Maurici v Chief Commissioner of State Revenue

AMP Henderson Global Investors Ltd & Ors v Valuer General (2004) 134 LGERA 426 ; Brimbella Pty Ltd v Mosman Municipal Council (1985) 79 LGERA 367 ; Coles v Woollahra Muncipical Council (1986) 59 LGRA 133 ; Hope v The Council of the City of Bathurst (1980) 144 CLR 1 ; Illawarra Meat (Developments) Pty Ltd v Valuer General (Land and Valuation Court No. 119 of 1977 10 March 1978) ; In re Land Tax Acts (Wilsons Case) [1927] VLR 399; Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 ; CASES CITED: McGeoch v The Federal Commissioner of Land Tax (1929) 43 CLR 277 ; McKee v Valuer General [1971] NZLR 436 ; Minister for Aboriginal Affairs And Another v Peko Wallsend Limited And Others (1986) 162 CLR 24 ; Morrison & Others v The Federal Commissioner of Land Tax (1914) 17 CLR 498 ; Peelmont Pty Ltd v Valuer General [1962] NSWR 376 (1961) 80 WN (NSW) 1545 ; Pye and Another v Valuer General [1973] 2 NSWLR 385; Tabag v Minister for Immigration & Ethnic Affairs(1982) 45 ALR 705; Toohey's Limited v The Valuer General [1925] AC 439

APPLICANT Mr P L G Brereton SC with Mr J Stoljar (Barrister) SOLICITORS Speed and Stracey LEGAL REPRESENTATIVES:

RESPONDENT Mr J A Ayling SC with Mr D M Jay (Barrister) SOLICITORS Crown Solicitor

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30039A of 1999 Maurici v Chief Commissioner of State Revenue

JUDGMENT The appeal 1 Talbot ACJ: In a closely reasoned and meticulously detailed judgment, Commissioner Nott determined on 10 February 2005 that an appeal by Anthony Phillip Maurici ("the applicant") against the determination by the Chief Commissioner of State Revenue ("the respondent") of the land value of 66 The Point Road, Woolwich ("the property") as $2,400,000 be upheld. The Commissioner determined the land value of the property as at the base date of 1 July 1997 to be $1,890,000. 2 The present appeal is made by Maurici pursuant to s 56A of the Land and Environment Court Act 1979 seeking revocation of the determination of $1,890,000 and that in lieu there be a determination that the land value of the land as at 1 July 1997 is $1,300,000 or that the matter be remitted to Commissioner Nott to re-determine the land value in accordance with my reasons. 3 The grounds of appeal relied upon by Maurici are as follows:- (a) The Commissioner erred in determining that any value accruing from the grant of a development consent forms part of land value of the land under s 6A(1) of the Valuation of Land Act 1916. (b) The Commissioner erred in determining that, in deriving the improvements increment from an exercise of comparing the sale of vacant property with the resale of that property after a development consent has been obtained, the value of the consent should be excluded from the improvements increment and should be regarded as part of the land value. (c) The Commissioner erred in finding that 26A The Point Road Woolwich was "available for occupation by the owner or leasing to a tenant" being a finding unsupported by the evidence, and further erred in treating that finding as a complicating factor against giving significant weight to the sales of that property in determining the quantum of the improvements increment. (d) The Commissioner erred in: (i) relying almost exclusively (giving slight weight only to the sales of 26A The Point Road, Woolwich) on sales of 1 Fern Road, Woolwich in determining the quantum of the improvements increment; and (ii) giving inadequate or insufficient weight to the relevant sales of 26A The Point Road Woolwich in determining the quantum of the improvements increment. (e) The Commissioner erred in taking into account an irrelevant consideration namely that entrepreneurial profit (expressed as a percentage of building costs) provided in the textbooks gives "much lower figures such as 15% or 20%." (f) By reason of those errors the Commissioner erred in quantifying the improvements increment that is attributable to the improvements as being "in the order of 27%." (g) The Commissioner erred in determining that the properties 11A Viret Street and 13-15 Viret Street Hunters Hill are not comparable, and a comparison of them is likely to give an unreliable or anomalous result, and for that reason erred in not taking into account those properties in relation to the scarcity factor.

(h) The Commissioner erred in determining that the sale of 30A Viret Street Hunters Hill used by the valuer for the Applicant to derive the scarcity factor was unreliable and for that reason erred in not taking into account 30A and 30B Viret Street in relation to the scarcity factor. … (j) By reason of those errors the Commissioner erred in determining that no particular adjustment for a scarcity factor is necessary. 4 Section 56A provides that an appeal lies from the decision of the Commissioner only in respect to a question of law. By Notice of Motion the respondent seeks an order that Maurici's appeal be struck out as incompetent as each of the grounds are in truth a complaint as to the findings of fact by the Commissioner and none of them allege on their face any error of law. 5 The respondent's Notice of Motion and the appeal have been heard concurrently. Error of law - Grounds (a) and (b) - The value of development consent 6 Section 6A of the Valuation of Land Act 1916 subsections (1), (2) and (3) provide 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. (3) Notwithstanding anything in subsection (1), in determining the land value of any land, being land in relation to which, at the date to which the valuation relates, there was a water right: (a) the land value shall include the value of the right, and (b) it shall be assumed that the right shall continue to apply in relation to the land.

7 "Land improvements" are defined by s 4(1) as follows:- (a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths, (b) the picking up and removal of stone, (c) the improvement of soil fertility or the structure of soil, (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 for the purpose of the erection of a building, structure or work, not being for the purpose of irrigation or conservation, (e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and (f) underground drains. 8 The point raised by the grounds (a) and (b) of the appeal relate to the following findings by the Commissioner:- [43] One reason that a land value inferred from improved properties might be higher than a value inferred from vacant land sales relates to the value of a development consent. A land value inferred from the improved sales would include any value that a development consent for the improvements has added to the land value of the property that was sold - in accordance with the judicial interpretation given to s 6A(1) of the Valuation of Land Act 1916. Or, alternatively, the land value inferred from the improved sales would be enhanced by reason of the statutory requirement in s 6A(2) that it must be assumed the improvements on the land may be continued in order to enable the use to which the land was put at the date of valuation to continue (pars 77). The vacant land sales in this case are not in the same category: they do not have the benefit of a development consent, and there is no presumption that a development consent will be granted for a particular house; and before the vacant land can be used for residential purposes, holding costs, interest costs and development costs would have to be incurred by the owner. [77] For the reasons given below, I am of the opinion that it is necessary to take into account the effect of a new development consent for the erection of a house on land value. In particular, in deriving the so-called improvements increment from an exercise of comparing the sale of a vacant property with the resale of that property after a development consent has been obtained, the value of the consent should be excluded from the improvements increment and should be regarded as part of the land value. [80] Once a development consent has been granted, it is usually the case that the property acquires an increased value because of the consent. And any value accruing from the consent forms part of the land value under s 6A(1): Illawarra Meat (Developments) Pty Ltd v Valuer-General (Land and Valuation Court, Rath J, 10 March 1978). [90] If the American textbooks The Appraisal of Real Estate or Appraising Residential Properties are referred to in relation to the method of valuing improvements, it seems that care needs to be taken not to attribute wholly to the value of the improvements any item that would more properly be related to the land value. This is because the concept of "land value" as used in those books does not appear to have the same specialised meaning that has been judicially given to the concept in s 6A(1) of the Valuation of Land Act 1916, and there is no consideration of a statutory assumption similar to s 6A(2). In respect of valuations for land tax or rating purposes in New South Wales, the costs of obtaining a development consent would be part of the increased land value due to that consent. 9 It is contended by Mr Brereton SC (as he was at the time of the hearing of the appeal) on behalf of Maurici that grounds (a) and (b) raise an issue of statutory construction, namely whether the expression "land value" as used in s 6A(1) extends to or includes the value accruing from the grant of a development consent. That is certainly how the Commissioner approached the issue in paragraph [43]. He relies specifically on "judicial interpretation given to s 6A(1)" or alternatively the enhancement of value by reason of the statutory requirements of s 6A(2). 10 The reasoning to support Maurici's contention that the value of a development consent is not part of the land value is explained by Mr Brereton as follows:- 18. The value of a development consent is not part of the land value of land but part of the improvements because: a) A development consent is an earned increment (see McGeoch); b) it comes about through operations of man ie. the owner; c) it enhances the value of the land; and d) it is not a "land improvement" pursuant to the exhaustive definition of that term in s4(1) of the Act. 19. Put another way, a development consent is so necessarily associated with improvements to the land the subject of the consent that it cannot be severed from those improvements to include it as part of the land value. This is consistent with the decision of Tooheys Limited v Valuer General where the Privy Council held that the additional value attributed to a hotel licence itself was not part of the unimproved value of the relevant land, because it was necessarily associated with the hotel premises. 11 The reference to McGeoch in (a) is the following passage from the joint judgment of Knox CJ and Dixon J in McGeoch v The Federal Commissioner of Land Tax (1929) 43 CLR 277 at 290:-

In the legislation in Australia imposing tax on the unimproved value of land we think it is clear that the subject matter sought to be taxed has always been that part of the value of the land at the relevant date which has been commonly described as the "unearned increment." The value at any given date of any given parcel of land has been considered as including two factors, namely, (1) the portion of the value at the relevant date attributable to improvements on or appertaining to the land made by the owner or his predecessors in title and (2) the portion of the value at such date attributable to extrinsic circumstances, such as public roads or railways, increased settlement in the neighbourhood, public services brought within reach and other causes not brought about by the operations on the land of successive occupiers. See Cox v. Public Trustee (1918) NZLR 95 at pp 99, 103. Adopting the language of Hosking J. in that case, we think the unimproved value which is the subject of taxation under this Act is the value at the relevant date of the land in its natural state as for the time being affected by extrinsic circumstances of every kind, as, for example, those above mentioned, but not by what has been done to it or upon it in the shape of improvements of any kind effected by the operations of successive owners the benefit of which continues as a factor in the then present value of the land. 12 In McGeoch the High Court confirmed what Griffith CJ had said in Morrison & Others v The Federal Commissioner of Land Tax (1914) 17 CLR 498 at 503 as follows:- What operations of man are improvements? When I say "operations of man," I think the term should be limited to what is done by the owner for the time being, that is, after the land has ceased to be Crown land. Any operation of man on land which has the effect of enhancing its value comes within the definition of "improvement." 13 In Toohey's Limited v The Valuer General [1925] AC 439 the Privy Council identified the question the valuer had to ask (when considering the unimproved value of the land as then required by s 6 of the Valuation of Land Act, as it then stood) as "what the land would fetch as at the date of the valuation if the improvements had not been made." In the course of submissions Maugham KC argued that the valuation was wrong in principle as it took into account the licence, which was attached to the buildings and not to the land itself. The judgment of their Lordships was delivered by Lord Dunedin who made the following point at p 444-5:- … the result obtained is not only contrary to the method permitted by the Act, but is demonstrably fallacious. Proceedings are begun by the taking of a figure for the subject as it stands as licensed premises. It is obvious that this figure is composed of three ingredients; first the bare land itself; second, the buildings themselves constructed for and appropriate for licensed premises; third, the enhanced value due to the fact that the land and buildings in question are not only suitable for licensed premises, but are in fact licensed premises. When, however, the subtraction sum is entered upon it is only item 2 that is subtracted from the total figure; the result being that item 3 is all included in the unimproved value. From this follows the extraordinary result that the land is enhanced by the value of a licence which could only be granted in connection with buildings - for a license such as this cannot be granted to sell liquor without premises - in a calculation in which you are told to assume that no building is there. Their Lordships will, therefore, humbly advise His Majesty that the appeal should be allowed and the case remitted to the Supreme Court to direct the valuer to make a valuation of the land itself as it at present stands with such advantages as it at present possesses, and viewed as bare land without any buildings upon it, and without any consideration of the value of the subject as including the de facto licensed premises. 14 It is clear from the above that issues (a) and (b) involve questions of construction of the provisions of s 6A and the application of those provisions and legal principles of valuation to the facts as found by the Commissioner. Accordingly they raise questions of law (Hope v The Council of the City of Bathurst (1980) 144 CLR 1 at 7; Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at [8]). 15 The respondent's counsel, Mr Ayling SC, points out that the Commissioner was concerned only with comparability or relative reliability in relation to the results of the valuation exercise undertaken when seeking to determine whether, when a comparison of values inferred from allegedly comparable vacant land sales is undertaken, there is any element of distinction between what was being compared. Accordingly, any adjustment made for the benefit of a development consent, or lack of it, is to make allowance for the enhancement of value by the existence of a development consent, as a right in rem attributable to the land. Moreover he says the proposition that the value of land is enhanced by the approval given by a development consent is obvious. Support for the proposition is found in the judgment of Rath J in Illawarra Meat (Developments) Pty Ltd v Valuer General (Land and Valuation Court No. 119 of 1977 10 March 1978) as follows:-

[10] The alternative view is that the unimproved value is to be determined on the basis of an approval for an abattoir having been given. It is the fee simple that has to be valued, and it is to be valued on the hypothesis that it is unencumbered by any restrictions created in the Crown grant or between parties (Gollan v. Randwick Municipal Council (1960) 6 L.G.R.A. 275). Restrictions imposed by the general law, such as town planning legislation, are to be taken into account (Royal Sydney Golf Club v. Federal Commissioner of Taxation 91 C.L.R. 610; 20 L.G.R. 48); but where such a restriction no longer effectively exists in regard to a parcel of land because of an approval given, the valuation must in my view be made in accordance with the reality of the case. In the present case I think that the subject land is to be valued on the basis both of the existing abattoir use and the approval for such use, though as I have said either alternative would produce substantially the same value, as would also the combination of the alternatives.

16 Although the approval for the abattoir in Illawarra Meat may have been obtained at a time when less stringent controls were applicable than at the date of valuation, I do not accept that fact as a distinguishing factor as the applicant contends. Rath J made his finding after considering reasons for the introduction of the predecessor to s 6A(2) and was satisfied the unimproved value of the land is to be determined taking into account the potential to continue to use the land for the purpose for which it was being used at the date of valuation (Pye and Another v Valuer General [1973] 2 NSWLR 385.) It is clear that a development consent is part of the criteria for securing that potential. 17 The "operations of man" referred to in Morrison in the context of land value do not in my opinion go beyond physical improvements placed or erected upon or carried out in the land. This much is clear from a reading of the whole judgment, particularly the examples contemplated at page 504. 18 The mere fact that a development consent obviously enhances the value of the land does not thereby make the consent itself an improvement nor is it necessarily associated solely with improvements to the land the subject of the consent. Any development as defined in s 4 of the Environmental Planning and Assessment Act 1979 ("the EPA Act") and controlled by an environmental planning instrument can be the subject of development consent. 19 Development, as defined, is not confined to the erection, maintenance or use of an existing building as was the case in Toohey's. Development consent can be granted in respect of a future use of vacant land, including subdivision, irrespective of its state of improvement at the date of consent as well as providing approval for the erection of yet to be constructed buildings together with the use of those future buildings. 20 The situation in Toohey's can be replicated by the granting of development consent for a specified use of an existing building. However the giving of development consent is not always dependent upon the existence of any particular building, as was the prevailing circumstance under consideration in that case. Although development consent can relate directly to the erection or use of a building or other physical improvement, it nevertheless attaches to and runs with the land itself. 21 Accordingly, irrespective of the use to which the Commissioner put the value accruing to the land from the grant of a development consent he did not commit legal error by finding that it forms part of the land value rather than an improvement in the relevant sense. 22 I am not assisted by the reasoning of North P and Turner J in McKee v Valuer General [1971] NZLR 436 at 443 referred to by the applicant. This reasoning is to be compared with the decision of Sugerman J in Peelmont Pty Ltd v Valuer General [1962] NSWR 376 (1961), 80 WN (NSW) 1545 where, not unlike the circumstances in Toohey's, the argument related to the treatment of a provisional approval pursuant to the Theatres and Public Halls Act 1908-1954. The Act provided for a licensing system under which licenses could be granted only in connection with the buildings and other necessary erections and improvements of a drive in theatre being a licence "which involves a personal privilege" (In re Land Tax Acts (Wilsons Case) [1927] VLR 399. Error of law - Ground (c) - Finding in absence of evidence 23 The applicant claims that the Commissioner fell into error by identifying a complicating factor in relation to estimating an improvements increment when applying the sale of a property at 26A The Point Road. He found at [141] that the property was "available for occupation by the owner or leasing to a tenant." If the applicant is able to establish that the finding was made or an inference was drawn in the absence of evidence that can be an error of law. 24 The evidence of the valuer proceeded on the basis that the land at 26A The Point Road was purchased under contract for sale dated 29 January 1999, completed 6 July 1999. The Commissioner refers to plans for a house on No. 26A dated July 1999 at [268]. The property was again contracted to be sold in June 2001 and the sale was completed in October 2001. The Commissioner at [269] accepts evidence that the property was substantially vacant at each sale date and any improvements were regarded as having no value. A house was subsequently erected on the land. The applicant's valuer calculated an improvements increment from January 1999 to June 2001 and allowed six months from June 1999 for erection of the house. 25 The Commissioner makes it clear at [141] that the evidence was not complete in that contracts were not available and the date of development consent was not known. Furthermore he states that assumptions were made by the applicant's valuer as to when building work commenced and when it finished. Other matters were not explained such as the reason for delayed settlement. According to Mr Ayling "the Commissioner was faced with the position where he either disregarded [the valuer's] calculations altogether or, if he accepted them, treated the sale as one of a house which was up to 18 months old by the date of contract and up to 22 months old by the time of transfer. The house could not have been "brand-new"". The Commissioner was entitled to make the inference based upon the evidence of the valuer. Ultimately, however he does not disregard as irrelevant the sale of 26A The Point Road as the applicant submits. He states at [146] "While I do not completely reject the analysis of 26A The Point Road, I place little weight on it." 26 Moreover the Commissioner suggests at [141] "the more reliable method of estimating an improvements increment along the lines used by" the applicant's valuer would be "where a property is purchased and thereafter, without undue delay, development consent is obtained for the demolition of any existing buildings and for the erection of the new building, and where marketing of the property commences towards the end of construction and the property is sold in a brand new condition." Although not emphatically stated the Commissioner makes it plain he is not comfortable with the application of the theory of the improvements increment as adopted by the applicant's valuer in the circumstances because the evidence is not complete. It is the review of the analysis of the sales as applied by the Commissioner that leads him to place little weight on the sale of 26A The Point Road for the purpose of determining an improvements increment. 27 The allocation of weight to particular evidence is a matter that lies entirely within the issues to be decided by the Commissioner and does not give rise to a question of law (Coles v Woollahra Muncipical Council (1986) 59 LGRA 133 at 140; Tabag v Minister for Immigration & Ethnic Affairs (1982) 45 ALR 705; Minister for Aboriginal Affairs And Another v Peko Wallsend Limited And Others (1986) 162 CLR 24 at 41). 28 Moreover, it is not appropriate on appeal from a tribunal of fact on a question of law to examine too narrowly the words used in a judgment when they are words not central to the decision. For the reasons explained above and in the context of the type of assessment being undertaken by the Commissioner at [141] and following, the purported error relied upon by the applicant in respect of this ground does not disclose any error of law that warrants intervention of the Court on appeal (Brimbella Pty Ltd v Mosman Municipal Council (1985) 79 LGERA 367 at 368). Error of law - Ground (d) - The comparative weight given to sale of 26A The Point Road, Woolwich and 1 Fern Road, Woolwich 29 The applicant relies on the decision of the High Court in Peko Wallsend, and particularly the judgment of Mason J, to contend that the Commissioner's decision-making process was an error of law because of the exclusion or "virtual exclusion" of the sales of 26A The Point Road. A number of reasons are given to support a proposition that the Commissioner's treatment of 26A The Point Road, as unreliable and worthy of little weight, is erroneous and irrational. The applicant contends that the property afforded at least some evidence of value so as to identify and quantify the improvements increment and should not have been excluded or virtually excluded from consideration on this issue (AMP Henderson Global Investors Ltd & Ors v Valuer General (2004) 134 LGERA 426 at [51], [52] and [53]). The evidence of the respondent's valuer was that 26A The Point Road was a comparable property whereas the Commissioner relied almost exclusively on 1 Fern Road, Woolwich. Similarity of a property is only one element to be taken into account in a valuation exercise. The valuer must also analyse the sale itself to determine whether it is comparable. 30 The Commissioner referred to insufficient certainty relating to movement in the market over what he regarded as a lengthy period of time as the reason for his conclusion that the sales of 26A The Point Road were not sufficiently reliable to form the basis for assessment of an improvements increment whereas he regarded the time span between the two sales of 1 Fern Road as not unduly long for that purpose. That is a judgement he was entitled to make on a question of fact.

31 Mr Ayling draws on the distinction between the determination of land value for the purposes of s 6A and the carrying out of a theoretical exercise to determine whether a factor described as "an improvements increment" should be applied to the value of improved sales as opposed to unimproved sales. He contends quite correctly, in context, what the Commissioner was considering in respect of the sales in question was the comparable reliability of the application of factors to determine the improvements increment. Accordingly, when analysing sales at that particular point in his judgment the Commissioner was not seeking to determine land value of the subject land as such but rather he was seeking to determine a component of the price to ascertain what should be deducted to derive a land value from improved property sales. He simply preferred the sales of one property over the other on the basis that the time frame was shorter and therefore more reliable. That discloses no error of law.

32 The Commissioner subsequently undertakes a separate analysis of 26A The Point Road when he makes a direct comparison with the subject land. He also makes a similar comparison between other identified sales and the subject land. The property 26A The Point Road is included in Table 12 of the "Court's weighted average land value from vacant land sales" showing $1,732,000 as deduced land value of the subject property after adjustment taken in from Table 3. There is nothing in [267] to [271], where the actual comparison is made between 26A The Point Road and the subject land, to suggest that the Commissioner at that stage erroneously took the approach the subject of the complaint by the applicant.

Error of law - Ground (e) - Textbook illustration 33 The applicant asserts that the Commissioner erred by taking into account an irrelevant consideration, namely the examples or models of allowances for entrepreneurial profit taken from textbooks. After first referring to the "clear weight of authority" in [130] the Commissioner gives an example from a textbook "in further support" of the proposition that according to good valuation practice the value of a new building would ordinarily include an amount for developer's or owner's profit. Again at [135] he refers to examples of entrepreneurial profit expressed as a percentage of total building costs merely as illustrations to support his perception that an improvements increment of the magnitude of the applicant's analysis is too high. 34 The extent to which the Commissioner actually uses the examples referred to is not actually stated but he makes his position obvious when he concludes at the end of [135]:- In my opinion more reliable market indications of an improvements increment would be needed before such a high fixed percentage of 40% could be applied to all improved properties in the comparable sales. 35 He goes on at [136] and [137] to demonstrate quite clearly that he forms his final view from evidence based on market conditions. It has not been established that the Commissioner did anything more than gain from the textbook examples some comfort for his determination, namely that the margin claimed by the applicant was too high. They enabled him to stress the need to use reliable market indicators. I am not satisfied that the Commissioner relied on the textbook material beyond that or that he used the examples as an essential step in his reasoning process and final determination. The error of law on this account has not been substantiated. Ground (f) 36 This ground is an encapsulation of the errors claimed in grounds (a) to (e) which the applicant protests collectively led to a lower improvements increment than would otherwise have been the case and thus a higher derived land value than the one contended for by Maurici.

37 It does not require separate consideration. Error of law - Ground (g) and (h) - The scarcity factor 38 The applicant claims that "the Commissioner treated as wholly irrelevant the transactions proved by the applicant to evidence the quantum by which vacant land in the relevant market attracts a premium for scarcity when compared to improved land." 39 In this respect the applicant relied on 11A and 13-15 Viret Street and 30A and 30B Viret Street, Hunters Hill as two sets of neighbouring properties. 40 At [32] the Commissioner dealt with the first set as follows:- [32] Having regard to the features of the first two properties (11A Viret St and 13-15 Viret St) chosen by Mr Byron (par 29 above), I am of the opinion that they are so different from each other that they are not comparable. Alternatively, the adjustments that could possibly be made (for other factors apart from size, such as shape, waterfrontage and views) to put the properties on an equal footing are likely to be too great, and the comparison is likely to give an unreliable or anomalous result. According to the evidence of Mr Croker (which I accept on this point), the large property at 13-15 Viret St is a landmark property in a far superior location to its neighbour at 11A Viret St, because 13-15 Viret St is located on a promontory with extensive waterfrontages on the north and on the east. Water views are available from the southeast right around to the north and northwest. The property at 13-15 Viret St is held as one parcel but it contains two large subdivided lots plus several minor lots. Mr Croker said that the sale price achieved in 2001 of $9 million was at that time a record for a Hunters Hill waterfront property. This property is in stark contrast to its much smaller neighbouring property at 11A Viret St, located to the south of 13-15 Viret St and having only an easterly aspect and a much more limited waterfrontage. 41 According to Mr Brereton, given the properties are adjoining there is no rational reason as to why appropriate adjustments cannot be made. Relying upon what was said by the High Court in Maurici v Chief Commissioner at [8], set out below, he says that it is a question of law in the context of a valuation appeal whether or not a transaction is to be taken into account as comparable. The relevant passage relied upon is as follows:- [8] An appeal lay, and was taken from that decision to a judge of the Land and Environment Court on a question of law pursuant to s 56A of the Land and Environment Court Act 1979 (NSW). We do not doubt that the question argued there, and again here, as to the relevance of scarcity, was a question of at least mixed law and fact. The making of a valuation will frequently involve an application of legal principle or principles. Questions of law, fact and opinion do not always readily and neatly divide themselves into discrete matters in valuation cases and practice (Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 at 266). The Privy Council took this view, with which we respectfully agree, of what may constitute a point, or question of law in relation to a valuation of land, in Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 at 432: "If it should appear that the Land Appeal Court ignored a principle of assessment of compensation for compulsory acquisition (resumption), such as for example that commonly known as the Point Gourde principle, that in their Lordships' opinion would be an error in law. So also if the Land Appeal Court rejected as wholly irrelevant to assessment of compensation a transaction which prima facie afforded some evidence of value and rejected it for reasons which were not rational, that in their Lordships' opinion would be an error in law. And as will be seen, it is on those lines that the developer contends that the Land Appeal Court erred in this case." (emphasis added) 42 The applicant's valuer made a subjective assessment that the two properties could be usefully compared. The Commissioner did not agree and gave his reasons based upon the facts found by him. It is not prima facie irrational for the Commissioner to have reached his own conclusion notwithstanding that the properties were adjoining and that it was contrary to the opinion of the applicant's valuer. The Commissioner enunciated his reasons for rejections of the comparison. The reasons are neither capricious nor so unreasonable that they could not plausibly be reached. 43 The passage quoted from Maurici (citing Melwood) does not require the Commissioner to take every set of sales put to him as relevant. The principle enunciated is that the Court can interfere with a decision if the reasons given for rejection of evidence are not rational. That requires the decision maker to properly consider the evidence and if it is relevant to properly take it into account and give it appropriate weight according to the circumstances. Once the decision maker concludes that the evidence is irrelevant, or of so little weight or reliability that it should be ignored, then unless that determination is so implausible and irrational that it is manifestly unreasonable for it to be sustained, the Court cannot set it aside on appeal as an error of law. Nothing that has been put to me in respect of the first set of properties establishes the necessary degree of unreasonableness or even that there is any. It was perfectly open for the Commissioner to decide, as he did, that the two properties were so different they are not comparable and that any necessary adjustment would be of such magnitude that it would make the outcome useless for determining whether the comparison reflects a scarcity factor. The Commissioner identified distinguishing features in relation to size, number of allotments, aspect, views, water frontage and location all of which bear heavily and directly on the weighing exercise in the process of making adjustments. His ultimate decision that they were so different they are not comparable in the circumstances of this case does not amount to an error of law. The sales were considered and rejected. They were not ignored but rather found to have insufficient weight to be of any assistance. 44 The Commissioner made the following observation in relation to a second set of properties relied upon by the applicant at [33] to [37]:- [33] In relation to the second pair of properties used by Mr Byron to determine a scarcity factor, other evidence indicates that the sale of 30A Viret St is unreliable. Assuming for the moment that the figures in Mr Byron's Table 1 are correct, the unreliability of the sale of 30A Viret St can be ascertained by comparing the land value deduced from that sale with the land values deduced from the other improved sales. The common property to which all the sales are adjusted is the subject land. Using Mr Byron's figures in column W of Table 1, the values for the subject land that are deduced from all the other improved sales are much higher than the deduced value from 30A Viret St of $857,000. Mr Byron's figures show that the deduced land value from all other improved sales is on average $1,507,000, which is 36.8% more than the value derived from 30A Viret St. [34] Mr Byron himself recognised the unreliability of the sale of 30A Viret St by excluding that sale and several other sales from his second averaging exercise appearing in the last row of Table 1. [35] Based on my findings elsewhere in this judgment that are reflected in Table 3, and as more clearly seen in Table 13 (par 339 ), I have found that the land value for the subject property deduced from the sale of 30A Viret St is $1,244,000, whereas the weighted average land value derived from all other improved sales is $1,894,000, which is 52.3% more than the indicated value from 30A Viret St. Obviously, the land value of the improved property at 30A Viret St was extremely low. [36] Whatever the reason for the great disparity between 30A Viret St and the other improved sales, that same reason, rather than a scarcity factor, would appear to fully account for the difference in the adjusted land values of the pair of properties at 30A Viret St and 30B Viret St. [37] If (as I have found) the sale of the improved property at 30A Viret St is so out of line with other improved properties that it should be given no weight and should play no part in the ultimate determination of the land value for the subject land, likewise the same unreliable sale should not be used in an exercise to ascertain what, if any, scarcity factor should be applied to all vacant land sales. 45 The Commissioner has given a cogent, rational explanation as to why the inherent unreliability of the sale of 30A Viret Street leads to the rejection of a comparison of the two latter sales for the purpose of deducing a scarcity factor. He did not reject the principle that a scarcity factor could be applied. His conclusion was that analysis of the relevant sales did not show that a premium for scarcity had been paid for vacant land. 46 The applicant seeks to show an element of inconsistency in that Commissioner Nott produced Table 3 to show "The Court's adjustments schedule and determination of land value as at 1 July 1997" yet he did not make further adjustments relative to the two properties in each pair on the basis that would give an unreliable or anomalous result. At [15] the Commissioner explains that he set out in Table 3 "all" of the comparable sales of both valuers. But at [47] he explains the distinction between the exercise undertaken in Table 3 and the subsequent basis for his conclusion that no particular adjustment for a scarcity factor was necessary:- [47] The reason that no percentage adjustment for a scarcity factor was initially applied in Table 3 was not to exclude such an adjustment but rather to ascertain whether (comparing the sales of all the waterfront properties in the present case) such an adjustment for a scarcity factor was needed and, if so, to have a basis upon which to make the adjustment. If the figures generated in Table 3 had shown that the average weighted inferred land value from the improved sales was significantly lower than the average weighted inferred value from the vacant land sales, then I would have applied some adjustment factor to the inferred value from the vacant land sales or would have made a judgment as to an appropriate final land value lower than the inferred value from the vacant land sales but probably not as low as the inferred value from the improved sales. But the market evidence that I have accepted in Table 3 shows that there is not a significant difference between the weighted average land value inferred from vacant land sales and the value inferred from improved land sales. So no particular adjustment for a scarcity factor is necessary. 47 The applicant further raises the point that although stating at [31] that if possible more than one or two pairs of properties should be examined to enable any unusual circumstances to be identified he did not examine other pairs of properties which it is alleged were of reasonably close proximity in terms of location and times of sale. The answer to this submission is firstly that no other pairs of properties were apparently put to the Commissioner for consideration on this issue. Secondly, after considering the calculation of a scarcity factor made by the applicant's valuer the Commissioner further explained his reasoning at [201] as follows:- [201] As indicated in the main findings of this judgments,[sic] an alternative and probably better exercise to that of Mr Byron's is to take many improved sales and infer a single land value from them for the subject land, after making necessary adjustments for the different features of each improved sale compared with the subject land, and then to take a group of vacant land sales and without making any deduction for scarcity infer a single land value for the common property. If the value inferred from the vacant land sales is noticeably higher than the land value inferred from the improved sales, then an appropriate adjustment could be made to take account of what would appear to be a premium included in the land value of the vacant property compared with the land value of a similar improved property. As will be seen, my findings in respect of the market evidence in the present hearing indicate that no adjustments are needed to the prices of the vacant land sales on account of the sales being fewer in number than the improved land sales or on account of there being any premium in the land value derived from vacant land sales. 48 The applicant also relies on the alleged erroneous determination of the improvements increment to vitiate the decision in regard to the scarcity factor. As I have rejected the applicant's argument raised earlier in relation to the improvements increment, that alleged error does not follow through to infect the decision in respect of the scarcity factor. 49 I do not agree that the Commissioner avoided his task to ascertain whether there was a scarcity factor on the basis that it was too difficult. On the contrary in Part 12 of the judgment he analyses the approach taken by the applicant's valuer and rejects it for the reasons already given. A check comparison followed to ascertain whether the value to be inferred from the vacant land sales is noticeably higher than the land value inferred from the improved sales. He found on the basis of the market evidence overall that no adjustments are needed to the prices of vacant land sales on account of scarcity (see also [39], [40] and [47]). Conclusion 50 The applicant has not established to my satisfaction that the Commissioner made an error of law either on the basis that he incorrectly applied a legal principle or that he received or rejected evidence on grounds that were not rational. 51 The appeal will be dismissed. In the absence of argument to the contrary it is appropriate that the Court exercise its discretion in relation to the costs of the appeal in favour of the respondent. Orders to that effect will be made. The exhibits may be returned.

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