Hemmings has submitted that the words themselves, when considered in conjunction with the relevant elements of the explanatory note and the second reading speech on the introduction of the legislation set out earlier, means that what has been removed is the third of the elements to be derived from the Court of Appeal's decision in Moneybox 2. 21 On the other hand, Mr Maston submits that we should take an entirely different perspective of the effect of the legislative amendment. His written outline of submissions helpfully encapsulates the proposition that he advances. His submissions were put in the following terms: As to the object and purpose of the amendment, it is permissible to have regard to extrinsic material: s 34 Interpretation Act 1987. This is permitted in order to confirm the ordinary meaning conveyed by the text or to determine the meaning of the provision if the provision is ambiguous or obscure or if the ordinary meaning conveyed by the text leads to a result that is manifestly obscured or is unreasonable: s 34(1). In these cases one might have regard to the explanatory note or memorandum for the Bill and the second reading speech in a House of Parliament: s 34(2)(e) and (f).

Relevantly, the explanatory note or memorandum on the introduction of the Valuation of Land Amendment Bill 2009 shows that the object of the Bill was to restore the practise of the Valuer General before the decision of the Court of Appeal in Valuer General v Commonwealth Custodial Services Limited [2009] NSWCA 143. It states that the Bill " reverses the Court decision " and that the amendment to s 14G was to give effect to the object outlined in the overview in the explanatory memorandum.

The second reading speech on behalf of the Minister includes the following central proposition:

The actual building itself is not assessed for value. The building is considered only for the purpose of determining the nature of use and the extent of development allowed on the land (emphasis added).

In effect, s 14G coupled with s 6A(1) of the Act requires the assumption of a particular purpose or use (in town planning sense), and the extent of the use in the actual building on the land is that which is required to enable the use to continue. In simple terms, this is the extent of floor space and in particular the extent of the net lettable area of the actual building on the land.

These are the only purposes for which regard may be had to the actual building on the land under s 14G when carrying out a valuation of the land under s 6A(1).

On this basis, the nature of the fabric of the building, the material from which it is made, and its precise form are not part of the assumptions required by s 14G. Assumptions other than those in s 14G are not permitted to be made by the Act, with respect to improvements (other than land improvements).

22 In effect, as we understand him, it is his thesis that s 14G(1)(b1) has now fundamentally altered the basis upon which s 14G should be regarded as influencing a valuation for a heritage impacted building or structure. In effect, he says that we should set aside the process as discussed by McClellan CJ at CL, writing the leading judgement in Moneybox 2, and what should be substituted instead is a valuation that is akin to a valuation undertaken pursuant to s 6A(2) of the Act, simpliciter, rather than a valuation pursuant to s 6A(1) of the Act with the subsequent consideration of the impacts of s 14G of the Act as a separate element or step in a chain of reasoning to arrive at a final valuation from the heritage impacted property.

23 We have considered this specific matter of statutory approach early in our consideration of the issues as the determination on this point, in considerable part, defines the nature and extent to which the disagreement between the two valuers need to be considered and resolved.

24 We are unable to accept the approach advocated by Mr Maston as we think that it is contrary to the express intention of the legislation in the words of s 14G(1)(b1) itself. To the extent that there might be any lack of clarity on the part of the legislature, evidenced by a comparison of the passages from the the explanatory note and the speech by parliamentary secretary (quoted by us) and that cited by Mr Maston, we consider that the actual terms of s 14G(1)(b1) are clear and do not require any reference to extrinsic materials to assist in ascertaining there meaning. The Act, in this new provision, does not speak like the Queen of Hearts in Alice in Wonderland (where words merely mean what she says they mean) - we are satisfied that their meaning here is clear from the ordinary understanding of the words themselves.

The comparable sites analysis 25 During the course of their oral evidence, the two valuers agreed that the Springfield Avenue sale of vacant land at King's Cross was the most relevant comparable site for the purposes of these proceedings. We agree with them. Indeed, we consider that the other sales or leases upon which they have variously based their analyses are sufficiently dissimilar that we should disregard them. 26 However, each of them values this site in a different fashion. It is fair to say, however, that Mr Ferdinands has approached his statutory valuation analysis (and the early phases of the joint conferencing between the valuers) on the assumption that the process (as submitted by Mr Maston to be the correct process) was, in fact, the approach to be adopted. As we have rejected this fundamental assumption, a deal of his evidence is rendered of little assistance to us. 27 The second general matter that should be observed with respect to the valuation evidence is that, as a consequence of the approach adopted by Mr Ferdinands, he has not undertaken any prior, separate analysis based on rental income but, to the extent that he has subsequently done such an analysis, has based his rental analysis evidence on a review of the material provided by Mr Dempsey. 28 Mr Dempsey had included, in his initial statement of evidence, analyses based on rental comparisons (including an extensive analysis of the rentals being achieved within the site) and has performed this latter analysis for each of the three relevant based dates, 1 July 2006, 1 July 2007 and 1 July 2008.

29 The third general observation to make concerning the valuation evidence is that, at our direction, a further joint conference was conducted by the valuers during which they undertook an analysis of the site for each of the three base dates - doing so adopting Mr Dempsey's methodology for the purposes of the exercise, this being: o the process earlier outlined of a s 6A(1) derived land value; o a consideration of the hypothesised rent taking into account the provisions of s 14 and applying and an uplift factor to regard the building as being in the condition required to be assumed by s 14 namely that all improvements referred to in paragraph (b) on that land are new (without any deduction being made because of their actual condition); and o applying what Mr Dempsey has described as being a heritage building construction penalty.

30 We will return to the question of the appropriateness or otherwise of this penalty allowance later in this decision.

31 It should be observed, at this point, that Mr Ferdinands only took part in preparing his elements of this joint analysis report after having expressly disavowed the validity of the process he was required to undertake.

Mr Ferdinands valuation approach 32 We have earlier set out the approach advocated by Mr Maston as being the Valuer General's view of what should be the correct approach to be undertaken in applying the present provisions of s 14G in its amended form. As earlier noted, we have not accepted this proposition. Various elements of Mr Ferdinands' evidence make it clear that he has undertaken his analyses on the basis that this approach is the correct one (as can be seen from a number of comments contained in his various written evidentiary contributions and also confirmed during the course of his oral evidence given concurrently with Mr Dempsey).

33 For the reasons earlier outlined, we consider that this approach is inconsistent with the approach endorsed by the Court of Appeal as modified by the legislative amendment that inserted s 14G(1)(b1).

The quantity surveyors' evidence 34 The parties had engaged expert quantity surveyors, Mr McColl for the applicant and Mr Martin for the Valuer General, to address two questions as at each of the three base dates. The two questions involved the construction costs for three hypothetical buildings being erected on the site and the value of the land improvements on the site - these land improvements being the excavation to obtain the additional areas that have been developed on the site below the original natural ground level.

35 For the exercise of considering the construction costs of hypothetical buildings, the quality surveyors were instructed to consider three hypothetical building designs: o a building built out of exactly the same materials and in exactly the same form as the present heritage restricted structure; o a new, built to modern construction standards, building using a concrete facade design which building would contain the same net usable area as the present heritage restricted building; and o a second new building as immediately above but one with a glass facade.

36 As a consequence of the joint conferencing process of the quantity surveyors, they reached an agreed position on all of the matters that they were asked to consider. To the extent necessary, this information is discussed below.

A preliminary issue concerning the new building options 37 The two new building options that were required to be considered by the quality surveyors, in their hypothetical exercises, arose because Mr Dempsey adopted a hypothetical concrete facade building whilst Mr Ferdinands considered that a glass facade building was the preferable hypothetical design option. The table provided by the quantity surveyors demonstrated that the hypothetical concrete facade building would be significantly cheaper to construct than the hypothetical glass facade building.

38 Mr Dempsey and Mr Ferdinands agreed on what would be the achievable rental rates that could be achieved for a new building. They agreed that the rate that could be achieved would be the same whichever of the hypothetical design models were to be adopted for such an exercise. In their allowances for such hypothetical new building in the valuers' further supplementary joint report, Mr Ferdinands preferred, for the purposes of working out his equivalent to Mr Dempsey's allowance for an "historic building reconstruction penalty", the adoption of the hypothetical glass facade building rather than the hypothetical concrete facade building.

39 Although, for reasons that are discussed later, we have declined to adopt the requirement for such an allowance in our analysis, it is convenient to make it expressly clear that we do not consider any rational person (undertaking a hypothetical transaction of this nature) would elect to construct a significantly more expensive building where it would offer zero effective return on the increased cost of construction. The adoption of the more expensive model here, by Mr Ferdinands, where there is no rational basis for doing so, together with the fact that there were a number of inconsistencies during the course of his oral evidence, causes us to conclude that, generally speaking, Mr Dempsey's evidence is to be preferred in the event that there is any relevant difference between them.

40 Having made that observation, we also note that, although there was a thematic consistency in Mr Dempsey's evidence, there was one calculation error of some significance. This calculation error was contained in his comparison analysis for the Springfield Avenue site. 41 In his analysis of this vacant land sale, Mr Dempsey derived a value per square metre of $2057 per square metre on a floor space ratio basis rather than a net lettable area basis. After adjustments (the appropriateness of the rates for which is discussed later), the resultant analysed figure contained in his report (derived from this erroneously calculated figure) - and also used in a subsequent joint report referred to earlier - was $1440 per square metre. After the conclusion of the hearing, a corrected agreed figure ($2209 per square metre on a net lettable area basis) was supplied to us on behalf of the parties. The corrected derived calculation shows that Mr Dempsey's analysed figure for the site should therefore be $1546.30 per square metre of net lettable area. This correction has an impact of some significance on the ultimately derived valuation, as later shown in tabular form.

The evidentiary focus on the 2006 base date 42 During the course of the hearing, the focus of the oral evidence given by Mr Dempsey and Mr Ferdinands was on the appropriateness and application of their various conclusions concerning the 2006 base date valuation. Their evidence for the 2007 and 2008 base date years shows, on our understanding of their calculations for each of these years and the bases upon which those calculations are founded, consistent patterns of variation between the years (within the evidence of each valuer) although with the obviously expectable differences between them given the approaches that they have taken. 43 As a consequence, having concluded that (subject to the discussion below and conclusions on the calculations that follow) we consider that the approach taken by Mr Dempsey, in his analytic process deriving the 2006 base date figures, is to be preferred, we have also concluded that his methodology and inter-year adjustments for calculating for each of the subsequent years should be applied.

The approach set out in the final joint valuer's report 44 During the course of the hearing, the valuers were instructed to undertake a further joint conference to consider an approach discussed by us with Mr Hemmings and Mr Maston. The advocates drafted the question that was to be considered by the valuers and it was provided to the valuers in the following terms: On the assumption that the Table at page 6 of the Joint Report, Exhibit D is consistent with the requirements of s.14G of the Valuation of Land Act , the valuers are to meet and confer in relation to each base date year in order to determine:

Rent per/m NLA net effective for the building in its actual state (though assuming new condition); and Rent per/m NLA net effective assuming s.14G does not apply.

That discussion is to include the relevant rental evidence included in Mr. Dempsey's Statement of Evidence, Exhibit A, paragraphs [174]-[197].

The valuers are to meet and confer in relation to the appropriate "land value rate per net lettable area" included in the Table at page 6 of Exhibit D for the base date years 2007 and 2008 (PD: $1600, EF $1,475) and 2008 (PD: $1,280 and EF: $1,400).

45 As a consequence of their consideration of these matters, a further supplementary joint report was produced. Although Mr Ferdinands took part in this discussion, he made it clear that he did not regard that which he had been asked to consider as a valid methodology - his non-acceptance being a proposition we have rejected for the reasons discussed earlier. 46 We reproduce, below, the table of their analysis for the 2006 base date valuation.

ASSUMING PRECAST FAÇADE (DEMPSEY) AND GLASS FAÇADE (FERDINANDS) MR DEMPSEY'S OPINION MR FERDINANDS' OPINION

New Building Rent m2 NLA net effective $380 $380 Subj. Building Rent m2 NLA net effective $300 $345

Difference being the Rental Adjustment for Sec 14G 21.05% 9.21%

Agreed Land Value NLA $1,400.00 $1,400.00 m2 NLA Applying the rental adjustment = s 14G Land Value $1,105.26 $1,271.05 m2 NLA Actual Lettable area of 223-255 Liverpool Street 4,464.99 4,464.99 m2 NLA

Section 14G Land Value $4,934.989 $5,675,237 Plus Excavation (Site Imps.) $402,995 $402,995 Less heritage cost penalty $1,666,203 $776,203

Heritage Land Value 2006 $3,671,781 $5,302,029

47 There are a number of matters to be observed concerning the inputs to these calculations. First, the valuers agree on the rent rate for each square metre of net lettable area that is the starting point for any calculation based on this assumption. They then each adjust that for what they describe as the s 14G heritage impairment allowance. As can be seen, the adjustment that Mr Dempsey makes is a reduction of 21.05% whilst that allowed by Mr Ferdinands is 9.21%.

48 It was Mr Dempsey's uncontradicted analysis of the current rent roll for the premises as at the 2006 base date that, having regard only to those portions of the premises that were actually rented (there being a small vacancy element at that time), the average achieved rate per square metre for the net lettable area of the building was $260. He adjusted that rate upward (by a little over 14%) to reach the rate that he derived as his actual full occupancy rental for the building. 49 Mr. Dempsey's uplift factor of ~ 14% takes into account not only the very small extent of the vacancies in the tenancies of the building as at 1 July 2006 but also makes an appropriate allowance for an uplift factor that reflects the costs of a notional renovation to bring the building back to the condition that it would have been if it were to be newly constructed in exactly its present form. This "newly constructed as it is" uplift factor is that which is required, by s 14G(1)(b1), in order to negative of the approach taken by the Court of Appeal in Moneybox 2. 50 Mr Dempsey then compared the resultant rate with the rental rate for the hypothetical new building to conclude that the discount would be 21.05%. Mr Ferdinands' position, a resultant comparative full occupancy rental and renovation uplift of $345, would require an upward adjustment of a ~ 25% to reflect the effect of the comparatively modest vacancy rate (revealed in Mr Dempsey's rent roll analysis) as at the relevant date and an extent of required renovation that would appear to be excessive in light of our observation of the condition of the building during our site inspection. 51 As a consequence, we can find no basis upon which we can support such a significant upward adjustment and accept Mr Dempsey's figure as being an acceptable calculation for the necessary upward adjustment for the comparatively modest vacancy rate. Adjustments to Springfield Avenue 52 In his analysis of the Springfield Avenue sale, Mr. Dempsey made two adjustments. The first, a downward adjustment of 25% for location, we accept as being appropriate as reflecting the comparison between the fringe area in Darlinghurst where the site is located compared to the Springfield Avenue location close to the heart of the King's Cross entertainment and commercial precinct. 53 However, Mr Dempsey also made a further downward adjustment of 5% to reflect the fact that, at the time the Springfield Avenue sale took place, that site had an existing development consent (even though it was not the development consent that was eventually acted upon for the construction of the building that is now located on the Springfield Avenue site). We do not consider it appropriate to make such a downward adjustment in the comparison between Springfield Avenue and the site as it is clear that s 14G requires us to accept that the present building on the site not only is there but is validly there (an assumed development consent). As a consequence, we are satisfied that we should also treat the site, as a consequence of s 14G, as if it had an existing development approval. 54 As a consequence, we are satisfied that the adjustment to derive the correct analysed value for the site from Springfield Avenue should be 25% rather than 30%. The resultant adjusted land value to be transported in into the calculation for the site is therefore $1656.75 per square metre of net lettable area. Heritage cost penalty - a case of double dipping? 55 As we understand the position, the postulated heritage cost penalty included by Mr. Dempsey and included by Mr. Ferdinands (although rejected by him as inappropriate) is, in our view, a case of double dipping. The only basis upon which an allowance can be made, as a consequence of the operation of s 14G(1)(b1), is to apply an uplift factor that reflects the cost that would be incurred in returning the building to its "as new" state as required by the section. 56 To adopt a proposition that says that, in addition to that uplift factor, some further allowance should be made for the reconstruction of the building in modern style and materials is, in our view, a fallacy. 57 The requirement of s 14G(1)(b1),to counter the decision of the Court of Appeal in Moneybox 2 and to give effect to what is required by the new provision, merely means the incorporation of the uplift factor that has been incorporated by both Mr. Dempsey and Mr. Ferdinands and the rate for which, calculated by Mr. Dempsey, we have adopted.

The flaw in the apparently similar positions 58 In his written closing submissions, Mr Maston set out the agreed position of Mr Dempsey and Mr Ferdinands concerning the adjusted valuations for the site in each of the three relevant base dates.

59 Superficially, it appeared that the two valuers were very close to agreement about what should be the adjusted land value but, as was established during the course of their oral evidence, although the numbers are very similar, the basis upon which each adopted his analysed outcome differ radically. For reasons earlier traversed, Mr Dempsey considers that his valuations are those to be applied to satisfy the s 14G considerations and that his numbers are based on a s 6A(1) valuation. On the other hand, Mr Ferdinands numbers are numbers that he says already comprehend the necessary s 14G adjustments and are, therefore, akin to a s 6A(2) valuation rather then Mr Dempsey's s 6A(1) valuation. We have considered the superficially comparable numbers - as can be seen from the earlier discussion - as, in reality, reflecting starkly differing approaches. The resultant calculations for base date 1 July 2006 60 As a consequence of the various conclusions we have described above, we have prepared what we consider to be the correct resultant analysis - derived from Mr. Dempsey's approach but incorporating the various determinations we have made about what elements should be or should not be incorporated and what number should be attached to them. The resultant calculation table for 1 July 2006 appears below: ASSUMING PRECAST FAÇADE CORRECTED ANALYSIS DERIVED FROM MR DEMPSEY'S APPROACH

New Building Rent m2 NLA net effective $380 Subj. Building Rent m2 NLA net effective $300

Difference being the Rental Adjustment for Sec 14G 21.05%

Agreed Land Value NLA $1,656.75 Applying the rental adjustment = s 14G Land Value $1,307.96 Actual Lettable area of 223-255 Liverpool Street 4,464.99

Section 14G Land Value $5,840,028 Plus Excavation (Site Imps.) $402,995 Less heritage cost penalty Not applicable

Heritage Land Value 2006 $6,243,026

The onus on the applicant 61 In statutory valuation appeals pursuant to the Act, s 40(2) specifically provides that those seeking to disturb a statutory valuation bear the onus of establishing that the valuation should be changed. In this instance, for the 2007 and 2008 base dates, the evidence of Mr Ferdinands, the Valuer General's expert valuer, is that the statutory valuation is too high. Although we discuss (and disagree with) the methodology upon which he reaches his conclusions, our disagreement is immaterial to the fact that, as a consequence of the Valuer General's own evidence, the s 40(2) onus is discharged for each of these years. As has been seen from the discussion in the body of our decision, we are also satisfied that the onus has been discharged for the 2006 base date year. Conclusion 62 As a consequence all the foregoing, we have concluded that the correct statutory valuation as at the base date of 1 July 2006 should be $6,240,000. 63 We have set out, earlier, what we consider to be the appropriate methodology, derived from the comparative positions of the expert valuers, to be applied to reach this position. As the focus of the evidence and statistical analysis during the course of the hearing was on the 1 July 2006 base date, we have not been in an immediate position to undertake the resultant calculations for the 1 July 2007 and 1 July 2008 base dates. 64 The result is that we are able to give final orders in the case involving the 1 July 2006 base date but direct that the parties bring in, within 14 days, Short Minutes of Order to reflect application of the approach we have set out to the statutory valuations for valuations as at 1 July 2007 and 1 July 2008. We would expect that it is likely that there will be some alteration in the valuations but that is a matter for consideration by the parties and those advising them. 65 We grant liberty, on two days notice, to re-list the matter before us, after 5 October, for short argument on any calculation disagreements that might arise concerning the calculations for the 1 July 2007 and 1 July 2008 base dates. Orders 66 In matter 30791 of 2009, the orders of the Court are: 1. The appeal is upheld; and 2. Pursuant to s 40(1)(b) of the Valuation of Land Act 1916, the statutory value for 223-225 Liverpool Street, Darlinghurst, as at the base date of 1 July 2006, is determined to be $6,240,000.

Tim Moore Russell Cowell Senior Commissioner Acting Commissioner of the Court

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.

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