ISPT Pty Limited v Valuer General

Land and Environment Court Act 1979 s69 LEGISLATION CITED: Land and Environment Court Rules 1996 Pt 16 r 4 Valuation of Land Act 1916

CASES CITED: AMP Henderson Global Investors Limited AND Others v Valuer General; AMP Henderson Global Investors Limited v Valuer General (No. 2) [2004] NSWLEC 344; Grant v Kiama Municipal Council [2006] NSWLEC 70

APPLICANT D Miller (Barrister) SOLICITOR LEGAL REPRESENTATIVES: Gadens Lawyers RESPONDENT A Pickles (Barrister) SOLICITOR Crown Solicitor

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30043 of 2005, 30815 of 2005 ISPT Pty Limited v Valuer- General (No 2)

JUDGMENT 1 Her Honour: I handed down judgment in these two matters on 7 August 2006 and found for the Applicant in relation to the appropriate valuation of its land for rating purposes for the 2003 and 2004 base date years.

2 The Applicant seeks its costs in those proceedings in its Notice of Motion dated 21 August 2006. The Applicant expended $313,875.41 in the proceedings and as a result of being successful has or will recoup $156,742 leaving it out of pocket by $157,133.41 according to its solicitor's evidence.

3 Section 69(2)(a) of the Land and Environment Court Act 1979 ("the Court Act") states: Subject to the rules and subject to any other Act (a) costs are in the discretion of the Court

4 Part 16 Rule 4(2) of the Land and Environment Court Rules 1996 applies. It provides: No order for the payment of costs will be made in proceedings to which this Rule applies unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable.

5 The Applicant relied on affidavits of Ms King, the Applicant's solicitor, dated 26 September 2006, and an affidavit in reply also by Ms King, dated 17 October 2006 to support its motion. The Valuer-General relied on the affidavit of its solicitor, Ms Valentine, dated 12 October 2006. The affidavits were lengthy and purported to set out the history of the preparation of the matter as perceived by the respective parties' solicitors.

6 A list of reports prepared in the proceedings shows that a large number of reports were prepared by the Applicant in relation to quantity surveying, planning and valuation. The only planning evidence tendered was a joint town planners report dated 26 June 2006. None of four quantity surveyor reports prepared by Mr Gary Boyd for the Applicant were relied on in the hearing. Valuation reports were relied on by both parties. Applicant's submissions 7 The Applicant submitted that it is clearly fair and reasonable having regard to the facts and circumstances of these appeals that it be awarded the whole of its costs of the appeal on the following bases: (a) the conduct of the Valuer-General in these proceedings was unreasonable (b) the proceedings involved mixed questions of fact and law and therefore, ceased to have the character of an administrative appeal, (c) the Applicant was wholly successful in these appeals and the Valuer-General's position was found to be profoundly illogical 8 The history of the proceedings as outlined in the affidavits of Ms King suggests that the Valuer-General's behaviour was unreasonable and had resulted in costs being thrown away in relation to planning, quantity surveying and valuation evidence. The Applicant's valuer maintained throughout the proceedings that the highest and best use for the site was for retail use only. It argued the Valuer-General's valuer consistently failed to adequately identify the highest and best use of the property in such a way as to enable the Applicant's valuer to understand his case. In his original report the Valuer-General's valuer relied on 18 sales for retail only, mixed commercial/residential, and residential only. Only four of these sales were ultimately relied on in Exhibit K, which was the primary document the subject of these proceedings.

9 The only reason the Applicant prepared material relevant to a hypothetical development assessment was because of the Valuer-General's advice that its assessment was based on a mixed use development including residential and as provided for by the planning report of Silvija Smits dated 2 May 2005, relied on by the Valuer-General. Mr Jackson's analysis on a hypothetical development assessment basis showed that such a use was uneconomic. He contended throughout that the highest and best use was for retail use only.

10 The Valuer-General failed to make concessions before and during the hearing that the original base date figures were incorrect despite not putting forward any evidence to support these. The Valuer-General did not accept the offers of compromise in both proceedings which were made on 26 April 2006. This is a factor that can be considered in any costs issue as identified in the note to paragraph 7 of Practice Direction No 2 of 2006 - Class 3 Valuation Objections, which commenced on 8 May 2006. Valuer-General's submissions 11 The Valuer-General submitted that it and its valuer did not act unreasonably in the preparation for the hearing. The Applicant first introduced the planning and quantity surveying and valuation evidence related to a hypothetical development approach based on a mixed use commercial/retail/residential use of the site. This was done well before the first report of Mr O'Leary was prepared in March 2006. 12 The proceedings continued to be an administrative appeal throughout

13 The Valuer-General further submitted that it did not unreasonably reject offers of compromise made by the Applicant. The offers of compromise made by the Applicant were unreasonable as they also sought agreement in relation to the 2005 base date calculations which were not the subject of these Court proceedings.

Finding 14 I have unfettered discretion in relation to the award of costs under s 69 of the Court Act. Part 16 r 4 sets out the Court's usual approach in Class 3 matters. No cases which have considered the application of Pt 16 r 4 to Class 3 proceedings under the Valuation of Land Act 1916 have been provided apart from AMP Henderson Global Investors Limited and Ors v Valuer General; AMP Henderson Global Investors Limited v Valuer General (No. 2) [2004] NSWLEC 344. That case was decided shortly after Pt 16 r 4 came into operation and Cowdroy J dealt with costs on the basis that the previous rule relating to exceptional circumstances would have been considered to apply by the parties when they commenced proceedings. I must consider whether in the circumstances of this case, given that the usual costs rule is that each party pay its own costs, it is fair and reasonable that the Applicant's costs be paid by the Valuer-General. 15 Mr O'Leary, the valuer appearing for the Valuer-General also prepared the valuations for the base dates appealed against of $10.7M (2003) and $15M (2004). In these appeals he argued that the appropriate valuations were $17.5M for both base dates. Mr Jackson, valuer for the Applicant, argued throughout that retail use only was the appropriate use of the site. I ultimately accepted Mr Jackson's figures of $9,420,000 for the two base dates.

16 The parties referred to Grant v Kiama Municipal Council [2006] NSWLEC 70 which considered at [15] a range of circumstances where in Class 1 proceedings costs have been awarded. The categories identified there can have application to Class 3 proceedings and the Applicant relied particularly on (a) the proceedings cease to have the character of merits review, and (d) where a party acts unreasonably in the conduct of proceedings in that it (i) unreasonably delayed in making concessions and (ii) unnecessarily protracted the proceedings.

17 It is not enough that the Applicant was completely successful in the proceedings. While I clearly preferred the opinion and evidence of the Applicant's valuer rather than the Valuer-General's that alone does not suggest that a costs order ought be made (nor did the Applicant argue to the contrary). While the Applicant argued that the proceedings ceased to have the character of an administrative appeal because there were mixed questions of fact and law, I agree with the Valuer-General's submissions that this was not correct. While I did make findings on the operation of the onus of proof under s 40 of the Valuation of Land Act 1916, that was incidental to the merit issues in the proceedings and did not alter their essential character. The other issues relied on by the Applicant as changing the character of the proceedings in relation to disputes about the highest and best use, and what adjustments for comparable sales should be made, were issues that would commonly arise in Class 3 proceedings of this kind.

18 In relation to the failure to make concessions, while I noted in my judgment that the Valuer-General was unreasonable in not conceding that the base date figures appealed against were wrong because it did not present any evidence to support these, it does not appear that additional expense was incurred by the Applicant by that failure to concede. Nor does the failure to accept the offers of compromise sent by the Applicant's solicitors which were conditional on agreement being reached in relation to the 2005 base date calculations sound in a costs order in my view.

19 The matter was completed within the hearing time of three days allocated. There was extensive consultation between the valuers leading up to the hearing which did produce a short list of comparable sales which were the focus of the proceedings and my judgment. It could not therefore be said that the hearing itself was prolonged by the Valuer-General's conduct. The primary issue I must therefore consider is whether the conduct of the Valuer-General and its valuer was unreasonable in the preparation for the hearing.

20 In this regard the Applicant is seeking the costs thrown away as a result of the Valuer-General's valuer no longer seeking to rely on a mixed use commercial/retail/residential use of the site as the highest and best use just before the hearing. This change in position meant that the Applicant did not have to rely on its evidence in relation to planning, quantity surveying and valuation which sought to demonstrate that such a use for the site was uneconomic. It is clear that the Applicant put on much of this evidence before the Valuer-General's valuer Mr O'Leary had filed his first report but after the Valuer-General had filed its planning report of Ms Smits in May 2005, which referred to the development potential for the site as mixed commercial/retail/residential use of the site. Mr O'Leary's first report dated 23 March 2006 in which he relies on Ms Smits' report, does identify 18 sales which include mixed commercial/retail as well as residential sales. Despite the Valuer-General's submission that Mr O'Leary did not rely on all these sales as comparable sales, but only the retail only sales, a reading of his report and subsequent evidence does not support that submission. I agree with the Applicant's characterisation of the history of the matter leading up to the hearing as Mr O'Leary continuing to rely on the planning evidence and sales which included a mixed commercial/retail/residential use of the site until just before the hearing. At the hearing the comparable sales identified in Exhibit K were all for sites used for retail only. Only one site at Mona Vale had any potential for other uses.

21 It is also clear that the Applicant considered it had to meet an argument from the Valuer-General that the appropriate valuation for the site was derived from a mixed commercial/residential use, not retail only use. That is clear from par 25-33 of Ms King's affidavit dated 17 October 2006 which state that prior to the preparation of evidence in this matter the Applicant's valuer had been told by an officer in the Valuer-General's department that the Valuer-General had valued the site for the base dates on the basis of a mixed commercial/retail/residential use and provided a list of sales which included such uses to Mr Jackson. The Applicant therefore caused various mixed use developments to be assessed by a quantity surveyor based on town planning advice from Mr Wilson, so that Mr Jackson could undertake a hypothetical development assessment to determine whether a mixed use development of the site was economically viable. He concluded it was not in his first report dated 11 November 2005. Mr Jackson maintained throughout the proceedings that the highest and best use of the site was for retail only.

22 I agree with the Applicant that Mr O'Leary's evidence continued to be up to two days before the hearing to be that a mixed commercial/retail/residential use was the appropriate highest and best use of the site, and that he identified comparable sales other than retail only in the numerous versions of a schedule of comparable sales prepared pursuant to orders made by the Court on 12 July 2006 as part of the case management of the matter.

23 I consider the conduct of the case by the Valuer-General and its valuer in relation to the identification of the highest and best use has caused additional unnecessary costs to be incurred by the Applicant such that it is fair and reasonable that an award of those costs thrown away should be made in the Applicant's favour. The circumstances identified in Grant v Kiama where the Court has considered it would be fair and reasonable to award costs were not intended to be exhaustive and nor could they be as every costs issue must inevitably be determined on the circumstances of the particular case. The category identified at [15] of the judgment at (d)(ii) in relation to protraction of proceedings is most apt. The circumstances here relate to the conduct of the Valuer-General's valuer in hearing preparation but are different from those described in brackets by Preston J in [15] at d(ii). In other words the circumstances of this case are another example of where the preparation of proceedings have been unreasonably protracted. I do not consider the whole of the costs of the Applicant for the proceedings should be awarded. 24 To avoid further need for discussion between the parties as to precisely what costs are payable I require the parties to agree on those costs thrown away or specify the planning, quantity surveyor and valuation evidence, the costs of which were thrown away so that I can make specific orders.

Costs of the Applicant's motion 25 While the Applicant has not been entirely successful on its motion, it has been partially successful and should be awarded its costs of this motion; see Grant v Kiama at [74].

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.