Leppington Pastoral Company Pty Ltd v Valuer General

Land and Environment Court (NSW)|2010-02-11|Before: Mr J, Mr P

CITATION : Leppington Pastoral Company Pty Ltd v Valuer General [2010] NSWLEC 1023

APPLICANT Leppington Pastoral Company Pty Ltd PARTIES : RESPONDENT Valuer General

KEY ISSUES: VALUATION OF LAND :- Contaminated Land

APPLICANT Mr I Hemmings (Barrister) SOLICITOR Instructed by Mr D Baird (Solicitor) Marsdens Law Group LEGAL REPRESENTATIVES: RESPONDENT Mr J Atkin (Barrister) SOLICITOR Instructed by Mr P Rankins (Solicitor) for Valuer General

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30057 of 2009 30058 of 2009 Leppington Pastoral Company Pty Ltd v Valuer General

JUDGMENT 1 This is an appeal by Leppington Pastoral Company Pty Ltd (the Applicant), under Section 37 of the Valuation of Land Act 1916 (the Act), against the Land Value assessed by the Valuer General (the Respondent) in respect of the property known as the Oran Park Raceway, Cobbity Road, Oran Park (the subject property). Background 2 The Applicant was represented by Mr I Hemmings, Barrister, instructed by Mr D Baird, Solicitor, Marsdens Law Group. 3 The Respondent was represented by Mr J Atkin, Barrister, instructed by Mr P Rankins, Solicitor for the Valuer General. 4 The Land Value of the subject property at 1st July 2004 (the 2004 Base Date) was assessed by the Applicant at $26,776,000 and by the Respondent at $52,000,000. 5 The Land Value of the subject property at 1st July 2007 (the 2007 Base Date) was assessed by the Applicant at $20,664,000 and by the Respondent at $40,000,000. 6 The matter was the subject of an on site inspection on 9th December 2009, followed by a hearing in Court on 10th December 2009.

The subject property 7 The subject property comprises an area of approximately 84.4 hectares, being divisible by differential zoning into three parcels. 8 The subject property was used, at the time of the hearing, as a motor sport race track and ancillary purposes though this use was to cease in the near future and the subject property was to be redeveloped for residential and ancillary purposes. 9 The subject property is located approximately 50kms south west of the Sydney CBD and approximately 8kms north east of Camden in a predominantly rural area being progressively developed for residential and ancillary purposes. 10 The subject property forms part of the South West Sydney Growth Centre, being divisible by differential zoning into three parcels. The first parcel comprises 76.4 hectares being zoned R1 General Residential, with the objective of the zoning being to facilitate a variety of forms of residential and ancillary purposes development. The second parcel comprises 4.0 hectares being zoned E4 Environmental Living, with the objective of the zoning being to facilitate low impact residential development in areas with special ecological, scientific or aesthetic character. The third parcel comprises 4.0 hectares being zoned RE1 Public Recreation, with the objective of the zoning being to facilitate land for use for public open space and recreational purposes. 11 The highest and best use of the subject property mirrors the zoning, being residential development for around 90% of the site, low-impact residential development for around 5% of the site and public open space for around 5% of the site. 12 As at the Base Dates, the subject property comprised part of Lot 1 DP252897.

Nature of improvements 6. 13 The subject property includes a variety of features that may or may not be considered to be either improvements or land improvements for the purposes of s6A(1) of the Act, including buildings and structures (such as the administration block or race stands), roadways (such as the racetrack), tanks (such as fuel tanks), earth mounds (such as those around the racetrack and those for 4WD tracks) asbestos and uncontrolled fill together with seepage from tanks and the racetrack into surrounding soil. 14 The parties agreed that it was likely that seepage would have occurred from tanks and roadways into the surrounding soil causing contamination requiring rehabilitation prior to further development.

15 Section 6A(1) of the Act states: "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." 16 For the purposes of this matter, it is relevant to consider buildings and structures, roadways, tanks, earth mounds, asbestos and uncontrolled fill together with seepage from tanks and roadways into surrounding soil in the context of land improvements which are to be assumed had been made and improvements which are to be assumed had not been made. 17 Land improvements are defined in section 4 of the Act to include: (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 18 Improvements are not defined in the Act but were considered in Trust Company of Australia Ltd v The Valuer General [2007] NSWCA 181 which held: "For the purposes of section 6A(1) of the Valuation of Land Act 1916 , " improvements " are any human operations on the land that have the effect, as at the date of valuation, of enhancing the land's value compared with its natural state." and at paragraph 24: "Thus, the notion of an increase in value or profitability is an inherent part of the concept of an "improvement" ".

19 Accordingly, any excavation, filling, grading or levelling of land associated with the erection of any building or structure (such as the administration block or roadways and racetrack) will comprise land improvements within the definition in section 4 and so are to be assumed had been made for the purposes of section 6A(1) of the Act.

20 While the language of section 4 primarily suggests a scenario where land is excavated, filled, graded or levelled with a view to making the land flat for the erection of a building or structure, it could also be interpreted to include the creation of earth mounds, such as those around the racetrack upon which the race stands were then erected. This would have the effect of rendering such earth mounds land improvements that are to be assumed had been made for the purposes of section 6A(1) of the Act.

21 Further, while the language of section 4 could also be interpreted to include the creation of earth mounds such as those used for 4WD tracks, the absence of a building or structure erected thereon may place such earth mounds outside the definition of land improvements in section 4 of the Act. 22 Buildings and structures (such as the administration block or race stands), roadways (such as the racetrack) and tanks (such as fuel tanks) may be considered human operations on the land that have the effect, as at the date of valuation, of enhancing the land's value compared with its natural state and so may be considered improvements under the definition in Trust Company of Australia Ltd v The Valuer General [2007] NSWCA 181. As improvements, it is to be assumed that they had not been made for the purposes of section 6A(1) of the Act.

23 Regarding the creation of earth mounds which may not be land improvements, such as those used for 4WD tracks, evidence was not tendered as to whether these enhanced the land's value compared with its natural state and so may be considered improvements under the definition in Trust Company of Australia Ltd v The Valuer General [2007] NSWCA 181. 24 The issue of contamination generally was considered indirectly in Trust Company of Australia Ltd v The Valuer General [2007] NSWCA 181 at paragraph 20 as alteration of the land by human hands but not "improvements" to the land. For the subject property, seepage from tanks and the racetrack are a result of the existence of the tanks and racetrack which are improvements. Accordingly, for the purposes of section 6A(1) where improvements are assumed not to have been made, the consequential assumption is that the seepage from such tanks and racetrack is assumed not to have been made. 25 Exhibit D refers to asbestos contaminated soil and to uncontrolled fill but evidence was not tendered as to the source of either such that they may not necessarily be associated with an improvement. As both asbestos contaminated soil and uncontrolled fill may be considered forms of contamination, these may be considered unlikely to enhance the land's value compared with its natural state and so may not be considered improvements under the definition in Trust Company of Australia Ltd v The Valuer General [2007] NSWCA 181. Accordingly, such contamination cannot be assumed to have not been made for the purposes of section 6A(1) and so requires regard in the valuation process. 26 In "Valuation of Land in Australia", Hyam cites Ritcher v Chief Executive, Department of Natural Resources (1998) 19 QLCR 274 as authority for the proposition that the significance of contamination comes to the fore when a site is on the verge of moving from a use for which contamination is not incompatible to a use for which contamination is incompatible, such as a move from an industrial use to a residential use. Accordingly, if regard is had to contamination in the value of the subject property, such regard may be likely to be greater at the 2007 Base Date than at the 2004 Base Date given the increasing likelihood of residential development of the subject property. 27 In summary, for the purposes of section 6A(1) of the Act: - the buildings and structures (such as the administration block or race stands), roadways (such as the racetrack) and tanks (such as fuel tanks) are improvements that are to be assumed to have not been made for the purposes of valuation and that consequential seepage is assumed to have not been made for the purposes of valuation; - the levelled sites and earth mounds upon which buildings and structures are erected comprise land improvements that are to be assumed to have been made for the purposes of valuation; - the earth mounds such as those used for 4WD tracks, asbestos contaminated soil and uncontrolled fill are neither improvements nor land improvements and exist as at the Base Dates and so require regard in the valuation. 28 Accordingly, the valuation is required to assume the existence of levelled areas of land together with earth mounds of varying sizes and shapes and with portions of the site being subject to contamination by asbestos contaminated soil and uncontrolled fill. 29 Exhibit D comprised a "Rehabilitation Quotation" prepared by Mr Glen Downey of TRN Group and dated 22nd October 2009 in the amount of $11.825m excluding GST, or $13.008m including GST, which comprised an estimate of the likely cost of various works required to rehabilitate the subject property for the purposes of housing development, being grouped under the following headings: General $0.200m Demolition $6.541m Earthworks $2.998m Underground Storage Tanks $0.041m Asbestos Contaminated Soil $0.724m Uncontrolled Fill $0.862m Septic Tanks $0.098m Landfarming Hydrocarbons $0.311m Dust Control $0.050m Total $11.825m 30 I note that Exhibit D appears to indicate that approximately 80% of the rehabilitation costs comprise Demolition (being principally demolition of existing structures, existing racetrack, hardstands and sealed roads) and Earthworks (being principally cut to fill, stripping and placing topsoil and grass seed topsoil area) with only approximately 15% comprising Underground Storage Tanks, Asbestos Contaminated Soil, Uncontrolled Fill and Septic Tanks. 31 I note that Mr Downey was not called to give evidence concerning Exhibit D. While Exhibit D appears to provide a broad indication of the magnitude of possible costs of removal of asbestos contaminated soil and uncontrolled fill and replacement of each with clean fill, in the amounts of $0.724m and $0.862m respectively, evidence concerning specific costing of works associated with the rehabilitation of each was not tendered. 32 Exhibit E comprised a copy of the "Rehabilitation Quotation" from Exhibit D, annotated by Mr Graveur to indicate those costs which, in his opinion, were contamination related (49.5%), ground improvements related (39.3%) and improvements related (11.2%). Evidence was not tendered concerning the basis upon which the division of costs was made and I note that the division appears inconsistent, such as "remove storage tanks" being classified as contamination related rather than improvements related. Accordingly, I consider that limited weight should be given to Exhibit E.

The comparable sales evidence 7. 33 Mr Graveur, Registered Valuer, tendered as evidence a valuation of the subject property as at 1st July 2004 dated 2nd November 2009 and a valuation as at 1st July 2007 dated 25th November 2009 and gave expert evidence on behalf of the Applicant. He concluded the land value of the subject property to be $26,776,000 and $20,664,000 at the respective Base Dates. 34 Mr Sorrenson, Registered Valuer, tendered as evidence an undated valuation of the subject property and gave expert evidence on behalf of the Valuer General. He concluded the land value of the subject property to be $52,000,000 at the 2004 Base Date and $40,000,000 at the 2007 Base Date. 35 The composition of Mr Graveur and Mr Sorrenson's valuations may be compared as follows: 2004 Base Date: Zoning Area Mr Graveur Mr Sorrenson RI General Residential 76.4 ha $340,000 per ha $650,000 per ha E4 Environmental Living 4.0 ha $100,000 per ha $500,000 per ha RE1 Public Recreation 4.0 ha $100,000 per ha $100,000 per ha Total 84.4 ha $26,776,000 $52,000,000

2007 Base Date: Zoning Area Mr Graveur Mr Sorrenson RI General Residential 76.4 ha $260,000 per ha $500,000 per ha E4 Environmental Living 4.0 ha $100,000 per ha $400,000 per ha RE1 Public Recreation 4.0 ha $100,000 per ha $100,000 per ha Total 84.4 ha $20,664,000 $40,000,000

36 I note that Mr Graveur and Mr Sorrenson agree on the value of that land zoned RE1 Public Recreation and so accept their valuation for this parcel. 37 For the 2004 Base Date, Mr Graveur had regard to the "Rehabilitation Quotation" prepared by Mr Glen Downey of TRN Group and dated 22nd October 2009 (Exhibit D) which was calculated to equate to $140,118 per hectare for the 84.4 hectare site. Mr Graveur had further regard to the Stage 2 Contamination Assessment Report by Douglas Partners (Exhibit C) which he believed would result in costs of a further 10%, equating to $154,129 per hectare. Finally, Mr Graveur adjusted this 2009 estimate to $109,817 per hectare as at 2004 with reference to the Rawlinsons Construction Cost Guide Building Indices. Mr Graveur then analysed comparable sales, deducted $109,817 per hectare and through an implicit process based on experience and judgment determined the respective rates per hectare adopted in the valuation. Mr Graveur also undertook a static hypothetical development valuation that indicated a rate per hectare of $325,000, which he considered fell within the same value range as arose from comparable sales analysis. 38 For the 2007 Base Date, Mr Graveur adopted a similar approach with analysis of comparable sales, deduction of $141,599 per hectare and adoption of an implicit process based on experience and judgment to determine the respective rates per hectare adopted in the valuation. Mr Graveur again undertook a static hypothetical development valuation which indicated a rate per hectare of $263,000, which he considered fell within the same value range as arose from comparable sales analysis. 39 Mr Sorrenson adopted a comparable sales analysis approach to the valuation only, determining the respective rates per hectare for adoption through an explicit process detailed in Exhibit 12, with adjustments based on experience and judgment. Mr Sorrenson noted that the south western Sydney residential markets deteriorated significantly between 2004 and 2007 and that E4 Environmental Living zoned land may be likely to result in larger land blocks and hence a lower yield resulting in a lower value per hectare than that attributable to land zoned R1 General Residential. For the 2007 Base Date, Mr Sorreson considered the issue of contamination risk and expected it to be relatively localised over small areas and capable of being addressed within the reasonably extensive earthworks involved in the residential development of a site of this size. For the 2004 Base Date, Mr Sorrenson considered residential development to be at some less certain time in the future, such that the subject property should be valued as a land bank opportunity for which contamination risk is of lesser relevance. Consistently, in Exhibit 12, Mr Sorrenson specified an adjustment of 5% for contamination at the 2007 Base Date and 3% at the 2004 Base Date.

40 Mr Graveur and Mr Sorrenson submitted one joint comparable sale at 650 Camden Valley Way, Catherine Field and four common comparable sales at: a 931 Cobbity Road, Oran Park; b 880 Camden Valley Way, Catherine Field; c 150 Lodges Road, Elderslie; and d 279 Richardson Road and 36, 66 Springs Road, Springs Farm which were inspected externally. 41 Mr Graveur submitted six further comparable sales at: a 1025 Camden Valley Way, Catherine Field; b 696, 812, 880 Camden Valley Way, Catherine Field; c 109 and 140 Springs Road, Spring Farm; d Lot 1 DP88119 Richardson Road, Spring Farm; e Lot 1 DP397935 Richardson Road, Spring Farm; and f 15 Hornby Street, Wilton which were inspected externally. 42 Mr Sorrenson submitted one further comparable sale at 214 Richardson Road, Spring Farm which was inspected externally. Consideration of the evidence 43 I note that the comparable sales traverse the period September 2003 to June 2009, being a period of almost six years from some nine months before the 2004 Base Date to some twenty four months after the 2007 Base Date. I consider this period to be too long, with the adjustments for time between some of the comparables sales and the respective Base Dates potentially being too great, particularly given the significant deterioration in market conditions in the south western Sydney residential markets between 2004 and 2007 as referred to by Mr Sorrenson. 44 Given the availability of comparable sales evidence, I further consider a period of about twelve months on either side of each Base Date to be a reasonable period from which to consider comparable sales, while acknowledging the limitations of considering comparable sales that occur after a Base Date. 45 Accordingly, I consider the comparable sales at 15 Hornby Street, Wilton, 1025 Camden Valley Way, Catherine Field and 696, 812, 880 Camden Valley Way, Catherine Field to be of limited relevance. 46 I note that this leaves six comparable sales relevant to the 2007 Base Date and three comparable sales relevant to the 2004 Base Date. Having regard to various aspects of comparability detailed below, I consider that a greater level of relevant comparable sales evidence exists for the 2007 Base Date than for the 2004 Base Date. 47 Further, I consider that a greater level of relevant comparable sales evidence exists for the 76.4 hectare parcel zoned R1 General Residential within the subject property than for either of the smaller parcels. 48 Therefore, I propose to primarily consider the comparable sales evidence in the context of the 76.4 hectare parcel of the subject property zoned R1 General Residential as at the 2007 Base Date and to secondarily consider the two smaller parcels at the 2007 Base Date and each of the parcels at the 2004 Base Date. 49 Accordingly, I consider the comparable sales at 109 and 140 Springs Road, Spring Farm, Lot 1 DP88119 Richardson Road, Spring Farm and Lot 1 DP397935 Richardson Road, Spring Farm to be of relevance for the 2004 Base Date but to be of limited relevance for the 2007 Base Date. 50 Of the six comparable sales relevant to the 2007 Base Date, I note that 880 Camden Valley Way, Catherine Field, 279 Richardson Road and 36, 66 Springs Road, Springs Farm and 214 Richardson Road, Spring Farm involve special purchasers and so are of limited relevance. 51 Therefore, three comparable sales remain for consideration in the context of the 2007 Base Date, being 650 Camden Valley Way, Catherine Field, 931 Cobbity Road, Oran Park and 150 Lodges Road, Elderslie. Having regard to the date of sale, site area, shape, location, zoning and topography, the three comparable sales may be compared with the subject property as follows. 52 650 Camden Valley Way, Catherine Field, being a joint comparable, is comparable to the subject property in terms of location. It is superior to the subject property in terms of being a regular shape, smaller site area, being zoned for industrial and business uses and being of relatively level topography. However, it is inferior in terms of date of sale, being some seven months after the 2007 Base Date. Having regard to the limitations to comparability of this sale to the subject property, I consider the sale to be an indirectly relevant comparable sale. 53 931 Cobbity Road, Oran Park, submitted by both valuers, is comparable to the subject property in terms of location and topography, being gently undulating. However, it is superior in terms of being a regular shape. However, it is inferior in terms of being a larger site area, being zoned for rural uses and in terms of date of sale, being some three months after the 2007 Base Date. Having regard to the limitations to comparability of this sale to the subject property, I consider the sale to be an indirectly relevant comparable sale. 54 150 Lodges Road, Elderslie, submitted by both valuers, is comparable to the subject property in terms of zoning being residential and topography, being gently undulating. It is significantly superior in terms of site area, being very considerably smaller, and superior in terms of site shape being L shaped and date of sale being some twelve months before the 2007 Base Date. However, it is significantly inferior in terms of location, being some distance from the subject property. Having regard to the significant differences between this sale and the subject property, I consider the sale to be of limited relevance.

55 I consider that there are no directly relevant comparable sales for the 2007 Base Date. 56 I consider that the comparable sales at 650 Camden Valley Way, Catherine Field and 931 Cobbity Road, Oran Park are indirectly relevant comparable sales for the 2007 Base Date. 57 I consider that the comparable sale at 150 Lodges Road, Elderslie is of limited relevance for the 2007 Base Date. 58 Mr Graveur analysed the indirectly relevant sale at 650 Camden Valley Way, Catherine Field to indicate a rate of $492,935 per hectare as at the 2007 Base Date but did not provide an explicit explanation of how this had been achieved. Mr Graveur then adjusted to reflect contamination and deduced a rate of $351,336 per hectare for application to the subject property. 59 Mr Sorrenson analysed the indirectly relevant sale at 650 Camden Valley Way, Catherine Field to indicate a rate of $485,700 per hectare as at the 2007 Base Date. Mr Sorrenson then provided an explicit matrix of adjustments to deduce a rate of $434,000 per hectare for application to the subject property, including an allowance of 5% for contamination. 60 Mr Graveur analysed the indirectly relevant sale at 931 Cobbity Road, Oran Park to indicate a rate of $204,161 per hectare as at the 2007 Base Date following a deduction from the sale price of $3,500,000 for improvements and riparian corridor with 76.9 hectares of land remaining. Mr Graveur did not then further adjust to reflect contamination and applied the deduced rate to the subject property. 61 Mr Sorrenson analysed the indirectly relevant sale at 931 Cobbity Road, Oran Park to indicate a rate of $316,500 per hectare as at the 2007 Base Date following a deduction from the sale price of $3,200,000 for improvements and riparian corridor with approximately 50 hectares of land remaining. The difference in area of land remaining largely explains the difference in analysed rate per hectare between Mr Sorrenson and Mr Graveur. Mr Sorrenson then provided an explicit matrix of adjustments to deduce a rate of $440,000 per hectare for application to the subject property, including an allowance of 5% for contamination. 62 Based on his analysis of comparable sales and with reference to his hypothetical development valuation, Mr Graveur then adopted a rate of $260,000 per hectare for the 76.4 hectares of land zoned R1 General Residential. I note that the rate of $260,000 per hectare adopted compares to the rates of $351,336 and $204,161 per hectare deduced by Mr Graveur from the analysis of comparable sales at 650 Camden Valley Way, Catherine Field and 931 Cobbity Road, Oran Park. I note that Mr Graveur did not provide a clear explanation of the reasoning process leading from the deduced adjusted rates per hectare from the analysed comparable sales evidence to the selection of the rate per hectare adopted in the valuation. 63 Based on his analysis of comparable sales, Mr Sorrenson then adopted a rate of $500,000 per hectare for the 76.4 hectares of land zoned R1 General Residential. I note that the rate of $500,000 per hectare adopted compares to the rates of $434,000 and $440,000 per hectare deduced by Mr Sorrenson from the analysis of comparable sales at 650 Camden Valley Way, Catherine Field and 931 Cobbity Road, Oran Park. I note that Mr Sorrenson did not provide a clear explanation of the reasoning process leading from the deduced adjusted rates per hectare from the analysed comparable sales evidence to the selection of the rate per hectare adopted in the valuation. 64 As noted above, Mr Graveur had reference to his hypothetical development valuation which indicated a rate of $263,000 per hectare as at the 2007 Base Date and may be compared to the rate of $260,000 per hectare adopted for his valuation. Exhibit B includes a copy of Mr Graveur's hypothetical development valuation which I note is a static valuation on a per site basis with allowances for income from sale price per allotment and expenses from a range of variables including marketing, GST, profit and risk, interest, regulatory contributions and construction, contamination and acquisition costs. Mr Graveur did not provide explanation for the relevance or quantification of the respective variables. 65 Concerning the 4.0 hectare parcel zoned E4 Environmental Living, as at the 2007 Base Date Mr Graveur attributed a rate of $100,000 per hectare and Mr Sorrenson attributed a rate of $400,000 per hectare. As noted above, the objective of the E4 Environmental Living zoning is to facilitate low impact residential development in areas with special ecological, scientific or aesthetic character. 66 Mr Graveur did not provide any explanation for the adoption of a rate of $100,000 per hectare which I note is the same rate adopted by Mr Graveur for the 4.0 hectare parcel zoned RE1 Public Recreation. 67 Mr Sorrenson explained his adoption of a rate of $400,000 per hectare through relativity to the rate adopted for that parcel zoned R1 General Residential. Mr Sorrenson explained the differing levels of development permitted under the respective zonings, with land zoned E4 Environmental Living likely to result in larger land blocks and hence a lower yield resulting in a lower value per hectare. 68 Concerning the 2004 Base Date, Mr Graveur tendered a separate valuation report, as noted above, while Mr Sorreson addressed both Base Dates within the same report. 69 Relative to the 2007 Base Date, Mr Graveur adopted the same rate per hectare for each of the 4.0 hectare parcels zoned E4 Environmental Living and RE1 Public Recreation for the 2004 Base Date. Concerning the 76.4 hectares zoned R1 General Residential, Mr Graveur adopted a rate of $340,000 per hectare for the 2004 Base Date which I note is approximately 30% above the rate of $260,000 per hectare adopted for the 2007 Base Date. Mr Graveur's approach to valuation and use of both the comparable sales approach and the hypothetical development approach are common to both Base Dates. 70 Relative to the 2007 Base Date, Mr Sorrenson adopted the same rate per hectare for the 4.0 hectare parcel zoned RE1 Public Recreation as adopted for the 2004 Base Date. Concerning the 4.0 hectare parcel zoned E4 Environmental Living, Mr Sorrenson adopted a rate of $500,000 per hectare for the 2004 Base Date which I note is approximately 25% above the rate of $400,000 per hectare adopted for the 2007 Base Date. Concerning the 76.4 hectares zoned R1 General Residential, Mr Sorrenson adopted a rate of $650,000 per hectare for the 2004 Base Date which I note is approximately 30% above the rate of $500,000 per hectare adopted for the 2007 Base Date. Mr Sorrenson's approach to valuation and use of the comparable sales approach are common to both Base Dates. 71 Mr Sorrenson provided a rationale for the difference in the rates adopted as at the 2004 Base Date and the 2007 Base Date through an explanation of the change in market conditions. Mr Sorrenson noted that a significant downturn in residential markets throughout the south west sector of Greater Sydney between mid-2004 and mid-2007 contributed to a fall in residential development land values.

Findings 72 Accepted valuation practice permits both explicit and implicit adjustment for differences, such as in location, area and time, to enable valuers to have evidentiary comparable values which, following adjustment, account for the various differences with the subject property. Such adjustment is generally based on a reasoning process drawing on the skill and experience of the valuer and undertaken to derive an opinion of value through a process of working forwards rather than a process of working backwards to justify an opinion of value previously formed. 73 Because properties are rarely identical, explicit and/or implicit adjustment for differences is obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property, with too much adjustment potentially rendering the comparable sale unsafe to use. Caution is, therefore, required where large explicit and/or implicit adjustments are required, with particular caution required for large implicit adjustments. 74 I note that Mr Graveur's valuation had regard to the assessment by Douglas Partners and to the total TRN Group "Rehabilitation Quotation" which I consider to be inappropriate as this assumes the demolition of structures and other costs inconsistent with the requirements of section 6A(1) of the Act. 75 Further, I note that Mr Graveur adopted the same value rate per hectare for land zoned E4 Environmental Living as for land zoned RE1 Public Recreation which I consider to be inappropriate as the objective of the former zoning is to facilitate low impact residential development in areas with special ecological, scientific or aesthetic character and of the latter zoning is to facilitate land for use for public open space and recreational purposes. Accordingly, the objective of the E4 Environmental Living zoning clearly supports residential development that may be likely to result in a value of the land greater than that where residential development is not supported. 76 Furthermore, I consider Mr Graveur's hypothetical development valuation to be inappropriate as it is static, rather than dynamic, reflecting a single period for development of a project that may be expected to take a number of years and during which the input variables may be expected to change. I also note that Mr Graveur provided no explanation for the relevance of or quantification of the respective variables. I am unable, therefore, to understand the basis upon which each variable was considered relevant for inclusion and which variables may have been considered not relevant for inclusion. I am also unable to understand the basis for quantification of each variable and the sensitivity of the resulting valuation to specific variables. A dynamic approach using a cash flow over time with a detailed explanation of the variables selected, the rationale for their quantification and provision of a sensitivity analysis would assist in understanding the results of the hypothetical development valuation. 77 Having regard to the inappropriate inclusion of the Douglas Partners assessment and the total TRN Group "Rehabilitation Quotation", the inappropriate approach to the valuation of the parcel zoned E4 Environmental Living and the inappropriate use of the hypothetical development method, I consider that limited weight should be given to Mr Graveur's valuation. 78 I note that, in Exhibit 11, Mr Sorrenson refers to contamination from "spraying / spillage of petroleum based products". However, in Exhibit 12 Mr Sorreson refers to contamination but without reference to the source or form of that contamination. 79 In Exhibit 12 Mr Sorrenson refers to dealing with contamination "by way of adjustment of sales evidence", by "a discount of $20,000 to $25,000 per hectare overall" and by an adjustment to comparable sales evidence of 5% and 3% for the 2007 and 2004 Base Dates, respectively. 80 While Mr Sorrenson's adjustment for contamination attributable to petroleum based products may be inconsistent with section 6A(1), the adjustments made by Mr Sorrenson may be considered to alternatively reflect the contamination due to asbestos contaminated soil and uncontrolled fill. 81 I note that the 5% adjustment for contamination adopted in Mr Sorrenson's valuation reflects $1,910,000 for that land zoned R1 General Residential as at the 2007 Base Date (being 5% of 76.4 hectares at $500,000 per hectare). I further note that the TRN Group "Rehabilitation Quotation" indicates $1,586,000 as the cost of rehabilitation of asbestos contaminated soil and uncontrolled fill, though I acknowledge the evidentiary limitations of the TRN Group "Rehabilitation Quotation". Given the absence of further evidence, I consider Mr Sorrenson's adjustment for contamination may alternatively reflect contamination due to asbestos contaminated soil and uncontrolled fill and to be appropriate. 82 I note that Mr Sorrenson did not specifically refer in his valuation to the treatment of the earth mounds such as those used for 4WD tracks. However, in Exhibit 11 when considering the manner in which a hypothetical purchaser might address contamination, Mr Sorrenson stated that a hypothetical purchaser contemplating residential development of the subject property would undertake reasonably extensive earthworks relative to producing graded/benched homesites and low grade access roadways. I consider that the nature, size and number of earth mounds, such as those used for 4WD tracks, relative to the size and topography of the subject property may be addressed in a similar manner for the purposes of valuation. 83 I note that 650 Camden Valley Way, Catherine Field is comparable to the subject property in terms of location. I consider that the downward adjustment for regular shape, smaller site area, industrial and business uses zoning and relatively level topography may marginally exceed the upward adjustment for date of sale, which may support Mr Sorrenson's adoption of $500,000 per hectare for that parcel zoned R1 General Residential as at the 2007 Base Date. 84 I note that 931 Cobbity Road, Oran Park is comparable to the subject property in terms of location and topography. I consider that the upward adjustment for larger site area, rural uses zoning and date of sale may significantly exceed the downward adjustment for regular shape, further supporting Mr Sorrenson's adoption of $500,000 per hectare for that parcel zoned R1 General Residential as at the 2007 Base Date. 85 I consider Mr Sorrenson's explanation of the adoption of a rate of $400,000 per hectare for the parcel zoned E4 Environmental Living as at the 2007 Base Date to be appropriate. 86 I note that Mr Graveur and Mr Sorrenson agree on the value of the 4.0 hectare parcel zoned RE1 Public Recreation and accept their valuation of $100,000 per hectare. 87 Accordingly, for the 2007 Base Date, I accept Mr Sorrenson's valuation of $40,000,000 comprising: Zoning Area Per Hectare Total RI General Residential 76.4 ha $500,000 $38,000,000 E4 Environmental Living 4.0 ha $400,000 $1,600,000 RE1 Public Recreation 4.0 ha $100,000 $400,000 Total 84.4 ha $40,000,000

88 Concerning the 2004 Base Date, I consider Mr Sorrenson provided an explanation of the change in market conditions that was appropriate. I note that Mr Sorrenson's adjustment for contamination of 3% for the 2004 Base Date is below that for the 2007 Base Date consistent with the proposition of Hyam based on Ritcher v Chief Executive, Department of Natural Resources (1998) 19 QLCR 274. I further note that Mr Sorrenson's difference between the 2007 Base Date and the 2004 Base Date of 25% to 30% broadly accords with Mr Graveur's difference of 30%. Accordingly, I accept Mr Sorrenson's valuation of $52,000,000 comprising: Zoning Area Per Hectare Total RI General Residential 76.4 ha $650,000 $49,600,000 E4 Environmental Living 4.0 ha $500,000 $2,000,000 RE1 Public Recreation 4.0 ha $100,000 $400,000 Total 84.4 ha $52,000,000

Orders 89 The orders of the Court: 1. The Appeal is dismissed. 2. The Land Values of $52,000,000 as at the base date of 1 st July 2004 and $40,000,000 as at the base date of 1 st July 2007 for the property known as the Oran Park Raceway, Cobbity Road, Oran Park are confirmed. 3. No Order is made as to costs. 4. The exhibits are returned.

              Dr David Parker
              Acting Commissioner of the Court
              ljr

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