Karimbla Properties (No. 35) Pty Limited v Valuer General of New South Wales

Category: Principal judgment

Parties: Karimbla Properties (No. 35) Pty Limited (Applicant)
Valuer General of New South Wales (Respondent)

Representation: Counsel:
R White (Applicant)
L Waterson (Respondent)
Solicitors:
W Zheng, Mills Oakley (Applicant)
E Golledge, NSW Crown Solicitor’s Office (Respondent)

File Number(s): 2024/00265958

Publication restriction: Nil

JUDGMENT

Introduction

1. The applicant Karimbla Properties (No. 35) Pty Limited (Karimbla Properties) appeals pursuant to s 37(1) of the Valuation of Land Act 1916 (NSW) (VLA) against the land value issued by the Valuer-General of New South Wales (VG) in connection with land at 150 Epping Road, Lane Cove West (Lot 1 in DP 1219702) (Subject Land), contending that it is too high.

2. Pursuant to s 6A of the VLA, on 1 July 2023 (valuation date) the VG determined the Subject Land value as $63,843,435. An objection was lodged to that determination of the land value by Karimbla Properties on 11 March 2024 on the basis that it was too high, contending for a land value of $52,000,000 plus land improvements (Ex A, Tab 1, p 12 Valuation Objection Form 11 March 2024).

3. On 20 May 2024 the VG disallowed Karimbla properties’ objection and confirmed the Subject Land value at $63,843,435.

4. On 19 July 2024, Karimbla Properties commenced these proceedings.

Statutory consideration

5. Pursuant to s 40 of the VLA the Court has the power to act as the judicial valuer.

6. Section 6A of the VLA is engaged and provides as follows:

(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 acquired 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.

7. Section 4(1) of the VLA relevantly defines “land improvements” as

Land improvements mean—

…

(d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation,

(d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land (otherwise than for the purpose of irrigation or conservation) that is associated with—

(i) the erection of any building or structure, or

(ii) the carrying out of any work, or

(iii) the operations of any mine or extractive industry,

The Land

8. The land in DP 1219702 comprises two Lots being: the Subject Land (Lot 1) and the Council Lot (Lot 2) (collectively, the Overall Site).

9. The area of the Overall site is 18,310m2.

10. As at the valuation date, the Overall Site accommodated five (5) residential unit buildings, with car parking, a retail space and a childcare centre, having a gross floor area of 35,351.2m2 (Existing Buildings).

11. It is accepted that the land has been improved by excavation, filling, levelling and grading works associated with the erection of the existing buildings including excavation for the purposes of a car park (land improvements) (Ex A, Tab C2, p 46 at [8]-[12]).

12. At the relevant date, the Council Lot, owned by Lane Cove Council, was developed with several affordable housing units in one of the existing buildings, with associated parking space.

13. As the Council Lot is not the subject of the valuation objection the parties have agreed that the valuation of the Subject Land (excluding the Council Lot) is to be undertaken by way of apportionment under s 26A of the VLA. This involves two steps:

(a) a determination of the land value for the Overall Site as at 1 July 2023, as if it comprised a single parcel with all improvements on it and owned by a single owner: s 26A(1); and (b) then an apportionment of the Overall Site land value between the Subject Land and the Council Lot based on their respective rental values as a proportion of the sum of those rental values: s 26A(1)(b).

14. The parties have also agreed that the respective rental values of the Subject Land and the Council Lot, as a proportion of the sum of the rental values of each of them, are as follows:

(a) Subject Land – 96.4% (b) Council Lot – 3.6%

15. The Overall Site is an irregularly shaped allotment, best described as semicircle, with an irregular street frontage of approximately 223m to Epping Road. The aerial photo in Figure 1 below gives some local context.

Figure 1: Aerial view of the Overall Site

Zoning

16. As at the valuation date, the Overall Site was zoned E4 – General Industrial under the Lane Cove Local Environmental Plan 2009 (LCLEP) with a floor space ratio (FSR) of 1.1:1 applied pursuant to cl 4.4 of the LCLEP. This equated to a developable gross floor area (GFA) of 20,141m3 for industrial use. The Overall Site had a building height limit of 18m in accordance with cl 4.3 of the LCLEP.

17. In the E4 zone, residential development, including residential flat buildings, is prohibited.

18. The development consent for the erection of the existing buildings and the residential use was granted in 2012 under the now repealed Part 3A of the E**nvironmental Planning and Assessment Act 1979 (NSW).

19. It is agreed that as at the valuation date, the land value of the Overall Site, assuming it could be developed with and for the purpose of the Existing Buildings, is materially greater than the land value of the Overall Site assuming it could be developed for a purpose within the E4 – General Industrial Zoning under the LCLEP (Ex A, Tab C2, p 48 at [15]).

20. Consequently, the current use of the Overall Site as at the valuation date should be used to form the basis of the valuation which in turn requires regard to be had to the statutory assumptions in s 6A(2) of the VLA. As per Olefines Pty Ltd v Valuer-General (2018) 234 LGERA 444; [2018] NSWCA 265 at [18], those assumptions are that:

(a) pursuant to paragraph s6A (2), the land could continue to be used for its current use which was lawful as an approved use granted under Part 3A of the EPA Act; and

(b) the improvements presently on the land, which are necessary to enable the land to continue to be so used, could continue to operate, pursuant to the grant of development consent; and

(c) nothing in s 6A(2) prevents regard being had to the assumption (in 6A(1)) that the improvements, other than land improvements, on the land had not been made.

Highest and best use

21. At the valuation date, the Court is required to consider a notional sale, whereby the Subject Land is being hypothetically purchased for its highest and best use, sometimes described as the best or most profitable potential use. How “highest and best use” fits into the construction of s 6A was considered by the Court of Appeal in Trust Company of Australia v Valuer-General [2007] NSWCA 181; 154 LGERA 437 (Campbell JA). After acknowledging that there is no explicit recognition of the concept of “highest and best use” in the VLA, his Honour stated that (at [32]):

“…it is well established that that concept is to be used for the purpose of ascertaining the land value under the Act: Spicer v Valuer General (1963) 10 LGRA 319 at 320. Section 6A(1) requires the postulation of a notional sale. It has been accepted that this notional sale is one that is assumed to take place in a market, and that the seller would conclude the sale for the highest price it could obtain in that market. As well, if there is some use of the property that is more beneficial than its present use, it is assumed that the potential purchasers in the market would include at least one who was prepared to pay more for the land by reason of the land being able to be used in that more beneficial way. In this way, the concept of highest and best use comes to be applied through the notional sale that section 6A requires to occur”.

22. The notional sale occurs between a hypothetical willing purchaser and a not unwilling vendor: Spencer v The Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 at 432. This means that the “bona-fide seller”, cognisant of the land value (based upon its potentialities), would not part with the land for less than it is worth: Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales (No 2) [2021] NSWLEC 47 at [18]. The identification of the highest and best use of the land to be valued is therefore central to the valuation task under the statutory scheme.

23. It is agreed that the cost of construction of the land improvements, as at the valuation date, was $8,789,484 (Ex A, Tab C2, p 48 at [16]). However, the valuers had very different approaches to calculating the value of the land improvements, an issue to which I will come to in due course.

Expert evidence

24. The following expert evidence was filed in this matter:

| Expertise | Applicant | Respondent | Exhibit | | Valuation | Danny Sukkar | Derek Hill | Ex B Tab 3, Joint Expert Report 23/04/2025 (JER) | | Valuation | Danny Sukkar | Derek Hill | Ex B Tab 4, Supplementary Joint Expert Report 19/05/2025 (SJER) |

Valuation methodology

25. Both experts adopt the direct comparison approach to value the land and used the conventional four steps of accumulation, analysis, adjustment and application: Square Holdings Pty Ltd v Valuer General of New South Wales [2018] NSWLEC 140 per Robson J at [32]; Warwick Farm Central Pty Ltd v Value**r General [2024] NSWLEC 25 per Pritchard J at [39]-[48].

26. They presented tables of sales for comparison, analysing those sales on the basis of which they proposed values (adjusted to reflect location, access, size, shape etc) as a measure of the value of the Overall Site.

27. In his Statement of Evidence Mr Sukkar focused on the following sales (Ex B, Tab 1, p 22 at [64])

28. 2, 3, 4, 5 Hallifax Street, Macquarie Park

29. 34 Hassall Street, Parramatta

30. 2a-12 Sexton Avenue & 24-34 Fishburn Crescent, Castle Hill

31. 242-244 Beecroft Road, Epping

32. Mr Hill focused in his Statement of Evidence on the following sales (Ex B, Tab 2, p 142)

33. 2, 3, 4, 5 Hallifax Street, Macquarie Park

34. 94 Talavera Road, Macquarie Park

35. 242-244 Beecroft Road, Epping

36. 37-41 Oxford Street, Epping

37. In their joint report the valuers analysed six sales and their respective values, together with their adjustments, are as set out in table which is reproduced below:

Karimbla Properties’ position

30. As the respondent identified in closing, Mr Sukkar had relied on the sale Nos 1, 3, 5 and 6 in his statement of evidence (Ex B, Tab 1, p 22 at [62]-[63]). Comparable sites which he stated had been:

“… carefully chosen because they would achieve similar development yields as the Overall Site namely sites that can yield at least 200 residential dwellings, so that the potential buyer pool would be limited to large scale residential property developers seeking to develop the land to its highest and best use (high density/ mixed use developments)”.

31. The sales sites were located in metropolitan Sydney to the west or northwest of the Sydney CBD where Mr Sukkar said high density residential developments are common and attract similar types of unit buyers (Ex B, Tab 1, p 22 at [62]-[63]) They are proximate to Metro stations because Mr Sukkar believes this attribute is important to the Sydney residential unit market as it brings ease and speed of access to connections across Sydney, including access to the CBD (ACWS at [23]).

32. Three of Mr Sukkar’s sales were vacant land sales (Halifax Street Macquarie Park, Beecroft Rd Epping and Sexton Avenue Castle Hill) with no improvements at the date of the sale. The sale at Hassall Street, Parramatta he described as being a “very lightly improved sale”.

33. Given the common attributes, Mr Sukkar gave evidence that these sales required very little analysis to reflect a greenfield site value before adjustments to compare with the Overall Site (Ex B, Tab 1, p 23 at [67]-[68]).

34. While the Appellant submitted in closing that there was “…some agreement between the valuers as to the analysis of each of the chosen sales to achieve a greenfield or unimproved site value at the valuation date of 1 July 2023”, it conceded that it was necessary to make some adjustments to the original Table to reflect the valuers’ final oral evidence. The Appellant’s revised Table, with appropriate adjustments made to each of the sales, is reproduced below.

35. As it happened the two common sales at 2-5 Hallifax Street, Macquarie Park and the sale at 242-244 Beecroft Road, Epping were of particular focus in the oral evidence. In the course of its final submissions , the Appellant submitted that these three sales of the six identified were significantly better for comparison to determine the value of the Subject Land.

36. In short, the Appellant submitted that the values attributable to the Subject Land could be best ascertained by reference to the three sale Nos 1, 2 and 3 (ACWS at [27]).

37. The Appellant’s closing written submissions are summarised below.

Attributes of the Subject site and the Lane Cove West area

38. With respect to the attributes of the Subject Land and the Lane Cove West area the Appellant submits, referencing the transcript, that Mr Hill and Mr Sukkar agreed that the Lane Cove West area is an established industrial location that is isolated from major public transport infrastructure, shopping centres, cafes, restaurants, and other public amenities or infrastructure.

39. Moreover, as at the date of valuation, the Subject land, located within the IN2 Industrial Zone, was dominated by light industrial land uses with a difficult frontage to Epping Road.

Adjustments for location/access

40. In closing, the appellant submitted that there was some overlap in the evaluation of evidence directed to adjustments for location and those to be made for access. Mr Sukkar’s adjustment for location, for instance, included proximity to public transport; but his adjustment for access did not. Despite the submission that it didn’t really matter under which criterion public transport was considered, Mr Sukkar had agreed in cross examination that it was more convenient to include the access adjustment when considering public transport.

41. The Appellant accepted this approach “provided the adjustment reflected accurately the access disadvantages” impacting the Subject Land by comparison with the sites that are the subject of the sales evidence being analysed.

42. Thereafter, it was submitted that in terms of the adjustment for access it should include proximity to public transport and ease of vehicle access (T29:40-50). As Mr Hill’s adjustment for access had failed to include a “segregated figure” for the Subject Land’s inferior proximity to public transport and ease of vehicular access, the appellant submitted that the Court would accept that his whole figure adjustment underestimated the access limitations of the Subject Land when compared to the sites that are the subject of the sales evidence.. Put simply, the submission was that Mr Hill had “… not gone far enough to offset the practical disadvantages of inferior access” (ACWS at [62]), access limitations that the appellant submitted on the evidence of Mr Sukkar were “…profound and multifaceted”.

Locational advantages of the comparable sales

43. The Appellant submitted that Mr Hill had underestimated the locational advantages of sales 1, 2 and 3 in his table when compared to the Subject Land. Locational advantages that he acknowledged in oral evidence but had failed to reference in his earlier written evidence (T17:5-39). In particular, the comparative advantage of access to shops, cafes and restaurants (T17:5-30), and the fact that the three comparable sites were all within walking distance from such amenities. A notable difference to the Subject Land which was a 2.2km distance by car, bus or foot from Lane Cove shops (T21:35).

44. Then there was the benefit of Macquarie Centre, opposite the Talavera Rd site together with proximity to the university, numerous office parks with employment opportunities (T61:29-36), and the proximity of the retail strip in Epping to the Beecroft Rd site.

45. All things considered, the Appellant submitted that Mr Hill’s final position was that Lachlan’s Lane and Talavera Road sites were clearly superior locations for high density residential accommodation when compared to the Subject Land “isolated from the main Lane Cove residential area” (T23:15); and “disadvantaged” in terms of proximity to public transport and with “problematic vehicular access” (T35:20-30).

Use of Sales data for Lane Cove not Lane Cove West

46. The appellant took issue with Mr Hill’s reliance on suburb wide sales data from the web site “realestate.com.au” to “validate” the median sales price for residential units in the Lane Cove West area when assessing the locational disadvantages of the Subject Land from the comparative sales in Macquarie Park (T24:45-50; T25:1-35). As this sales data referred to the broader Lane Cove postcode, the Appellant submitted that Mr Hill’s median price snapshot for units in Lane Cove and Macquarie Park was not representative of the inferior area of Lane Cove West (T18:15).

47. The Appellant invited the Court to reject that evidence or at best give it little weight as it was unreliable evidence.

Zoning of the adjacent land

48. As the appellant identified, the Subject Land is bordered to the north by land zoned SP1 Classified Road, and to the east, west and south by land zoned E4 (formerly IN2) general industrial. It submits that its location within an industrial area, isolated from the main residential area of Lane Cove is not properly reflected in Mr Hill’s adjustments for location. He has underestimated the poor locational aspects of the Subject land.

Access

49. The appellant records that Mr Hill assessed access for the three comparable sites as 15% superior to the Subject Land, whereas Mr Sukkar in agreeing that they were superior had proposed 15% for Talavera Rd and 10% for Lachlan Line and Beecroft Rd. The disparity being how each expert considered various aspects of the access. (Noting, that Mr Hill looked at access generally and Mr Sukkar didn’t consider access to public transport only vehicular access (T27:34-45; T28:1-40).

50. Despite that evidence the appellant dealt with three categories of access: private (vehicle, bicycle and pedestrian); public transport (buses) and public transport (Metro and train).

Access – Private

51. The appellant submitted that there are several marked disadvantages with access to the Subject Land via private methods – coming from the city you cannot turn right on Epping Road into the site; nor is it possible to access the site from the Lane Cove Tunnel. Rather a vehicle is required to do a “loop detour” which Mr Sukkar timed at 13 minutes by car – a route which Mr Hill accepted (but was unsure of how long it would take (T34:34).

52. Whereas it was submitted that Lachlan’s Lane had direct access to Epping Road in both directions and no issue with vehicular access for Talavera Road and the Beecroft Rd sites.

Buses

53. The appellant submitted that the Court, having walked the length of Epping Rd to the eastern bus stop, would appreciate the time it takes to that bus stop being about 8-10 minutes from the subject Land. Moreover, it requires a pedestrian to cross the pedestrian bridge over the Epping Rd. It was further submitted that such access to public transport was “plainly unsuitable for people with mobility issues” (ACWS at [50]). And, while the Court did not walk to the nearest western bus stop it was submitted that this downhill incline was further and also a difficult access path.

54. In support of its submissions on access, the appellant underlined that Mr Hill had agreed in cross examination that the eastbound bus traffic was “problematic” when compared to Lachlan Lane (T34:1-4) and that Mr Hill had accepted that Beecroft Rd had superior access to buses and other forms of transport (T87:32-35) and Talavera Rd was very well serviced by bus stops.

Metro

55. There was no dispute between the parties that access to a Metro station is a valuable locational attribute in the Sydney residential market. Again, the appellant was keen to emphasise that Mr Hill had agreed that the Subject Land suffered from disadvantage in terms of access to the Metro (T31:42) compared to Lachlan Line, Talavera Rd (located some 400m from Macquarie University Metro station) and Beecroft Rd which it was accepted is 800m from the Epping station (with Metro, train and connecting bus services).

56. Despite Mr Hill’s acknowledgement of the Subject Land’s “marked disadvantage” in terms of access when compared to Lachlan’s Line, Talavera Rd and Beecroft Rd, the appellant submitted that his adjustments for this criterion did not go far enough to offset the practical disadvantages of such inferior access (ACWS at [60]).

The Brochure ‘Arise’

57. The appellant asks me to place no weight on the brochure advertising the apartments in the Subject Land. It relies on Mr Sukkar’s evidence that the document is generic and promotional rather than objective evidence of the actual physical attributes of the Subject Land.

Location/access – total assessment

58. Ultimately the appellant submitted that the 20% adjustment for the two Macquarie sites and 10% for the Beecroft Rd site given by Mr Hill were insufficient for the reasons stated above.

59. It submitted that Mr Sukkar’s revised adjustment for both criteria at 30% for Lachlan’s Line and 25% for Beecroft Rd should be preferred as they are supported by the evidence.

The FSR uplift debate

60. The Appellant submits that the successful purchaser of the Talavera Rd and Beecroft Rd sites would have paid more because there was a potential to gain more GFA though the uplift bonus offered in the State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARH SEPP) which was in force at the date of sale – even if not taken advantage of by that purchaser. It identified that Mr Hill accepted in oral evidence that a potential uplift in GFA, if available, is very relevant to the sale price (T64:20-30). Yet, he did not consider the uplift when adjusting the Talavera Rd site because the developer purchaser did not take advantage of the uplift.

61. While that may have been the fact, the appellant argued that the uplift opportunity nonetheless would have inflated the market price, and the developer would have had to compete on that basis in that market despite electing not to utilise it. For that reason, it was submitted that an adjustment for the uplift – which was not available for the Subject site needs to be factored into those comparable sales.

62. The appellant submitted that the locational advantage of sale 2, with its proximity to Macquarie Shopping Centre and excellent public transport (including the Metro), approved uplift in terms of height/GFA under cl 4.6 of the Ryde Local Environmental Plan 2014, has not been properly included in Mr Hill adjustments for the Subject land which had no potential for uplift in height or GFA because of the operation of s 6A(2)(ACWS at [67]).

63. It was also argued that the sale in Beecroft Rd had a similar strategic locational advantage compared to the Subject Land due to its proximity to the Epping Metro/town centre (T89:15-30). An advantage which Mr Hill acknowledged in oral evidence in respect of better transport (for which he allowed a -15% adjustment for access) but held fast to his view that the Subject Land was in a superior location compared to the two Epping sales – as reflected in his +5% adjustment position which the Appellant submitted was clearly wrong, given the proximity of the shops, cafes in Epping compared to the isolated Subject Land.

64. Based on the evidence summarised above the Appellant submitted that Mr Hill’s adjustments for location and access did not fairly represent the disadvantages of the Subject Land. His adjustment of 20% for location and access to public transport (5% for location and 15% for access) is simply inadequate. It submits that Mr Sukkar’s overall 30% adjustment of these criteria when compared to the Macquarie Park and Epping sales should be preferred (ACWS at [70]-[71]).

Other matters (GFA, shape, topography, views)

65. The GFA adjustments were agreed in the table.

66. There was no adjustment for shape for the Talavera Road sale 2 site and disagreement on an adjustment for shape for the other sales. While Mr Hill agreed in oral evidence that the land split over several sites on either side of Halifax Rd was an advantage for staging of construction – allowing storage of materials – and a benefit he did not make an allowance for an adjustment, he argued the subject site also had service areas and walkways for storage. Each site had a bushland or parklands setting and recreation areas containing barbeque amenities.

67. Mr Hill did not make an adjustment for topography. And while he accepted that the Beecroft site was relatively flat and requires minimal excavation before the creation of building pads, he accepted the s 6A(2) consideration that the building pads were taken to be on the Subject Land for assessment purposes. The appellant contends that adjustment for topography should be included in the shape consideration and if it was then it would be in favour of the Beecroft Rd compared to the Subject Land. It was submitted that this was a relevant and clear omission by Mr Hill and Mr Sukkar’s 10% adjustment should be accepted as Beecroft Rd is superior to the Subject site.

68. It was agreed that the Subject Land had equal or superior views to the other three sale sites. Mr Hill’s adjustment was 5% to all three sites and Mr Sukkar believed that Beecroft Rd and Lachlan’s Line were equal and Talavera Rd was inferior with an adjustment of 2.5%.

69. In respect to higher views, the experts again offered different opinions. Mr Hill focussed on views to the CBDs of Sydney, North Sydney and Chatswood and Olympic Park observed from the rooftop of the Subject site. Whereas Mr Sukkar was of the opinion that the more predominate view was the Lane Cove Business Park with its high voltage transmission lines, office parks and industrial buildings and industrial rooftops set within the trees and not the city skyscapes (T52:32-42).

70. As the site is set within bushland Mr Hill assessed that it had superior low and mid level views (T98:28) to Lachlan Line. Albeit he conceded that the western side of that development would be facing internal development. In respect of mid level views from Beecroft Rd he again accepted that it would include the railroad track and housing.

71. All things considered the Appellant contends that the sale site views are equivalent to the Subject Land and Mr Hill’s adjustment for views at 5% is too large.

Development Application (DA) and Option

72. The Subject Land has in place an approved DA, by operation of the s 6A(2) assumptions and the experts agree that this is an advantage over the other three sales.

73. In closing the Appellant addressed this issue of “shovel readiness” and the varying levels of development consent for each of the three sites it relies upon.

74. In respect to Lachlan’s Line**,** it submitted that it was sold with an option exercisable for a period of two years from 2021 – which was an advantage. Mr Hill had adjusted this sale site by 10% on the basis that it had achieved a DA by the relevant date of 1 July 2023 (T58:33-48). Mr Hill had regard to the time and expense of getting the DA and the Appellant argued that it would have been factored into the price of the land in 2021.

75. Talavera Road was purchased on 13 May 2022 and the DA was lodged on 21 January 2022. The Land and Environment Court granted consent to the DA on 31 May 2023, some 16 months later. Mr Hill had assessed that the purchaser would have had a high degree of confidence that the DA would be approved and that would have been factored into the purchase price – it was a permissible development. He gave a 20% adjustment in favour of the Subject Land in comparison to the ‘shovel ready’ land. Mr Hill also took into account the risk of obtaining the DA – in circumstances where that risk was negligible and the Appellant submitted that was double counting (ACWS at [106]-[107]).

76. Beecroft road was uncontroversial, and Mr Sukkar agreed with Mr Hill that a 5% adjustment was appropriate as the sale site sold with a concept DA.

77. in short, the Appellant submitted that the informed purchasers would have factored into the sale price the value of an existing DA or not. Therefore, Mr Hill’s 20% adjustment is overstated and does not reflect the real market experience and Mr Sukkar’s figures should be preferred.

The Appellant’s final position

78. The Appellant contends that the evidence demonstrates that the Subject Land is “materially inferior to the [three] principal sites across the key criteria of location, shape and access” (ACWS at [112]).

79. It submits that Mr Hill’s adjustments are consistently understated in the table at p 263 of the SJER (Ex B, Tab 3) and do not reflect the Subject Land’s disadvantages particularly in terms of isolation, and lack of amenity, inferior access and the surrounding industrial zone. While the Appellant accepts that the Subject Land has a marginal advantage in terms of views and DA, it contends that they do not overcome the need for “substantial adjustment downwards to reflect the sites’ real and practical limitations as a high-density residential site when compared to the other sale sites”.

80. Accordingly, it submits that the Court should prefer Mr Sukkar’s adjustments as being appropriately calibrated and responsive to the Subject Land as supported by the evidence and based on the Court’s observations at the site view.

81. Relying on the updated sales table, and the adjustments made by Mr Sukkar (which it submits should be preferred), it submits that sales 1-3 show a range of value per sqm of GFA between $1,259/sqm (sale 2) and $1572/sqm (sale 3). Sales 1 and 2 are located in Macquarie Park and are most proximate to the Subject Land. Mr Hill places greatest weight on those sales when assessing the appropriate GFA rate for the Subject Land, because of their proximity to the subject land (Ex B, Tab 4, p 260 at [74]). The appellant does not disagree with this analysis.

82. The appellant adopts the analysed GFA rate for sales 1 and 2, which, when properly adjusted by reference to the written and oral evidence (and with the benefit of a site inspection), show that the appropriate GFA rate is between $1,313/sqm and $1,328/sqm.

83. Adopting $1320/sqm as an appropriate midpoint, the appropriate land value of the entire Overall Site is $46,663,584. The “land improvements” must be added to this amount.

Land Improvements

84. The assumption in s 6A(2) is that the land improvements had been made. Land improvements in this case being excavation, filling, levelling and grading works associated with the erection of the existing buildings including excavation for the purposes of a car park (land improvements) (SOFAC at [8]-[12]).

85. The cost of such works as based on a Quantity Surveyors report have been agreed at $8,789,494.00.

86. However, Mr Hill claims that the sum of the improvements included in the valuation is much higher than the cost of excavation and in this case is $16,050,000. This is because land improvements include time savings, holding costs savings on top of the excavation costs themselves and savings in interest costs (and a saving in the DA fees initially included was removed following cross examination as Mr Hill agreed it had already been accounted for in the adjustment for the DA (T116:40-50; T117:0-5).

87. The Appellant emphasises that Mr Hill’s assumptions concerning holding cost savings on top of the excavation costs and interest savings necessarily depend on the individual circumstances of the particular purchaser not the hypothetical purchaser called up by the VLA. He also assumes a borrowing rate for the exercise using the RBA 7.5% interest rate for a large business variable loan applicable at 1 July 2023 (T117:25-30).

88. These assumptions about a particular purchaser must be dependent on that purchaser’s credit ratings, the size of the company and track record in the development industry. If the identity of the purchaser was different from the purchaser Mr Hill had in mind then the assumed borrowing rate will be different.

89. The Appellant submits that the class of purchaser and the value of the land improvements derived from an application of those purchaser characteristics is irrelevant to the task under s 6A which assumes a sale between a hypothetical purchaser and a hypothetical vendor whose identities are irrelevant: Storage Equities Pty L**td v Valuer General [2013] NSWLEC 137 (Storage Equities).

90. It is a notional sale under s 6A of the hypothetical fee simple stripped of all improvements other than land improvements, which does not exist in the real world, between hypothetical parties: Valuer-General v Fivex Pty Ltd (2015) 206 LGERA 450; [2015] NSWCA 53 at [11]. It is not a private dispute where the parties can bring to bear their facts and circumstances; the valuation has direct effect upon third parties notably the rating and taxing authorities who rely on the Register: Valuer*-*General (NSW) v Perilya Broken Hill Ltd (2013) 195 LGERA 416; [2013] NSWCA 265 at [85].

91. The Appellant submits that the principles in Storage Equities can be applied to the facts in this case. Whilst it can be assumed that the land improvements exist this does not detract from the proposition that the identity of the purchaser is irrelevant (ACWS at [128]). Therefore, Mr Hill’s calculation assumptions should be rejected as contrary to the wording of s 6A and the authority of the Court. The land improvements are limited to the sum of $8,789,494. Bank financing adjustments are irrelevant given the central tenet of s 6A is that the parties are hypothetical.

92. Therefore, the land value of the Overall Site is to be determined at $55,453,078 (ACWS p 29 at [132]). Then, adopting the agreed apportionment factor of 96.4% to the value of the Overall Site, the Subject Land’s land value should be determined at $53,456,767.00.

Valuer-General’s expert evidence

93. The VG accepts the assumptions referred to by the applicant in the ACWS at [5]-[19] and the AOWS at [23]; but underlines that the appellant bears the onus of demonstrating that the issued land value is too high: s 40 VLA.

94. To that point and the fact that the appellant’s case turns on the evidence of its valuer, Mr Sukkar, it submits that evidentiary burden has not been discharged on material matters (RCWS at [4]). It was submitted that the appellant’s changed position in final submission that the land value for the overall site can be properly ascertained by reference to only three sales (1, 2 and 3) (AWS at [27]) is an acknowledgement of Mr Hill’s superior valuation expertise.

95. Given that the choice of sales is at the very core of the valuer’s judgement and expertise, it was further put that the appellant’s abandonment of Mr Sukkar’s sales 5 and 6 – after he had given evidence that he had carefully chosen those sites as “comparable sites” – reflects adversely on his general credibility as a valuer.

96. Mr Hill has held a consistent position with regard to the locations of sales 5 and 6 at Parramatta and Castle Hill respectively and that their remoteness from the overall site made them unreliable indicators of value compared to other sales; and the Court, on that basis, should prefer his valuation evidence in this case (ROWS at [49]-[52]).

97. However, that said, the VG did accept his analysis of sale 4 (Oxford Street, Epping); and submitted it should be given some weight by the Court because there is substantial agreement between the valuers on most adjustments in respect of that site.

Location and access adjustments

98. Pertinently, the VG highlighted the agreed approach to adjustments to the sales-evidence comprised separate adjustment for location and access, as well as a number of other matters (Ex B, Tab 3, p 22 at [62]; Ex B, Tab 4, p 263; T27:39-50; T28); and that Mr Hill, at all times, adopted the agreed approach and considered all forms of access – including public transport and private vehicle access.

99. In oral evidence, Mr Sukkar conceded that his approach had given a disproportionate weight to vehicular access; and that he had failed, as agreed, to consider access holistically (T29:13-19).

100. Consequently, the VG maintained that Mr Sukkar’s concession to the Court that Mr Hill’s adjustment for access was “better” (T29:32-36) and his acknowledgement in closing that Mr Hill’s approach was “correct” means that the Court cannot rely on Mr Sukkar’s evidence.

101. The submission stands that the effect of his approach was to attribute, erroneously, the same weight to vehicular access as to every other matter for which separate adjustments would be made in determining price (T28:35-43). Further, the VG argues that Mr Sukkar’s adjustments for location and access are flawed as a matter of principle and must be disregarded. If as conceded, public transport is properly considered as part of a holistic access-adjustment, it cannot properly comprise part of a separate location-adjustment, which is the approach taken in Mr Sukkar’s evidence.

102. Summarising, the Respondent concluded;

“Despite these concessions, the Appellant ultimate position appears to be that no separate adjustment for “access “should be made at all and that access issues should be considered as part of a combined “location and access” super adjustment.

There is simply no warrant for such a wholesale re-engineering of the expert evidence. The agreed approach of the valuers was that separate adjustment for access and location were appropriate and were to be given the same weight as adjustments for all the other agreed factor. Neither of them abandoned that structure in their oral evidence nor were they asked to. The Appellant’s position is an attempt to reconfigure the evidence to overcome the fundamental flaws in Mr Sukkar’s approach to the access ad location adjustments and should be rejected”.

(RCWS at [14], [15]).

The Valuer General’s adjustments

103. Mr Hill placed greatest weight on sales 1 and 2 at Macquarie Park as they are closest to the Overall Site and derived a rate of $1805m2 GFA (Ex B, Tab 4, p 260 at [74]).

104. Mr Sukkar placed the greatest weight on sale 1 and derived a rate of $1350m2 GFA (Ex B, Tab 1, p 36 at [78]-[79]).

105. The Appellant ultimately contended for a rate of $1320m2 GFA (ACWS at [117]).

Sale 1

106. Mr Sukkar made an adjustment of -20% and Mr Hill made an adjustment of -5% for location. As Mr Sukkar’s adjustment contained an adjustment for public transport, the VG submits that his adjustment is flawed and too high and should be rejected and Mr Hill’s accepted.

107. In support of this adjustment the VG relies on Mr Hill evidence that Lane Cove is a superior location to Macquarie Park when regard is had to the higher median unit prices for Lane Cove compared to Macquarie Park (T23:36-45). Although not determinative, the VG submits on the evidence of Mr Hill and Mr Sukkar that median unit prices are one objective gauge of differences in locations, and as such it is not inappropriate to have regard to them (T27:18-21). It was further submitted that this market evidence from a reputable source adds objectivity to an otherwise completely subjective evaluative judgment and should be considered in determining land value (T92:1-13).

108. The VG submits that I should reject the Appellant’s attempts to disregard the median unit sales data because it includes sales from desirable and expensive areas such as Longueville, Riverview and Northwood. It submits, as Mr Sukkar accepted, the inclusion of these areas will not skew the data because they do not contain a substantial number of units/apartments (T26:11-31).

109. Mr Hill made an overall negative adjustment of -5% given the sale 1 site’s superior amenity when compared to the Overall Site in terms of proximity of shops, cafes etc.

110. In respect to access, Mr Sukkar made a -10% adjustment while Mr Hill made a greater -15% adjustment. However, for the reason identified above, the VG submits that Mr Sukkar’s adjustment is flawed, without public transport included, and should be rejected.

111. The VG submits that Mr Hill’s evidence on access reflects the superior public transport available at the site provided by the Metro compared to the Overall Site (T35:13-17).

112. In respect to shape, Mr Sukkar made an adjustment of -5% and Mr Hill made an adjustment of +5%. The VG submits the Court will prefer Mr Hill’s adjustment because Mr Sukkar had regard to the topography of the site in determining his adjustment when he was required to assume that land improvements had been made to create a level building pad on the Overall Site for the purposes of the land valuation exercise (T47:23-31).

113. The VG submits that while Mr Sukkar considered that the western most lots comprising the site were narrow and that buildings upon them would not have great northerly exposure, he did not consider that this would limit the flexibility of buildings on the site compared to the Overall Site (T54:5-4). It was further submitted that this evidence was sufficient to support Mr Hill’s adjustment.

Views

114. Mr Sukkar made 0% adjustment for views and Mr Hill adjusted the value by a modest +5%.

115. As the VG acknowledged, the experts were generally agreed that the views from the upper levels of the Existing Buildings and those expected from the taller buildings on the eastern lots were fairy equivalent. However, Mr Sukkar was of the opinion that the expected views from the buildings to be constructed on the western lots of the site (looking over building rooftops) were slightly inferior to those levels of the Existing building which look at trees (T54:5-14). That said, the VG submitted that this evidence is sufficient to support Mr Hill’s adjustment.

DA

116. The VG submitted that there was not a significant difference between the valuers’ adjustments for a DA. Mr Sukkar made a +5% adjustment and Mr Hill made a +10% adjustment. And, while they adopted very different approaches to the quantification of this adjustment, Mr Sukkar conceded in Court that Mr Hill’s adjustment was not excessive (T60:52).

117. Accepting the effect of the assumptions in s 6A(2) of the VLA, Mr Hill adopted an approach that specified and analysed particular costs that would be saved by a developer/purchaser in not having to apply for and obtain a development consent for the Overall Site. He assumed a two year approval period for obtaining the DA consent for the existing buildings and the cost saved in terms of land tax, council rates, interest costs and DA application/associated professional fees.

118. Mr Sukkar also accepted that these costs should be assumed into the consent for the existing buildings (T82:38-50).

119. On that basis Mr Hill calculated an amount of +30% for these savings plus an amount for the elimination of the planning risk of no DA (Ex B, Tab 2, p 136 at [87]). However, his adjustment was the more conservative amount of +20% for sale 2 which sold without a DA consent and a +10% for sale 1 (and sales 3 and 4) because that site sold with the benefit of a concept approval (Ex B, Tab 2, p 171; Ex B, Tab 3, p 233 at [95]).

120. Mr Sukkar applied a +10% adjustment for sale 2 (Ex B, Tab 4, p 255 at [42]), which he then reduced to +5% for sale 1 and sales 3 and 4 (Ex B, Tab 1, p 26; Ex B, Tab 4, p 258 at [60]).

121. Cross-examination invited analysis of Mr. Sukkar’s adjustment approach, and his “rule of thumb” assessment practice, which he claimed was built from experience. The VG’s counsel rose to this somewhat opaque explanation and proposed the Court should prefer Mr Hill’s more “transparent and more logical exposition of the underlying reasoning of his adjustment”; and reject for instance, the grossly inadequate +10% adjustment figure Mr Sukkar would factor into estimating the cost advantage which might accrue from a DA consent.

122. Little weight, it was further submitted, based on Mr Hill’s conflicting experience, should be attached to the Appellant’s desperate attempts to justify Mr Sukkar’s underwhelming assessment that such estimated cost savings were be factored into the sale price (ACWS at [101]-[110]). The VG relies on the following exchange of evidence in the transcript in support of its position on this issue:

WHITE: But the developer when he purchases the land in 2021 knows that he's going to have to undertake those expenses doesn't he?

WITNESS HILL: Yes.

WHITE: That's going to be built into the price that he pays for the land isn't it?

WITNESS HILL: No, it's a reflection of what the land is worth without a development application.

(T59:6-14)

123. The VG also submitted that if the costs were absorbed into the price as the Appellant argues then surely Mr Sukkar’s +5% adjustment must also be incorrect**.**

Option

124. Both experts agreed -10% adjustment should be factored in for this criterion. Although, as the VG pointed out the Appellant, again sought to combine this “option” criterion with the “DA” contrary to the agreed methodology when there was no basis to displace the agreement of the valuers (ACWS at [111]).

Conclusion on Sale 1

125. Having regard to the above, the VG submitted that Mr Hill’s adjustments should be accepted and (based on the agreed size adjustment of +20%) this requires total adjustments of +10% and a rate of $1805m2 GFA.

Sale 2

126. Mr Hill placed weight on this sale (together with sale 1) because of their proximity to the Overall Site and the VG submits that the Appellant accepted this approach (ACWS at [115]).

127. As the VG identified, Mr Sukkar conceded his analysed rate for this sale was incorrect because it was based on a GFA achieved under a DA consent granted 19 months after the first consent, rather than the maximum GFA under the planning controls at the same time. Accordingly, the correct analysed rate for this sale must be that calculated by Mr Hill at $2,124m2/GFA instead of Mr Sukkar’s $2,105m2/GFA.

128. It was further submitted that the flaw in Mr Sukkar’s analysis of this adjustment criterion further undermines his overall credibility in the case.

Location

129. Both valuers considered the location of the sale to be superior to the overall Site.

130. Mr Sukkar applied a -15% adjustment and Mr Hill applied a -5% adjustment.

131. The VG invites me to accept Mr Hill’s adjustment which it submits took into account the superior location (including Macquarie shopping centre), and accounted for the fact that the purchaser did not take advantage of the GFA uplift available under the State Environmental Planning Policy (Housing) 2021 at the time of sale. Whereas Mr Sukkar’s adjustment had reflected additional GFA offered under reforms to the housing planning controls that were not available at the time of sale (T73:10-31). For these reasons, the VG submitted that Mr Sukkar’s adjustment should be rejected.

Access

132. I have already dealt with access at [49] above. It was submitted Mr Hill’s adjustment of -15% should be preferred as it reflected the superior public transport access to the site compared to the Overall Site provided by the Macquarie Park Metro station.

Views

133. The valuers agreed that the Overall Site was superior in terms of views. Mr Sukkar applied a +2.5% and Mr Hill applied +5% adjustment. Again, Mr Sukkar conceded Mr Hill’s adjustments were reasonable. As such, the VG submitted that they be preferred as the site only had views of a utility to the north compared to multi directional views form the Overall Site, a feature which supported a slightly larger adjustment (T85:38-45).

DA

134. Mr Sukkar’s adjustment was +10% based on his rule of thumb analysis. Mr Hill’s adjustment was +20%, based on his method of estimating the quantum of holding costs and risk. For the reasons earlier identified, the VG submitted I would accept Mr Hill’s more transparent approach; an approach that acknowledged a sale price agreed in October 2021 with a later settlement date in May 2022 and a DA consent in May 2023. In inviting me to accept Mr Hill’s evidence the VG emphasised that he had assessed that the purchaser would have had a high degree of confidence of obtaining a DA consent when agreeing to the purchase price but that it was not certain so his adjustment has taken into account not only risk but savings in holding costs for the period until the consent was obtained (T80-81). Again, Mr Hill adopted a more conservative figure than his adjustment which supported +30% as set out earlier.

Conclusion on Sale 2

135. For the reasons above, the VG submitted I would accept Mr Hill’s adjustments which derive a rate of $1805m2 similar to sale 1.

Sale 3

136. Mr Sukkar applied a -15% adjustment and Mr Sukkar applied a +5% adjustment.

137. Again, it was submitted that Mr Sukkar’s adjustment was fundamentally flawed because it had contained an adjustment for public transport which it is now accepted to be part of access.

138. The VG also submits that Mr Sukkar’s adjustment is at odds with the objective evidence that shows a “very substantial difference in median unit prices as between Epping and Lane Cove” (T92:27-50).

Access

139. Mr Sukkar’s adjustment was -10% and Mr Hill’s -15%.

140. Again, it was submitted that Mr Sukkar’s adjustment was fundamentally flawed as it only related to vehicular access and did not contain an adjustment for public transport which properly forms part of the adjustment.

141. It was further submitted that Mr Hills’ significant quantum is justified and appropriate when regard is had to the superior public transport access at the site to Epping Metro station compared to the Overall Site.

Shape

142. Mr Sukkar applied a -10% adjustment and Mr Hill gave no adjustment being 0%.

143. For the reason earlier stated it was submitted that Mr Sukkar’s adjustment was flawed as it included topography to the required assumptions. And it was further submitted that the Court should reject the Appellant’s attempts to mischaracterise this topography reference in the evidence as “amenity” of the apartments at the lower levels of the existing buildings (T94:40-44; T95:12-15). There was no reference to amenity of apartments in his evidence and instead a focus on cost of construction on a steeper site (Ex B, Tab 1, pp 25, 29, 34). He also conceded it was not a corner site despite analysing it as such.

Views

144. Mr Sukkar made 0% adjustment and Mr Hill made +5% adjustment. It was submitted that Mr Sukkar gave no reasoning for is adjustment at 0% (Ex B, Tab 1, p 20; Ex B, Tab 3, p 240 at [88]).

145. And, Mr Hill’s modest adjustment was consistent with the superior views obtainable from the existing buildings compared to the site due to the elevated nature of the Overall Site (T98:15-36).

DA

146. The table was corrected to record an adjustment of +5% by Mr Sukkar for DA, not 0% as recorded. Mr Hill made a +10% adjustment. For the reasons identified earlier under this criteria the VG submitted that Mr Hill’s figure be accepted.

Conclusion on Sale 3

147. The VG invited me to accept Mr Hills’ adjustments for the reasons outlined which derives a rate of $2,354m2 GFA which is well in excess of the chosen rate of $1805m2 GFA.

148. In the event that Mr Sukkar’s figures were accepted (after correction of his error in respect to the DA adjustment) the VG submitted that this would derive a rate of $1650m2 GFA which is inconsistent with his preferred rate of $1350m2 GFA.

Sale 4

Location

149. Mr Sukkar made a -15% and Mr Hill applied a +5% adjustment (the same adjustments as they each made for the sale 3). The VG repeated the same basis to advocate for Mr Hill’s adjustment.

DA

150. Mr Sukkar made an adjustment of +5% and Mr Hill made an adjustment of +10%. Again, as explained Mr Sukkar applied his rule of thumb analysis and for the reasons already stated the more transparent approach of Mr Hill’s was advocated for by the VG.

Conclusion on Sale 4

151. The VG submitted Mr Hill’s adjustment be accepted which results in a rate of $2,011m2 GFA which is well in excess of his chosen rate of $1,805m2 GFA.

Overall conclusion on sales evidence from VG

152. For the reasons set out, the VG submitted that Mr Hill’s adjustments be accepted and a rate of $1,805m2 of GFA be adopted. The applicant has failed to discharge its onus of showing that Mr Sukkars’s derived rate of $1,350m2 GFA is correct.

Land Improvements

Consideration and findings

153. Based on the evidence as summarised, I accept Mr Hill’s determination of land value of $1,805m2/GFA (disregarding the value of land improvements) over that of Mr Sukkar because his adjustments are more transparent and were based on the agreed evaluation method. The attack on Mr Sukkar’s credibility in respect of the use of sales evidence and in respect of adjustments for location/access (RCWS at [14], [21], [25] and [49]) are in my opinion supported by the evidence.

154. It is noted, however, Mr Sukkar did not, as the appellant would have it, change his evidence during the joint reporting process to focus only on the sales 1-3 (ACWS). On day one of the hearing, after the preparation of the joint reports, the appellant insisted on the inspection by the Court of all of Mr Sukkar’s comparable sites, upon which the appellant relied to varying degrees. The Appellant, rather, elected to adopt only three sales in its final submissions and abandon Mr Sukkar’s evidence about all “carefully chosen comparable sales” as identified in his reports.

155. I accept the obligations under the Expert Code of Conduct (Uniform Civil Procedure Rules 2005 r 31.23) to endeavour to reach agreement with the other expert witness and Mr Sukkar lived up to this expectation during his oral evidence – when he correctly conceded mistakes in his analysis or when he agreed that Mr Hill’s evidence was reasonable. Notwithstanding my preference for the evidence of Mr Hill, I found Mr Sukkar to be a truthful and honest witness who at all times tried to assist the Court.

156. That said, the agreed methodology as to calculation of land value must underpin the assessment task of the valuer otherwise there can be no true comparison to adjudicate. It follows that the Appellant’s revised table – adopting a holistic assessment of location and access in closing submissions – cannot displace the agreed methodology. I reject the revised table and accept the original table at p 263 of the Supplementary Joint Report (Ex B, Tab 4) as the evidence baseline subject to the oral evidence as it unfolded, together with my observations at the site view which accord with Mr Hill’s evidence in respect to location, views, access, shape and DA and option. Those factors, as applied to the Subject land, support the relevance of sales 1, 2, and 3.

157. The integrity of the valuation process and comparative task requires the experts’ adherence to the agreed methodology. While Mr Hill accepted in cross examination that it probably doesn’t matter how proximity to public transport and vehicular access is collected, as long as it is collected, (T16:16-25) that was not the agreed method adopted by each expert as stated in their written evidence. “Access” and “location” were separate criteria. I do not accept as the Appellant submits, that the valuers were at cross purposes as to which “bucket” to place “proximity to public transport” because Mr Sukkar accepted in Court that it would logically fall under the access heading.

158. In respect to sale 4 I accept, as the Appellant submits, that there is no need to have regard to this further sale given the fundamental disconnect as to whether sale 4 is a superior location and because the common sales are easier to adjust.

159. With respect to the affordable housing uplift that would have been available to purchasers as at the relevant date of the sale 2 in October 2021 under the ARH SEPP (Ex F) I accept Mr Hill’s evidence that for this sale it is irrelevant as the actual purchaser paid $30 million to develop the land and did not utilise the uplift entitlement (T66:25-50). The property was sold with no DA, no concept plan and an advertised FSR of 3:5:1; a vacant block of land. According to Mr Hill’s evidence it was one or two years later that the developer applied for a development consent that that application did not rely on the ARH SEPP (T67:15-50).

160. I also accept the data of median sales for residential units in the Lane Cove area, referred to in Mr Hill’s evidence, for the reasons he expressed in his oral evidence. While not determinative, it does provide some objective evidence of median sales price to assist the evaluation exercise.

The correct value to be attached to land improvements

161. The definition of land improvements is that set out above at [7] and, it is commonly agreed that the land value of the Overall Site be determined on the assumption that the land improvements had been made at the relevant date. That said, the valuers had very different approaches to calculating the value of the land improvements.

162. Agreeing that the construction cost of land improvements, as at 1 July 2023 would have been $ 8,789,484 (Ex A, Tab C2, p 48 at [16]), Mr Sukkar voiced the opinion that this amount comprised the value of land improvements – having been told to accept this approach due to a legal issue (T1:50; T117:48-50; T219:24; Ex B, Tab 1, p 10)

163. Mr Hill, on the other hand, had regard to the cost of constructing the land improvements over an estimated construction period of one year (Ex B, Tab 2, p 137 at [96]). He included DA fees such as land tax, rates and interest costs that in effect might be enjoyed in not having to finance their construction. (Later, in oral evidence, he conceded DA fees should not have been so included as it has in effect been included as part of the DA adjustment he made.) Mr Hill’s claim for land improvements is $16,050,000.

164. The VG submits that Mr Hill’s method is clearly superior because it more accurately reflects all the costs the purchaser of the Overall Site would have saved by having the land improvements in place. Mr Sukkar accepted that savings of the kind described by Mr Hill would likely be reflected in the price the purchaser would have paid (T121:7-25).

165. However, as the appellant noted, legal impediments exist, and the Appellant contends that Mr Hill’s approach to valuing land improvements is legally impermissible because:

(a) his evidence concerning the amount of savings of holding and interest costs associated with the land improvements are dependent on an assumption that the purchaser will be a particular person or class of person; and (b) no assumption of that kind can be made for the purposes of s 6A(1) of the VLA because the purchaser (and seller) of the Overall Site contemplated under that provision are hypothetical and their identities are irrelevant to the statutory task (RWS at [97]).

166. In response, the VG submitted that the valuers had agreed that the highest and best use of the Overall Site was its existing residential use (Ex B, Tab 3, p 219 at [28]-[32]). Consequently, the Appellant itself accepts that the class of the hypothetical purchasers for the Overall Site would comprise large scale residential developers (ACWS at [23]), and it would be no legal error in making this assumption because although s 6A(1) assumes a hypothetical purchaser for the sale, it does not occur in a vacuum. The notional sale is assumed to take place in a market in which there must be attributed to the hypothetical seller and purchaser a knowledge of all matters and circumstances that affects its land value: Valuer-General v Oriental Bar Pty Limited (2016) 217 LGERA 1; [2016] NSWCA 48 at [123]. It is the role of the valuers to identify, based on their experience and expertise in observing markets for the sale and purchase of land, those matters and circumstances of which the hypothetical parties are assumed to be aware Commissioner of Highways v Tynan (1982) 53 LGRA 1 at [9].

167. With this in mind , the VG submits that Mr Hill has done no more than identify matters and circumstances that based on his experience and expertise would affect the price that would be paid by members of the agreed class of purchasers for the land and how those matters and circumstances would affect that price (T115:1-9).

168. The relevant circumstances identified by Mr Hill include interest and other kinds of savings that would be made by the hypothetical developer/purchaser of the Overall Site if the land improvements were already in place (Ex B, Tab 2, p 137 at [96]). It is further submitted Mr Sukkar agreed these types of costs would be reflected in the price, albeit he did not attempt to quantify them because of the direction about the legal issue.

169. As it happened Mr Hill’s evidence about these circumstances and their effect on the price, which were based on a number of assumptions as to likely construction period, and the prevailing interest rates, land tax rates and council rates as at the valuation date were not challenged. He was only questioned as to whether the savings on interest would be relevant if the hypothetical borrower did not borrow funds to finance the purchase. And, in that circumstance Mr Hill said that the purchaser/developer would factor the opportunity cost of investing its own funds elsewhere rather than interest costs (T114:24-45).

170. Ultimately, the VG submits that there is nothing in the authorities that supports the Appellant’s contention. Moreover, there is nothing in s 6A or in the VLA that precludes the making of the assumptions suggested by Mr Hill. Instead, they are consistent with the hypothetical purchaser and seller of the land envisaged under s 6A being fully informed about all circumstances that affect the value of the land.

Finding land improvement

171. I disagree with the VG’s submissions and its interpretation of the case law and the VLA and accept the Appellant’s arguments on this issue.

172. I am of the opinion that Mr Hill’s approach to the valuation of the Land improvements is not legally permissible. In forming that view I accept the assumption that the notional sale takes place in a market in which there must be attributed to the hypothetical purchaser and vendor knowledge of all matters and circumstances that affect its value. That assumption does not identify the requirement of s6A(1) of the VLA that the value of the land improvements is not excluded as an element of the “land value”.

173. The Court in Storage Equities states that the task of construing s 6A cannot be undertaken by assuming the identity of a particular purchaser/vendor, or a particular class of purchaser, contrary to the RCWS at [98]. The identity of the purchaser is irrelevant in the notional sale contemplated by s 6A: Storage E**quities at [47]. Furthermore, there is no evidence to support Mr Hill’s assumption that all large scale residential property developers, being the class of purchaser nominated by the VG (RCWS at [98]) would need to borrow monies for the purchase price or all of it. The class of purchasers relied upon by Mr Hill, and in turn accepted by the VG could not possibly be consistent in terms of financial position or borrowing capacity and credit rates at the relevant date.

Conclusion on land value

174. As the VG apprehended, my decision on the legal point above does not ultimately impact the outcome of the appeal.

175. For the reasons expressed, the appropriate rate to be derived from the sales evidence is Mr Hill’s rate of $1,805m2 GFA which derives a land value for the Overall site, excluding land improvements, of $63,808,916 based on the agreed GFA for the Overall Site of 35,531.2m2.

176. After applying the agreed 96.4% apportionment to this amount in accordance with s 26A of the VLA, the land value for the Subject Land excluding land improvements would be $61,511,795, slightly less than the issued land value (RCWS p 16 at [117]). Accordingly, even applying Mr Sukkar’s lower land improvement at $8,789,484 when 96.4% of this amount is added to the amount of $61,511,795 the total exceeds the issued land value for the Subject Land (RCWS p 16 at [117]).

177. As the VG does not contend for a land value higher than the issued land value the appeal is dismissed. It is to be noted that the parties are agreed that there is to be no order as to costs.

178. Accordingly, the Court orders:

179. The appeal is dismissed.

180. The exhibits are returned.

S Dixon

Senior Commissioner of the Court

**********