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Tribunal: Acting Presidential Member G Curtin SC Senior Member D Parker

Date of Orders: 22 August 2025 Date of Reasons for Decision: 17 September 2025 Date of Publication: 24 September 2025 AUSTRALIAN CAPITAL TERRITORY ) CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 69/2024

BETWEEN: MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109342547) First Applicant LOLITA (ACT) NO 1 PTY LIMITED (ACN 106 428 835) Second Applicant LOLITA (ACT) NO 2 PTY LIMITED (ACN 106 428 844) Third Applicant

AND: COMMISSIONER FOR ACT REVENUE Respondent

TRIBUNAL: Acting Presidential Member G Curtin SC Senior Member D Parker

DATE: 22 August 2025 ORDER The Tribunal orders that: 1. The respondent’s confirmation dated 1 July 2024 of the Notice of Assessment, Lease Variation Charge, dated 7 March 2024 is set aside. 2. In lieu thereof, the lease variation charge for Development Application no.2023414149 is determined to be $26,480,938. 3. Liberty to apply in relation to costs.

………………Signed……………….. Acting Presidential Member G Curtin SC REASONS FOR DECISION

Introduction .............................................................................................................. 2 The two sections in dispute ...................................................................................... 7 The issues in dispute and the structure of these reasons .......................................... 9 Principles of statutory interpretation ...................................................................... 11 Legislative history of the lease variation charge.................................................... 14 Factual, planning and lease variation charge background ..................................... 34 The land and the EDP works ................................................................................. 44 The parties’ contentions ......................................................................................... 46 Common ground .................................................................................................. 46 Molonglo’s interpretation of ss 277 and 277A .................................................... 51 The Commissioner’s interpretation of ss 277 and 277A ..................................... 54 Decision ................................................................................................................. 56 Overview as to how the provisions work ............................................................ 56 Section 277A modifies section 277 ..................................................................... 58 The meaning of “must not be taken into account” .............................................. 59 The definition of “improvements” ....................................................................... 60 “Existing” improvements .................................................................................... 60 “Proposed improvements” ................................................................................... 61 “And includes any of the following” ................................................................... 62 Section 277A(3)(e) .............................................................................................. 65 Section 277A(3)(f)............................................................................................... 68 Valuing the after value ........................................................................................ 73 The valuation evidence .......................................................................................... 77 General comments ............................................................................................... 77 Ms Byrne .......................................................................................................... 80 Mr Flannery ...................................................................................................... 86 Mr Dyson .......................................................................................................... 90 The quantity surveyors’ evidence and our findings ............................................. 102 The calculation of the LVC.................................................................................. 108 Conclusion ........................................................................................................... 109 Orders ................................................................................................................... 109 Introduction

1. The main issue in this case is the proper interpretation of ss 277 and 277A of the Planning and Development Act 2007 (the PDA), the substance of which is now replicated in ss 332 and 333 of the present Planning Act 2023.

2. Those provisions govern the calculation of the charge payable to the Territory when a nominal rent Crown lease is varied.

3. In this case the Commissioner contends that the charge should be a little over $100m. The applicants contend the charge should be zero.

4. For the reasons that follow both contentions should be rejected. In our view the charge should be $26,480,938.

5. The land the subject of this case (the Molonglo land) is approximately 14 ha in area, is the subject of one Crown lease and was purchased by the second and third applicants in 2007.

6. The first applicant is a company associated with the second and third applicants and has, between the three corporations, administrative responsibility for the Molonglo land. For the purposes of these reasons, it is convenient to refer to the three applicants collectively as Molonglo.

7. Molonglo wishes to develop the Molonglo land.

8. The Purpose clause in the Crown lease for the Molonglo land presently provides for limited uses, including, most relevantly, that the gross floor area 2 (GFA) permitted for buildings is limited to 20,170 m and that construction of multi-unit dwellings is not permitted.

9. In September 2022, Molonglo lodged a development application (DA 86) for 1 the approval of an Estate Development Plan (EDP) for the Molonglo land.

10. That EDP was approved subject to conditions (the approved EDP). That is, the proposal and plans put forward for consideration by Molonglo (albeit after

1 AB 1621 at [93] discussions with various authorities in the consultation phase of an EDP 2 application process ) were approved, but subject to some conditions.

11. The approval was given on 19 December 2022 and was the subject of several later reconsiderations and subsequent approvals. Unless otherwise necessary, we shall simply refer to the initial and subsequent approvals collectively as the EDP approval.

12. The EDP geographically delineated an “estate”, being the land the subject of the EDP approval, and various of the approved plans show the estate boundary. The estate in this approval included both the Molonglo land and a small amount of adjoining Territory land.

13. The approved EDP provided for the creation of 36 new CZ3 - Services Zone blocks, some demolition, and the construction of various utility services, roads, footpaths, earthworks, tree removal, landscaping, public open spaces, publicly accessible open spaces and other associated works (the EDP 3 works).

14. One condition of the EDP approval for DA 86 was that a variation of the Purpose clause in the Crown lease would need to be obtained to permit the development approved in the EDP approval.

15. In 2023, and as required by the EDP approval, Molonglo lodged a development application (DA 19) primarily, although not only, to vary the Crown lease by varying the Purpose clause. That application was approved on 5 June 2023.

16. The lease variation has not yet been effected pending the outcome of this dispute.

17. The approved lease variation substantially expands the Purpose clause of the lease. Further uses would now be permitted. Most relevantly for this case, the

2 AB 1616 at [79]-[80]; AB 4155 3 th One of the valuers, Mr Dyson, could only see 35 blocks on the plan and assumed the 36 block was for the proposed new roads. It makes no difference in the case whether there were 35 or 36 blocks 2 approval would allow an increase of GFA from 20,170 m to a little under 2 192,000 m (excluding residential uses) and would permit multi-unit housing of up to 700 dwellings. Those latter two uses are the uses which overwhelmingly affect the value of the land, and we will therefore only mention them hereafter.

18. The approval of DA 19 was a “chargeable variation” under the PDA. The approval of DA 19 triggered an obligation under the PDA to pay a lease variation charge (LVC), calculated by ss 277 and 277A in the PDA.

19. All sections referred to below are references to sections of the PDA unless otherwise specified.

20. Section 276D said that the LVC is taken to be worked out on the day the development approval of the chargeable variation is approved. In this case that date is 5 June 2023.

21. Section 277 provided the formula for the calculation of the LVC. Put simply, it said that market valuations were to be made of the value of the lease immediately before and immediately after the lease variation.

22. Section 277 said that the before value was then to be subtracted from the after value, and the result discounted by 25%, to arrive at the LVC.

23. Section 277A modified the valuation exercise provided for in s 277.

24. Section 277A(1) said that in working out the before and after values an improvement (as defined) in relation to the land “must not be taken into account”.

25. Section 277A(3) defined “improvement”.

26. The central dispute in this case is whether some or all the costs of the EDP works are caught by the definition of “improvement” in 277A(3).

27. Some of the EDP works are to be carried out on the Molonglo land. Some are to be carried out on the Territory land which is inside the estate boundary. Those two categories of works were referred to in the case by the experts as the onsite works (being on the site of the estate). Other EDP works were to be carried out on Territory land which is outside the estate boundary (these were referred to by the experts as the offsite works).

28. We shall describe these works in greater detail later in these reasons, but the evidence was that if all the EDP works (the full EDP works) were undertaken, the Molonglo land would then be in a subdividable state. That is, the land would be in a physical state which would allow for a successful subdivision application, although another development application would need to be lodged and approved for a formal subdivision to take place.

29. The applicants retained a quantity surveying firm (Turner & Townsend) to cost the full EDP works. Those costings were provided to one of Molonglo’s two valuers, Ms Narelle Byrne.

30. After receipt of the Turner & Townsend costings, Ms Byrne sought revised costings of the full EDP works from Molonglo. She sought costings of only those parts of the full EDP works which, if undertaken, would make the Molonglo land (in Ms Byrne’s opinion) as comparable as possible to the basket of comparable sales Ms Byrne desired to use for her comparable sales 4 analysis.

31. Revised costings were provided.

32. Those revised costings (undertaken by Mr Sephton Wolmarans of Rider Levett Bucknall) were provided to Ms Byrne and have been the costings put 5 forward by Molonglo for the purposes of this case. Their quantum is disputed by the Commissioner although not in relation to any item of work or the quantities measure by Mr Wolmarans.

33. In the dictionary of the case, and in these reasons, these works costed by Mr Wolmarans were referred to as the EDP works. It should not be overlooked that these works were not the full works provided for in the EDP approval. If

4 AB 287 at [3.1.3]; T 800.1-802.44 5 Being those in Mr Wolmarans’ report dated 12 December 2024 and annexed to Ms Byrne’s report as Annexure E, at AB 195 ff. A physical description of some of the works excluded from the Turner & Townsend costings was given by Ms Byrne at T 824.46-827.1 the EDP works (being less than the full EDP works) were undertaken, the Molonglo land would be in an almost subdividable state. We shall sometimes refer in these reasons to the outcome of the EDP works costed by Mr Wolmarans as the (almost) subdivision.

34. The EDP works were costed by Molonglo at a little under $70m, a sum which included the offsite works costed at approximately $15m. The respondent costed the EDP works at approximately $51m (including the offsite works).

35. Until necessary to quantify those costings more precisely we shall use those approximate figures in these reasons for ease of expression.

36. In his initial decision as to the amount of the LVC the respondent (the Commissioner) assessed the before value of the Molonglo Crown lease at a little over $22m, the after value at just under $72m, the difference at just under $50m and, after applying the statutory discount of 25%, assessed the LVC at 6 $36,993,750.

37. The applicants sought a reconsideration of that assessment pursuant to s 7 277C. After reconsideration the Commissioner confirmed the assessment 8 referred to above.

38. The applicants then commenced proceedings in the Tribunal to review the reconsideration determination, it being a reviewable decision.

39. In these Tribunal proceedings the parties agreed that the before value of the Molonglo land should be $21,408,000. There is no reason not to accept that agreement. For that reason, we shall only refer to the after value hereafter although much of what we say in relation to the interpretation of ss 277 and 277A applies to the valuation of the before value.

40. For the purposes of this case an electronic and hard copy Application Book was prepared which contained the evidence and the parties’ written

6 Notice of Assessment dated 7 March 2024, AB 914 7 By application dated 11 June 2024 8 AB 912 submissions. The Application Book of a little over 11,000 pages was tendered 9 and became Exhibit A. References to the relevant pages of the Application Book are noted in these reasons as AB#.

41. In these reasons we have provided references to some of the evidence tendered or submissions made. We have done this for the assistance of the parties to aid their understanding of our reasons, but it should be understood that we had regard to all of the evidence and submissions.

The two sections in dispute

10

42. As at the date of approval of the lease variation s 277 said: 277 Lease variation charges—s 277 chargeable variations (1) The commissioner for revenue works out the lease variation charge for a s 277 chargeable variation of a nominal rent lease as follows: LVC = (V 1 – V 2) x 75% (2) In this section: LVC means the lease variation charge payable for the s 277 chargeable variation of the lease. V1— (a) for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if— (i) the lease were varied as proposed; and (ii) the lease were genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require; and (iii) the rent payable throughout the term of the lease or, for a variation that involves the 9 Most but not all documents in the Application Book were tendered. What was and was not tendered is noted in the transcript 10 Although the relevant approval in this case, DA 19, approved the “consolidation” of Blocks 11 and 12 together with a variation of the purpose clause, the application was not for a “consolidation” as defined in the PDA because s 234 defines “consolidation” to mean the surrender of two or more leases, and the grant of a new lease or leases. It follows that the relevant sub-sections of s 277 to apply are those referring to chargeable lease variations which are neither a consolidation nor a subdivision surrender of a lease and issue of a new lease, the new lease, were a nominal rent; or (b) … V2— (a) for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if— (i) the lease were not varied during the remainder of its term; and (ii) the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions that a genuine seller would require; and (iii) the rent payable throughout the term of the lease, or lease to be surrendered, were a nominal rent; or (b) … (3) If the amount worked out as V1 is equal to or less than the amount worked out as V2, no lease variation charge is payable. (4) ...

43. There was no issue in relation to the interpretation or application of (a)(i) and (iii) in the definition of the after value (V1). The contest was in relation to (a)(ii), the capital sum the lease might be expected to realise if genuinely offered for sale immediately after the lease variation.

44. Section 277A said: 277A Lease variation charge under s 277—improvements (1) In working out V1 and V2 under section 277, an improvement in relation to the land comprised in the lease must not be taken into account. Note Power to make a regulation in relation to a matter includes power to make provision in relation to a clas of a matter (see Legislation Act, s 48 (2)). … (2) However, an existing improvement by way of clearing, filling, grading, draining, levelling or excavating the land may be taken into account. (3) In this section: improvement, in relation to land, means an existing or proposed improvement and includes any of the following: (a) a building or structure on or under the land; (b) an alteration or demolition of an existing building or structure on or under the land; (c) the remediation of the land; (d) earthworks, planting or other work that affects the landscape of the land; (e) anything mentioned in paragraphs (a) to (d) that is required— (i) as a condition of a development approval; or (ii) by a statutory approval obtained or required for a development proposal; or (iii) under an agreement between the Territory or a territory entity and— (A) the lessee; or (B) if the lessee is not the applicant for the development approval—the applicant. (f) anything mentioned in paragraphs (a) to (d) proposed in a development application in relation to a chargeable variation of a nominal rent lease to be carried out on land outside of the land under the lease. remediation—see the Environment Protection Act 1997, dictionary.

The issues in dispute and the structure of these reasons

45. The issues in dispute between the parties included the following: (a) Did s 277A qualify s 277, or was s 277A inconsistent with s 277 and therefore should be read down. (b) What were “proposed improvements” in s 277A(3). (c) Did the definition of “improvement “ in s 277A(3) contain two categories of matters, namely existing and proposed improvements (which also had to fall within s 277A(3)(a)-(f)), or did the definition contain three categories of matters, being existing improvements, proposed improvements, and matters set out in s 277A(3)(a)-(f) (which might not otherwise be existing or proposed improvements). (d) Whether, to be caught by sub-s 277A(3)(e), the “anything” had to be described in detail in the conditions of the development approval. (e) Were the EDP works “required” by a “condition of a development approval”, or were they “required” by a statutory approval obtained or required for a development proposal per s 277A(3)(e). (f) Whether, to be caught by sub-s 277A(3)(e)(iii), an agreement had to have been entered into rather than existing in draft form. (g) Whether, to be caught by sub-s 277A(3)(f): i. the “anything” had to be in the development application for the lease variation, as distinct from being in the development application for an EDP; and ii. did the word “proposed” mean put forward by an applicant as distinct from being required by a planning authority. (h) The meaning to be given to the words “development approval”, “development proposal” and “development application” used in ss 277 and 277A. (i) Were the EDP works caught by one or more sub-sections of s 277A. (j) Assuming some or all of the EDP works were caught by s 277A, could some or all of those works (and the costs associated therewith) nevertheless be used in a reasoning process such as that employed by: i. Ms Byrne in her comparable sales method; ii. Mr Michael Dyson in his hypothetical development method. (k) What is the reasonable cost of the EDP works. (l) What is the after value of the Molonglo land for the purposes of s 277.

46. We have structured our reasons to answer those and the other questions which arise as follows.

47. We first set out the principles of interpretation we have applied. We then set out the legislative history which preceded the introduction of ss 277 and 277A.

48. We then set out the factual and planning background to this dispute, followed by a brief explanation of the EDP works.

49. We then briefly describe the parties’ competing contentions before turning to our decisions on the issues in dispute.

Principles of statutory interpretation

50. The principles of statutory interpretation both under statute and at law were not in dispute. They were comprehensively set out in the parties’ written submissions by reference to the relevant sections of the Legislation Act 2001 and the common law.

51. The relevant statute is the Legislation Act 2001, and the central provisions of that statute are ss 138-142.

52. In short, those provisions provide that “working out the meaning of an Act” means resolving an ambiguous or obscure provision, confirming or displacing the apparent meaning of an Act, finding the meaning of the Act when its apparent meaning leads to a result that is manifestly absurd or is unreasonable or finding the meaning of the Act in any other case.

53. Section 139(1) says that the interpretation that best achieves the purpose of an Act is to be preferred to any other interpretation. Section 139(2) says that s 139(1) applies whether or not the Act’s purpose is expressly stated in the Act. It follows, by necessary implication, that the Legislation Act allows for the purpose of the Act to be ascertained from material external to the Act itself.

54. There was no dispute that provisions of an Act must be read in the context of the Act as a whole and that extrinsic material may be considered.

55. The common law principles were not in dispute. They are set out in the authorities cited by the parties which included, although were not limited to, CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2, Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41, Lacey v Attorney-General (Qld) [2011] HCA 10, Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56 and Pafburn Pty Limited v The Owners – Strata Plan No 84764 [2024] HCA 49.

56. We have also considered R v A2 [2019] HCA 35in which the High Court neatly explained what “context” was to be considered, and how context and purpose interacted with the literal meaning of words used in an Act.

57. In that case Kiefel CJ and Keane J, with whom Nettle and Gordon JJ agreed, said the following at 520-522: [32] The method to be applied in construing a statute to ascertain the intended meaning of the words used is well settled. It commences with a consideration of the words of the provision itself, but it does not end there. A literal approach to construction, which requires the courts to obey the ordinary meaning or usage of the words of a provision, even if the result is improbable, has long been eschewed by this Court. It is now accepted that even words having an apparently clear ordinary or grammatical meaning may be ascribed a different legal meaning after the process of construction is complete. This is because consideration of the context for the provision may point to factors that tend against the ordinary usage of the words of the provision. [33] Consideration of the context for the provision is undertaken at the first stage of the process of construction. Context is to be understood in its widest sense. It includes surrounding statutory provisions, what may be drawn from other aspects of the statute and the statute as a whole. It extends to the mischief which it may be seen that the statute is intended to remedy. “Mischief” is an old expression. It may be understood to refer to a state of affairs which to date the law has not addressed. It is in that sense a defect in the law which is now sought to be remedied. The mischief may point most clearly to what it is that the statute seeks to achieve. [34] This is not to suggest that a very general purpose of a statute will necessarily provide much context for a particular provision or that the words of the provision should be lost sight of in the process of construction. These considerations were emphasised in the decisions of this Court upon which the Court of Criminal Appeal placed some weight. [35] The joint judgment in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue rejected an approach which paid no regard to the words of the provision and sought to apply the general purpose of the statute, to raise revenue, to derive a very different meaning from that which could be drawn from the terms of the provision. The general purpose said nothing meaningful about the provision, the text of which clearly enough conveyed its intended operation. Similarly, in Saeed v Minister for Immigration and Citizenship the court below was held to have failed to consider the actual terms of the section. A general purpose of the statute, to address shortcomings identified in an earlier decision of this Court, was not as useful as the intention revealed by the terms of the statute itself. In Baini v The Queen, it was necessary to reiterate that the question of whether there had been a “substantial miscarriage of justice” within the meaning of the relevant provision required consideration of the text of the provision, not resort to paraphrases of the statutory language in extrinsic materials, other cases and different legislation. [36] These cases serve to remind that the text of a statute is important, for it contains the words being construed, and that a very general purpose may not detract from the meaning of those words. As always with statutory construction, much depends upon the terms of the particular statute and what may be drawn from the context for and purpose of the provision. [37] None of these cases suggest a return to a literal approach to construction. They do not suggest that the text should not be read in context and by reference to the mischief to which the provision is directed. They do not deny the possibility, adverted to in CIC Insurance Ltd v Bankstown Football Club Ltd, that in a particular case, “if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance”. When a literal meaning of words in a statute does not conform to the evident purpose or policy of the particular provision, it is entirely appropriate for the courts to depart from the literal meaning. A construction which promotes the purpose of a statute is to be preferred. (Citations omitted, emphasis added.)

58. In substance, Bell and Gageler JJ made the same observations. At 545 [124], their Honours said: The principles of interpretation were not in issue on the hearing of the appeals. In assigning legal meaning to the words of a provision, the court starts with consideration of the ordinary and grammatical meaning of the words taking into account both context and legislative purpose. Consideration of context in its widest sense and the purpose of the statute informs the interpretative task throughout. That consideration, and the consequences of giving a provision its literal, grammatical meaning, may lead the court to adopt a construction that departs from the ordinary meaning of the words. … (Citations omitted.)

59. It is important to note two things. First, that if there be any conflict between the common law principles and the Legislation Act, the latter prevails.

60. Second, the most relevant context to consider (in addition to the wording of the Act and the provisions) is the context existing at and before the insertion 11 of s 277A into the PDA in 2011.

61. Context may include the legislative history. That history may illuminate the mischief which was sought to be addressed. In this case that mischief is of importance.

Legislative history of the lease variation charge

62. The Australian Capital Territory (the Territory) is the only Australian jurisdiction with a leasehold land tenure system.

63. From about 1971 a “change of use charge” (CUC) was applied where a lease was varied and the variation had the effect of increasing the value of the lease (most often by increasing the purposes permitted by the terms of the lease).

64. The authors of the Final Report on the Review of the Change of Use Charges System in the ACT dated 29 November 2010 (the Final Report), a report to which we will shortly come, said the following about the purpose of the CUC: A fundamental principle of the leasehold system is the unearned increment in the bundle of rights belongs to the community and thus remains with the community. The Change of Use Charge (CUC) introduced in 1971 ensures that a proportion of any windfall gain accruing to a lessee from a variation to their lease is returned to the community as originally intended.

11 Inserted by the Planning and Development (Lease Variation Charges) Amendment Act 2011

65. Various methods of calculating the CUC were put in place over the years (more fully described in the Final Report at pp 5 ff).

66. The details of all earlier methodologies used to calculate the CUC is not necessary to traverse, but a useful start may be made at 1991.

67. From 1991 until 1996, the CUC was determined on the assumption that the land to be valued was unimproved. This was done pursuant to the then s 184 of the Land (Planning and Environment) Act 1991 and regs 12 and 13 of the Land (Planning and Environment) Regulations.

68. Section 184 simply said that the Executive would not execute a variation of a lease unless all rent had been paid and, where a variation of the lease would increase the market value of the lease, the lessee had paid the Executive an amount determined by the Executive in respect of the increase in the value of the lease that would result from the variation.

69. Regulation 12 provided that the “added value” was the amount by which the value of the lease immediately after the variation would exceed the value of the lease immediately before the variation, it being assumed that there were no improvements on the land.

70. Regulation 13 said that the amount payable was the amount equal to the added value, remissions could be granted (per reg 15 and at certain rates set out in Schedule 3 under particular circumstances) and in determining the added value of a lease, no reduction would be allowed for where the variation of the lease was conditional upon the applicant financing or undertaking works on the land comprised in the lease or on any unleased Territory Land.

71. That position changed in 1997.

72. Effective from 24 June 1997, s184A was inserted into the Land (Planning and Environment) Act 1991 and the abovementioned regulations were omitted and replaced.

73. In written submissions the Commissioner submitted that the CUC calculated under s 184A was calculated on the basis that the land to be valued was improved. We note that the Final Report said at part 7 that that was the way the statute operated at the time (and until 2011) and we read the provisions the same way.

74. Section 184A said: Variation of nominal rent lease—change of use charge (1) The Executive shall not execute a variation of a nominal rent lease unless the lessee has paid the Territory any change of use charge determined by the Minister under subsection (2), subject to any remission or increase under section 184C. (2) The Minister shall determine the change of use charge for a variation of a nominal rent lease in accordance with the formula— CUC = (V1 – V2) x 75% where: CUC is the change of use charge payable for the variation of the lease; V1 is the capital sum that the lease might be expected to realise if— (a) the lease were to be varied as proposed; (b) the lease were offered for sale in good faith immediately after the variation on such reasonable terms and conditions as a genuine seller would require; and (c) the rent payable throughout the term of the lease were a nominal rent; V2 is the capital sum that the lease might be expected to realise if— (a) the lease were not to be varied during the remainder of its term; (b) the lease were offered for sale in good faith immediately before the variation on such reasonable terms and conditions as a genuine seller would require; and (c) the rent payable throughout the term of the lease were a nominal rent. (3) Where the capital value assessed as “V1” under subsection (2) is equal to or less than the capital value assessed as “V2” under that subsection, no change of use charge is payable under subsection (1). (4) Insofar as this section applies, by virtue of section 184, to the surrender of a lease and the grant of a new lease— (a) the reference in paragraph (c) of the definition of “V1” in subsection (2) to the term of the lease is to be read as a reference to the term of the new lease; and (b) the reference in paragraph (c) of the definition of “V2” in subsection (2) to the term of the lease is to be read as a reference to the term of the lease to be surrendered. (5) A variation of a lease has no effect if the change of use charge payable under subsection (1) for the variation is not paid.

75. Section 184A is substantially in the same form as the subsequent s 277 of the PDA, although in the Land (Planning and Environment) Act 1991 there was no equivalent to the PDA’s s 277A.

76. Section 184C of the Land (Planning and Environment) Act 1991 said that the Minister could, on application by a lessee, remit a change of use charge under s 184A for the variation of a nominal rent lease in circumstances prescribed by the regulations, and that the Minister could make regulations for that purpose.

77. A regulation was made, being the Land (Planning and Environment) Regulation 1992. It provided for remissions in reg 20 which said: Prescribed circumstances—Act, s 184C (1) (1) For the Act, section 184C (1), prescribed circumstances are that it is necessary or desirable to— (a) promote development of an area; or (b) change the purposes for which land or buildings, or parts of land or buildings, in an area may be used; or (c) promote the construction of housing meeting good design or construction criteria; or (d) promote the construction of attached houses, apartments or 2 or more detached houses on a single lot; or (e) promote the construction of housing accessible to, or adaptable for, frail or disabled people; or (f) provide land for the exclusive use of community organisations; or (g) assist occupiers of premises affected, or likely to be affected, by the operation of the Smoking (Prohibition in Enclosed Public Places) Act 2003, part 2 (Smoking prohibited in enclosed public places) to provide additional facilities at the premises.

78. In 2007 the Land (Planning and Environment) Act 1991 was repealed and replaced by the PDA. Most provisions, of the PDA, including the ones mentioned hereunder, commenced on 31 March 2008. Sections 277 and 277A of the PDA, which are the subject of the case before us, were not in the original PDA. The original s 277 was in substantially the same form as it is in the case before us, but there was no equivalent to s 277A.

79. The original form of s 277 in the PDA, located in Division 9.6.3, was relevantly as follows: 277 Working out change of use charge (1) The planning and land authority works out the change of use charge for a variation of a lease as follows: CUC = (V1 – V2) x 75% (2) In this section: CUC means the change of use charge payable for the variation of the lease. V1 — (a) for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if— (i) the lease were varied as proposed; and (ii) the lease were genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require; and (iii) the rent payable throughout the term of the lease or, for a variation that involves the surrender of a lease and issue of a new lease, the new lease, were a nominal rent; or (b) for a variation that is a consolidation or subdivision, … V2 — (a) for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if— (i) the lease were not varied during the remainder of its term; and (ii) the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions that a genuine seller would require; and (iii) the rent payable throughout the term of the lease, or lease to be surrendered, were a nominal rent; or (b) for a variation that is a consolidation or subdivision, … (3) If the capital value assessed as V1 is equal to or less than the capital value assessed as V2, no change of use charge is payable.

80. Section 278 provided for remissions and is different to s 278 as it applied in June 2003. Section 278(1) said that the planning and land authority must remit all or part of a change of use charge for a variation of a lease under section 276 as prescribed by regulation. Sub-section (2) said that regulations may prescribe the amount to be remitted under sub-section (1).

81. Regulations 175(1) and (2) of the Planning and Development Regulation (2008) gave effect to s 278. (Note that this Regulation internally refers to its “sections” when it intends to refer to “regulations”. We shall use the term “regulation” to avoid possible confusion with terms of the statute.)

82. Regulation 175 said: Remission of change of use charges generally—Act, s 278 (1) and (2) (1) The planning and land authority must remit all or part of a CUC for a variation of a lease: (a) if the variation of the lease is necessary and desirable to— (i) promote development in an area; or (ii) change the purposes for which land or buildings, or parts of land or buildings, in an area may be used; or (iii) promote the construction of well designed or constructed housing; or (iv) promote the construction of attached houses, apartments or 2 or more detached houses on a single lease; or (v) promote the construction of housing that is suitable for frail or disabled people; or (vi) provide land for the exclusive use of a community organisation; or (vii) assist occupiers of premises affected by the Smoking (Prohibition in Enclosed Public Places) Act 2003, part 2 (Smoking prohibited in enclosed public places) to provide additional facilities at the premises; (b) in a circumstance, or for a period, stated in a policy direction. (2) The amount of the change of use charge to be remitted is— (a) if a policy direction applies to the variation—the amount worked out in accordance with the policy direction; or (b) in any other case—the amount (if any) that the planning and land authority decides is appropriate in the circumstances.

83. The “policy direction” referred to in regulation 175(2) was a policy direction made under reg 177 which said that the Minister could make a policy direction for reg 175 (1) (b) or (2) (a) and that such policy direction was a disallowable instrument.

84. This was the mechanism referred to in the Final Report at paragraph 2.5.4 under which developers were able to offset (a proportion or percentage of) the increase in land value arising from a successful lease variation application against onsite and offsite user costs. We shall return to paragraph the Final Report shortly.

85. Before leaving s 277 as it then was (before the introduction of s 277A) it is worth noting that s 277 was the subject of some judicial consideration in Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32 (Macedonian).

86. In that case the Church was the Crown lessee of land in Narrabundah. The lease was a concessional lease. The Church desired to “deconcessionalise” the lease (which was approved) and subdivide the land to create two new leases. On one lease the Church desired to erect Church related improvements, and on the other it sought approval for the erection of multi-unit dwellings. Those approvals were granted.

87. The Commissioner assessed the CUC, and the Church contended that the cost of undertaking the development should be deducted from the after value on the basis that the varied lease mandated that the development be done. This argument was rejected. The case is not directly on point in relation to the issue before us, but the Court of Appeal did make some remarks on the then s 277 which are of some assistance in the case before us.

88. And at [107] the Court said: We are satisfied that the “after value” assessed for CUC purposes is the value of the new lease or leases to the extent that it reflects the effect of the lease variation on the scope for using the leased land. The after value should in general not account for the lessee’s particular plans for the new lease as distinct from the general possibilities open to any holder of the lease by reason of the change that has been made by varying the original lease or replacing it with a new lease or new leases. Of course, the after value would need to account for the lessee’s particular plans if those plans had been incorporated in the new lease or leases.

89. That passage supports an interpretation of ss 277 and 277A (that are before us) to the effect that a varied lease is to be varied on the basis of the lease’s highest and best use and not on the applicant’s particular plans (unless incorporated within the lease).

90. In relation to matters to be taken into account in the valuation process the Court said at [24]: It is agreed that certain matters external to the leases are properly taken into account in valuing each lease; these include “public laws which affect the value of the land, ... including restrictions imposed by planning laws and instruments made thereunder” (Valuer-General v New South Wales Golf Club (2012) 192 LGERA 105 at 114; [36], applying Royal Sydney Golf Club v Federal Commissioner of Taxation (1995) 91 CLR 610 at 624). In the ACT this would include the Territory Plan as well as zoning rules and requirements and certain other instruments made under or for the purposes of the Plan, and possibly other restrictions such as tree preservation orders or heritage listings.

91. That passage supports an interpretation of ss 277 and 277A (that are before us) that the value of a lease is to take into account restrictions imposed by “public laws” including any applicable planning instruments.

92. Meanwhile (that is, leading up until 2009) there had been concerns raised with the Government about the CUC, and its various iterations.

93. The result was that in its 2009-10 Budget, the Territory Government committed to re-examine and codify the CUC.

94. Professor Des Nicholls from the School of Management, Marketing and International Business at the College of Business and Economics at the Australian National University and Dr Stephen Anthony, Director of Budget and Forecasting at Macroeconomics (self-described as an investment advisory and portfolio allocation strategy business offering high end advisory, modelling and forecasting services) were engaged by the government to review the CUC system. The project was overseen by a Steering Committee comprising senior officials from Treasury, ACT Planning and Land Authority (ACTPLA) and the Department of Land and Property Services.

95. They consulted with a number of stakeholders and produced a number of papers in 2009 and 2010.

96. On 29 November 2010, Messrs Nicholls and Anthony issued their Final Report.

97. In the case before us the Commissioner placed significant reliance on the contents of the Final Report, it being part of the extrinsic materials which 12 could be considered. Most particularly, the Commissioner drew our attention to general statements in the Final Report about the purpose of what became ss 277 and 277A.

12 There was no dispute that the Final Report could be considered

98. The Final Report said that the CUC had originally been known as 13 “betterment”. The authors described the concept of betterment as follows: Betterment is defined as a benefit conferred by the public on some identifiable beneficiaries. If it is not recovered, the benefit becomes an ‘unearned’ windfall conferred by the public to private beneficiaries. A windfall is unearned in the sense that in the current context it is a creation of the ACT Government’s ability to assign value (in the form of rights and privileges) through lease conditions, to parcels of land across the Territory. Leaseholders may receive a benefit without having to make any improvement to their property. Because this value is ‘gifted’ to the leaseholder, rather than earned, it is socially efficient and equitable that government retains a significant proportion of that windfall and uses it for the benefit of the community.

99. The authors also noted that if the Government chose to retain the entire windfall, it may contribute to reducing incentive for property development. The task, the authors said, was to find the right balance between the two, competing objectives.

100. Section 2.5.4 of the Final Report addressed the then offsetting of onsite and offsite capital costs against the CUC. It said: The current CUC system in the ACT incorporates the following parts: - a betterment levy, which relates to an increase in a property value as a result of a lease variation; - onsite capital costs required to prepare the land for redevelopment; and - offsite costs required for the redevelopment to proceed. There are two kinds: o capital works/infrastructure that would be required irrespective of the type of development; and o development specific infrastructure required as a direct result of the particular development proposal.

101. The third dot point quoted about referred to two kinds of offsite works which were explained in a footnote which said: The distinction between different kinds of offsite works is important because the first is infrastructure which the Government may choose to pay for or subsidise; the other is purely development driven and consideration needs to be given to the attribution of benefits and costs. Offsite works in the first category will usually represent an opportunity 13 At p 4 to improve public infrastructure in circumstances where the new development represents only an incremental increase in infrastructure usage. Were the Government to wish to extract a proportion of costs for new offsite infrastructure, this raises questions about contributions from other private property owners already established in the same area and using the public infrastructure. (Emphasis added.)

102. The Final Report continued: Under the current system all these user costs, as well as improvements, are taken into consideration in the determination of the CUC. Developers are able to offset (a proportion of) the increase in land value from a successful lease variation application against onsite and offsite user costs. However, the original concept of the payment of a betterment was to charge for additional developmental rights; it was not intended to compensate developers for expenditure, both onsite and offsite, required to undertake the redevelopment. Over time, however, these offsets have become a component of the current CUC system. (Emphasis added.)

103. The first sentence of the quote immediately above was also footnoted. That footnote said: Infrastructure costs may be reflected in the ‘before’ value (e.g. demolition costs), or deducted from the ‘after’ value (e.g. construction of the footpath and landscaping in front of the block), or deducted directly from the CUC payable (e.g. the cost of a school fence requested by the Department of Education). In all cases the CUC payable has been impacted by these costs.

104. The Final Report continued: It is important to recognise that a CUC is not an infrastructure or development charge, but a payment for a lease variation which results in increased rights to be associated with the lease. The CUC and user charge are fundamentally different and as such should be separated in their determination and charging. Under the current system, as a result of developers being able to offset both onsite and offsite costs against CUC, the actual revenue from the betterment component is significantly reduced. A considerable amount of the discussion with industry during the course of this study has revolved around the treatment of user charges relating to onsite and offsite costs relating to Brownfield development/redevelopment sites. In considering these issues it was noted that the ACT Government has the right to remit all or part of a CUC for the variation of a lease under certain circumstances which are broadly based. Indeed sections 175-177 of the Regulation relate to the remission of CUC (see Attachment 1). In the case of onsite costs, including demolition costs, it was argued by a number of stakeholders that such costs should be included in the determination of the CUC where this was necessary to make a redevelopment economically viable. It is difficult to justify this approach in general, as such costs should be reflected in the price paid for the property for redevelopment, or alternatively, would be passed on to the end user of the redeveloped property, or shared between the two parties. … With respect to offsite costs, our understanding is that the majority of these are mandatory costs imposed by the Government as part of the DA process. Such costs include intersections and road upgrades, for example. The requirement from the developer to undertake these offsite works as part of a development/redevelopment appears to have worked well. This approach satisfies the requirement of timeliness and efficiency from the point of view of project delivery. As in the case of onsite costs however, these mandatory offsite costs should not be included as part of the CUC. Infrastructure costs should be considered separately from the determination of the CUC and each reported separately. (Emphasis added.)

105. The circumstances being addressed in those passages included ones in which developers were required to construct what we shall call public infrastructure (roads, footpaths etc) or infrastructure which was “development driven”, and who would pay for such infrastructure. At that time, developers sought and were able to offset at least some of those costs from CUCs.

106. The Final Report suggested that the CUC and “user charges” (being mandatory onsite and offsite works) were fundamentally different, and, accordingly, should be separated in their determination and charging. Separation of the two different charges would, in the opinion of the authors, go some way to ensuring that the CUC would not be (at least in part) an infrastructure or development charge.

107. The authors recommended that a formal process should be developed and overseen by appropriate government agencies to identify, verify “and where 14 appropriate fund mandatory offsite infrastructure requirements”. The 15 authors emphasised that: … mandatory infrastructure costs should be dealt with separately from the LVC.

108. The authors of the Final Report recommended that the LVC be codified for 16 most land in the Territory. They dealt with “Improvements, onsite and offsite costs revisited” at section 4.2.5. In that section the authors said: A noteworthy reform associated with the introduction of codification is the treatment of onsite and offsite works which will be treated separately from the calculation of LVC. The proposed codification system will be based on variations to permitted uses that would result in changes in land values (by means of an index value determined from the market value of land averaged over three years), excluding improvements and those onsite and offsite user costs which are allowable under the current CUC system. This is in line with the principles for the codified framework stated in Section 4.1 above. By taking this approach some of these costs, such as demolition costs, would be reflected in either the offset or premium paid for the land to be redeveloped or would be passed on to the end users/owners of the land through increased purchase prices/rents payable. This is in contrast to the current system where, by allowing these costs to be accounted for in the determination of V 1 and V2, the community is effectively paying for much of the user charges/costs. This approach also has the potential to distort development decisions in supporting demolition of improvements. As with the current CUC system and as stated earlier, the ACT Government would still retain the right to fully or partially waive the determined CUC in certain cases (in accord with Sections 175-177 of the Regulation or Disallowable Instrument). This right, as at present, would be in the form of a regulation. While mandatory offsite works will need to be calculated separately from the LVC charge, in response to the feedback received from industry since the release of the Discussion Paper, we are recommending to Government that consideration be given to an efficient process to manage the incidence of benefits and costs of offsite infrastructure. Whilst there should be no justification for the Government to pay for offsite infrastructure upgrades that arise as a result of the operational needs of a particular development, we agree that developers should be compensated for the mandated offsite works, especially if the benefits are realised by the wider community. In such

14 At p 18 15 At p 19 16 Beginning at section 4 circumstances, the proposed approach allows the developers to be paid the full value of mandated works, whereas under the current system, they are only allowed to deduct a percentage of these costs. (Emphasis added.)

109. In that passage the authors drew a distinction between offsite infrastructure upgrades that arose because of the operational needs of a particular development (which they considered the Government should not pay for) and mandated offsite work which the Government should pay for (especially if the benefits are realised by the wider community).

110. The Final Report continued at p 30: Separating out the value of mandatory offsite works under the new arrangements is consistent with the principles of codification identified previously (in particular, timeliness, growth, transparency and simplicity). The consultant recognises that if a development is to be undertaken in a timely fashion, both the scope and funding for mandatory offsite costs will need to be established upfront in a transparent fashion. For the future administration of offsite costs, we suggest that an appropriate structure and process be established to give due consideration to the reasonableness and scope of these works, who will pay the mandated costs and how they will be funded. Our understanding is that under the current system many DAs requiring mandatory offsite works have had the cost of these works included as part of the overall construction costs; that is they are not separately identified and costed. Under the new LVC system, where mandatory offsite works are to be undertaken by the developer, these works should be separately identified and costed prior to approval by the relevant government agency.

111. As far as we are aware, the structure or process mentioned in that passage to give due consideration to the reasonableness and scope of offsite works, who will pay the mandated costs and how they will be funded has been established. All that existed (after the amendments made because of the Final Report) was a discretionary power exercisable by the Minister to remit a percentage of an LVC pursuant to s 278.

112. Many of the circumstances leading to an LVC were codified as recommended by the Final Report. However, the authors noted that there would be circumstances in which codification would not apply. They said, at section 4.2.6, that in such circumstances valuers would be required, and that valuations would be based on land values only. The authors said: Valuations would be based on land values only excluding any structural improvements, or any onsite and offsite costs requirements.

113. That statement was repeated at section 4.5 (and the final paragraph in section 5.2) with the addition that: As stated earlier infrastructure costs should be considered separately from the quantification of the LVC.

114. A distinction between certain types of offsite costs was further mentioned at section 7.7 wherein the authors commented on industry feedback. After noting that the authors supported the principle that demolition and onsite and offsite costs should not be taken into account in determining the CUC, the authors also recognised the (presumably construction and financial) efficiencies associated with developers undertaking (as in constructing) the mandatory offsite works and agreed that that practice should continue.

115. The authors went on to say that the codified values they suggested had been determined from land market values. They then said: The Report has concluded that improvements, onsite costs (including demolition costs) and non-mandatory offsite costs should not be subsidised by the community. They are costs which should be the responsibility of the developer and should be reflected in the price paid for the land to be developed, the developer’s profit, the price paid by the end user(s) for the developed property, or some combination of all three of these. This overall approach is consistent with the original intention of the betterment levy and accords with some earlier versions of the CUC such as Method B discussed in Section 2.1.2. (Emphasis added.)

116. The important point to note is that when the authors referred to offsite costs not being subsidised by the community in the quote above, their comment was limited to non-mandatory offsite costs.

117. Later, at section 8.5 (dealing with industry feedback to the draft report) the authors said: The approach proposed in this report is for the schedule of codified values to be based on the market value of land, excluding improvements, onsite and offsite costs. The reason for this, as already stated, is that the LVC should be determined to reflect the increase in the value of the lease as a result of the increase in the bundle of rights associated with the lease. It should not reflect the value of improvements, demolition and other onsite and offsite costs. (Emphasis added.)

118. The result of the Final Report, and after consideration by the then Government and debate by the Legislative Assembly, was the introduction of the Planning and Development (Lease Variation Charges) Amendment Bill 2011 (the LVC Bill) into the Legislative Assembly on 5 May 2011.

119. The LVC Bill proposed replacing the then Division 9.6.3 (which contained ss 277 and 278 as we have set out above) with a new Division 9.6.3.

120. The LVC Bill proposed some terminology changes to s 277 (to refer to a LVC rather than a CUC) but no substantive changes. It introduced the new s 277A and a new s 278 (amongst other changes).

121. In the LVC Bill (which was later amended), cl 277A was in the following form: 277A Lease variation charge under s 277—improvements (1) In working out V1 and V2 under section 277, an improvement in relation to the land comprised in the lease must not be taken into account. Note Power to make a regulation in relation to a matter includes power to make provision in relation to a class of a matter (see Legislation Act, s 48 (2)). (2) However, an improvement may be taken into account if— (a) for V1 and V2—it is prescribed by regulation; and (b) for V2—it is an improvement by way of clearing, filling, grading, draining, levelling or excavating the land. (3) A regulation may prescribe the percentage value of an improvement mentioned in subsection (2) that may be taken into account. (4) In this section: improvement, in relation to land, means an existing or proposed improvement and includes any of the following: (a) a building or structure on or under the land; (b) an alteration or demolition of an existing building or structure on or under the land; (c) the remediation of the land; (d) earthworks, planting or other work that affects the landscape of the land; (e) anything prescribed by regulation; (f) anything mentioned in paragraphs (a) to (e) that is required— (i) as a condition of a development approval; or (ii) by a statutory approval obtained or required for a development proposal; or (iii) under an agreement between the Territory or a territory entity and— (A) the lessee; or (B) if the lessee is not the applicant for the development approval—the applicant. remediation—see the Environment Protection Act 1997, dictionary.

122. In short, cl 277A said that improvements must not be taken into account unless prescribed by regulation or unless it was an improvement by way of clearing, filling, grading, draining, levelling or excavating the land. It then defined (for the first time) what an “improvement” was for the purposes of that clause.

123. The LVC Bill seemed to give effect to the recommendations in the Final Report that, ordinarily, improvements (as defined) should not be taken into account, including what appear to have been regarded as mandatory works referred to in clause 277A(4)(f).

124. Remissions were the subject of clause 278 which said that the Commissioner for Revenue must remit all or part of a lease variation charge for a chargeable variation of a nominal rent lease as prescribed by regulation, and that a regulation may prescribe the amount to be remitted.

125. The Explanatory Statement to the LVC Bill noted, at cl 2, that lease variations were a “development” that required development approval. It then made frequent references to passages of the Final Report and said, at cl 16, that there were two main categories of lease variations for the purpose of the LVC.

126. The first category was prescribed chargeable variations (the subject of the codification) which at the time consisted of variations to increase the permitted number of dwellings on residential leases and variations to increase the maximum amount of gross floor area permitted for a non-residential purpose (as well as variations to subdivide or consolidate leases).

127. The second category were those for which it was said that it was not practical to set a codified charge. Examples given, at cl 32, were lease variations to change the uses authorised under a lease.

128. Turning to the exclusion of offsite and onsite costs, the Explanatory Statement said: Exclusion of off-site and on-site costs. 39. The Final Report recommended that calculations of the LVC not include any on-site physical improvements on the relevant land such as new or modified housing, demolition and remediation (ss 2.5.4, 4.2.5). The Final Report also recommended that the LVC not take account of any off-site improvements, for example, completion of infrastructure works (roads etc) adjacent or near the land. This is because the LVC is intended to be a charge for obtaining additional rights under the lease to which these costs are not relevant. The Final Report (pp 16, 17) noted that: “Under the current system all these user [on-site, off-site] costs, as well as improvements, are taken into consideration in the determination of the CUC. Developers are able to offset (a proportion of) the increase in land value from a successful lease variation application against onsite and offsite user costs. However, the original concept of the payment of a betterment was to charge for additional developmental rights; it was not intended to compensate developers for expenditure, both onsite and offsite, required to undertake the redevelopment. Over time, however, these offsets have become a component of the current CUC system. It is important to recognise that a CUC is not an infrastructure or development charge, but a payment for a lease variation which results in increased rights to be associated with the lease. The CUC and user charge are fundamentally different and as such should be separated in their determination and charging. Under the current system, as a result of developers being able to offset both onsite and offsite costs against CUC, the actual revenue from the betterment component is significantly reduced.” 40. Consistent with the recommendations of the Final Report, the Bill makes it clear that improvements (on-site, off-site improvements) must not be taken into account in calculating the LVC. … 42. Some LVCs will not be set by the LVC Determination. These will still be determined under the existing formula of s277 which involves estimating the current value of the relevant lease and the likely value the lease would gain should the proposed lease variation proceed. For such LVCs, new ss277A (clause 10) makes it explicitly clear that building, modifications, demolition, remediation, earthworks done on the relevant land cannot be taken into account in assessing the LVC. (Emphasis added.)

129. Clauses 118-123 of the Explanatory Statement addressed the proposed cl 277A but throw no light on the issues before us.

130. Clause 124 does provide some further context to what became s 277A(3)(e), namely that: For the purposes of working out what constitutes an improvement, it is immaterial if the possible improvement was completed or is proposed to be completed as a condition of a development approval or other statutory approval or agreement between a Territory entity and the 17 lessee (new s277A(4)(b)).

131. The relevance of cl 277A(4)(f)(iii) was that where a developer performed work as required by the Territory, it was frequently undertaken under the provisions of a holding lease and deed of agreement between the developer and the Territory.

132. Notably, cl 277A(4) did not include what became s 277A(3)(f), which was: (f) anything mentioned in paragraphs (a) to (d) proposed in a development application in relation to a chargeable variation of

17 We think the reference to “(new s277A(4)(b))” is a typographical error, and the reference should be to cl 277A(4)(f) a nominal rent lease to be carried out on land outside of the land under the lease. (Emphasis added.)

133. Whilst the Bill was before the Legislative Assembly various amendments were proposed. Some were rejected. Some were accepted.

134. A proposed amendment to omit the proposed new s 277A(1)-(3), and replace it with a section which said that in working out V1 and V2 under s 277 an improvement in relation to the land must be taken into account was rejected.

135. A proposed amendment to vary the proposed new s 278 to make it mandatory to remit the cost of doing work on land outside of the lease if required by a condition of a development approval was likewise rejected.

136. A proposed amendment to replace the proposed new s 277A(2) with a section allowing an existing improvement by way of clearing, filling, grading, draining, levelling or excavating the land to be taken into account was allowed.

137. Effective from 1 July 2011 the old Division 9.6.3 was entirely replaced by a new Division 9.6.3 by the Planning and Development (Lease Variation Charges) Amendment Act 2011 (the 2011 Amending Act).

138. Importantly, reg 175 (which had previously provided for remissions) was then omitted from the Planning and Development Regulation 2008.

139. The new Division 9.6.3 contained an identical s 277 to the previous version (although with some changes in terminology and the addition of sub-s (4)). The CUC then became the LVC.

140. The significant change was the addition of s 277A (which had not existed in any form in the previously applicable legislation) and was in the form set out earlier in these reasons.

141. Subsequently, the PDA was replaced by the Planning Act 2023, the relevant parts of which commenced operation on 27 November 2023.

142. As the approval to vary the lease was granted on 5 June 2023, the PDA applies 18 to the chargeable variation rather than the Planning Act.

Factual, planning and lease variation charge background

143. In February 2007, the second and third applicants became tenants in common of Blocks 11 and 12 of Section 38, Fyshwick, being the Molonglo land.

144. At that time the Molonglo land was zoned IZ1 – General Industry.

145. From 30 April 2021, and because of an application by Molonglo, the Molonglo land was rezoned CZ3 - Services Zone by way of a variation to the 19 Territory Plan.

146. The general planning regime under the PDA was as follows.

147. Section 46 provided that there must be a Territory Plan that applies to the Territory. The Territory Plan is a notifiable instrument and was first notified on 13 February 2008.

148. The Territory Plan was concerned with, inter alia, “development”.

149. “Development” was defined in s 7 which said: (1) In this Act: development, in relation to land, means the following: (a) building, altering or demolishing a building or structure on the land; (b) carrying out earthworks or other construction work on or under the land; (c) carrying out work that would affect the landscape of the land; (d) using the land, or a building or structure on the land; (e) subdividing or consolidating the land;

18 See s 614(3)(b) of the Planning Act 2023 19 Notifiable Instrument NI2021-65 − Planning and Development (Plan Variation No 377) Approval 2021 and Commencement Notice CN2021-2 − Planning and Development (Plan Variation No 377) Commencement Notice 2021 (f) varying a lease relating to the land (other than a variation that reduces the rent payable to a nominal rent); …

150. “Using” land was defined in s 8 to include changing the use of land.

151. A “development application” was defined in the Dictionary to the PDA as being: … an application in relation to a development proposal made under chapter 7 (Development approvals).

152. A “development proposal” was defined as: … a proposal for development, whether in a development application or otherwise. (Emphasis added.)

153. As we read those definitions, a development proposal was that which a developer proposed to do (as in put forward for consideration), whether as set out in a development application or “otherwise” (meaning in other documents associated with the development application form itself or in subsequent communications between the applicant and the planning authority).

154. A “development approval” was defined as: … development approval under chapter 7 (Development approvals).

155. Chapter 7 contained s 113 which said that a person who had a development proposal may apply to the planning and land authority for approval to undertake the development proposed.

156. Thus, if a developer desired to develop land in a particular way, including constructing buildings or structures on or under the land, or changing the use of the land, what it desired would be a “development proposal”. The developer would then apply for approval of that proposal by lodging a “development application”. An approval of that development application under Chapter 7 was then the “development approval”. These statements may seem a little trite, but they assume some significance for the proper application of s 277A(3)(e) and (f) to the facts of this case and in which all three defined terms are used.

157. Section 50 required developments to be assessed in accordance with the requirements of the Territory Plan.

158. The Territory Plan included, in part 16, the Estate Development Code (the Code). The Code applied to all proposals in the Territory for the subdivision 20 of land. It provided additional planning, design and environmental controls to support the objectives of each relevant zone and was used by ACTPLA to assess development applications for estate development plans.

159. The Code required the preparation and approval of an EDP if an applicant desired to subdivide land. The Code stated that: Estate development plans (EDPs) set out the proposed subdivision pattern and infrastructure works for an estate. EDPs must be submitted as development applications for approval by ACTPLA. Development approval of the EDP is required before design acceptance can be obtained from TAMS, works can commence and leases issued for the subdivided blocks.

160. Molonglo’s EDP application (DA 86) was subject to the Code because it 21 sought to create 36 blocks for an eventual subdivision.

161. According to the town planning evidence, a substantial part of the Code related to the design of public/handback assets to a standard set down by the Territory through agencies and utility entities. Other parts of the Code dealt with estate layout, public realm and environment protection.

162. More formally, s 94 set out the requirements for an EDP. Section 94 said: 94 What is an estate development plan? (1) An estate development plan, for an estate, sets out the proposed development of the estate, and the creation of blocks in the estate, in a way that is consistent with— (a) if the estate is in a future urban area—the concept plan for the area where the estate is; and (b) any other code that applies to the estate.

20 Compliance with the Estate Development Code is mandatory: see Village No 22 Pty Ltd ACN 620 656 260 v ACT Planning and Land Authority & Anor [2021] ACAT 43 at [88]-[98] 21 Although a further development application would need to be lodged to achieve that objective Note A development application for the development of an estate must be accompanied by an estate development plan (see s 139 (2) (s)). (2) An estate development plan must identify— (a) the block boundaries for individual blocks proposed for inside the estate and the boundaries proposed for the whole estate; and (b) if the estate is in a future urban area—the zones proposed for the estate and any existing zones that are to continue to apply; and (c) if the estate is not in a future urban area—the existing zones in the estate. (3) An estate development plan may include the following for the estate: (a) design and construction requirements for roads; (b) design and construction requirements for infrastructure works and landscaping; (c) particular areas for particular detailed purposes; (d) a tree management plan; (e) design and construction requirements for reticulated services; (f) design and construction requirements for works on proposed public land; (g) a provision, which is consistent with the territory plan, that is proposed to apply to the ongoing development of a block in the estate (an ongoing provision) that— (i) relates to the subject matter addressed by an existing mandatory rule or criteria applying to the block; and (ii) does not permit the development of the block in a way that would not be permitted by the existing mandatory rule or criteria. … (4) In this section: mandatory rule, in relation to a code, means a rule that is described in the code as being mandatory. (Emphasis original.)

163. It follows from those provisions that an application for an EDP and an application for a lease variation were both applications to develop land under the PDA.

164. Turning to the Molonglo land, that land (being on one Crown lease) is presently sufficiently serviced to the boundary of the lease in terms of utilities for its existing uses.

165. The Molonglo land has some current usage. Various utilities (water, power etc), roads and footpaths extend from the boundary of the land to the various buildings on the land.

166. On 4 August 2022, Molonglo lodged development application DA202240586 22 (DA 86) seeking approval of an EDP.

167. What Molonglo was putting forward for consideration in that development application was a development proposal (as defined in the PDA), and the application was a development application (as defined in the PDA).

168. DA 86 described the proposal as follows: Proposal for an estate development plan for to [sic] create 36 blocks, four public roads, and associated relocation of existing utilities infrastructure, construction of new utilities infrastructure, and earthworks. This application also seeks approval for tree removal and demolition of fences and buildings.

169. The Crown lease did not permit the use of the Molonglo land for that development, but DA 86 was able to be lodged under s 137AA in anticipation 23 of a development application for a change of use.

170. The DA 86 application also said that it would be supported by a separate, concurrent development application for a variation of the Crown lease. The DA 86 application said: Our EDP DA will be supported by a separate, concurrent Lease Variation DA to obtain the development rights for the site’s redevelopment, as well as supportive offsite works, such as road upgrades and active travel infrastructure.

22 AB 926 (the date appearing in the Index at AB 903 and confirmed by the Commissioner’s solicitors at AB 11132 at [4]) 23 “A person may apply for approval of a development proposal for a prohibited development in anticipation of a variation to the territory plan (the anticipated variation) that would have the effect of allowing the proposed development.”

171. The DA 86 application said that the EDP was an essential approval allowing Molonglo to construct the infrastructure required to support the proposed development. It said: The EDP is an essential approval which allows us to construct the infrastructure required to support the proposed development and facilitate better connections to the site. Additionally, without all the related EDP approvals, we cannot add new uses to the site.

172. It follows, and we find, that DA 86 was inextricably linked with the subsequent DA 19, the development application for the lease variation. To develop the land as it proposed, Molonglo needed the approval of both applications.

173. By Notice of Decision dated 19 December 2022, ACTPLA approved the “proposal for an” EDP subject to various conditions (the EDP approval). In summary, the Notice of Decision approved: (a) the creation of 36 new ‘CZ3 – Services Zone’ blocks, across Blocks 11 and 12, and Blocks 12 and 13 Section 47 Fyshwick (unleased land); (b) earthworks, footpaths, landscaping, publicly accessible open spaces, public open spaces, roads, tree removal and utility services; (c) demolition and other associated works; and (d) offsite works.

174. There were several subsequent variations to the approved EDP (as described by Mr Blencowe at AB 1622 – 1628 and 7479 and which explains why the “approved” plans in evidence bear the date 1 May 2023 or later). As far as we can determine, the precise details of those particular variations are not relevant to the interpretation issues in this case other than the variation to Condition 3. We will come to Condition 3 shortly.

175. It is pertinent to note at this time that a significant proportion of the works approved in the EDP approval were works put forward for consideration, or proposed by, Molonglo in its application. They were not proposed by ACTPLA and then imposed on Molonglo by the conditions of the EDP approval. 24

176. The works proposed by Molonglo were described in the application and the 25 plans submitted “for approval” attached to the application. Not all of the plans submitted as part of that application (at least as listed in the EDP DA 26 Submission Document Index ) appear to have been in the evidence.

177. The relevant works were, of course, governed by and required to comply with the requirements of the Code and other aspects of the Territory Plan. It was presumably because of the requirements of the Code, other relevant aspects of the Territory Plan or other planning instruments, that Molonglo put forward for consideration that which was in the DA 86 application.

178. Condition 3 of the original EDP approval said that the approval for the EDP did not take effect until the Crown lease for the Molonglo land was varied to permit the approved development. Condition 3 said: 3. APPROVAL DOES NOT TO TAKE EFFECT This approval does not take effect until the provisions of the Crown lease for Blocks 11 and 12 Section 38 Division of Fyshwick is varied to permit the approved development. Note: The proposed development is not currently permitted by the purpose clause; a variation to permit additional uses not currently listed on the Crown Lease purpose clause for blocks 11 & 12 Section 38 Fyshwick, is required for this approval to take effect. Note: As per condition 7 below, for residential use including multi-unit dwellings to be included in the purpose clauses, further information to address EPA requirements and site suitability are also required. Note: Direct sale (part block 11 Section 47) & consolidation may form part of the lease variation application process.

179. Condition 3 also demonstrated the inextricable link between DA 86 and the subsequent DA 19.

180. Condition 3 of the EDP approval was varied a number of times. Its final form (22 September 2023) was as follows: APPROVAL DOES NOT TO TAKE EFFECT

24 AB 926 25 AB 934, 4997-5050. See the statement of Mr Blencowe at AB 1621 at [93] 26 AB 5002 With the exception of civil works (incl works necessary for: utility services, roads, footpaths, earthworks, tree removal, landscaping, public open spaces, publicly accessible open spaces) as outlined in this decision, this approval does not take effect until – a) the provisions of the Crown lease for Blocks 11 and 12 Section 38 Division of Fyshwick is varied to permit the approved development; Note: The proposed development is not currently permitted by the purpose clause. The Lease Variation DA202341419 in relation to these blocks was approved subject to a condition that the lessee surrender the existing Crown lease over these blocks in favour of a new Crown lease over the consolidated block which includes the approved additional uses. This process has not been finalised and is required for this approval to take effect. Note: Condition 7 as amended in the Notice of Decision on Reconsideration dated 2 February 2023 applies to ‘all’ consequential leases with residential use on site not just to the those in direct sale parcel. As per Condition 7, for residential use including multi-unit dwellings to be included in the purpose clauses in consequential leases, further information to address Environment Protection Authority (EPA) requirements and site suitability are also required. Refer to EPA advice under PART B ENTITY ADVICE below b) the crown lease over part Block 11 Section 47 Division of Fyshwick (new block identifiers 12 & 13 Section 47 Fyshwick & currently, the subject of a direct sale application), is granted and the lease is consolidated with the new Crown lease over Blocks 11 and 12 Section 38 Division of Fyshwick; and Note: A new development application for the consolidation of the direct sale parcel/s may be required. c) prior to any subdivision or consolidation of Blocks 11 and 12 Section 38 Division of Fyshwick, the lessee: i. surrenders the new Crown Lease over the consolidated block (i.e. consolidation of Blocks 11 & 12 Section 38 Fyshwick with part Block 11 Section 47 Fyshwick) in favour of a “Core Area” Crown Lease incorporating the existing subleases with all other development areas surrendered into a Holding Lease for the purpose of subdivision and urban development in accordance with a Deed of Agreement and associated approved Dairy Road EDP, on terms and conditions as agreed to by the Territory to allow for the development and delivery of the onsite and offsite works OR ii. prior to the registration of the new Crown Lease over the consolidated block (i.e., consolidation of Blocks 11 & 12 Section 38 Fyshwick with part Block 11 Section 47 Fyshwick), enters into a separate Deed of Agreement with the Territory and provides an associated General Performance Bond to the satisfaction of the Territory which will be held by the Authority as security for the works required to be undertaken by the Developer. (Emphasis added.)

181. Condition 4 of the EDP approval said that the approval would end if the Crown lease was not varied within 24 months of the date of the date of the 27 decision. This was later varied to a period of 36 months.

182. On 14 March 2023, Molonglo submitted a development application for a lease variation, being DA202341419 (DA 19) in order to satisfy Condition 3 of the EDP approval.

183. Most relevantly, DA 19 sought to expand the Purpose clause of the Crown lease to allow for additional purposes, most relevantly an increase of GFA to 2 191,844 m and to allow for multi-unit housing of up to 700 dwellings.

184. The proposed change of use was a “development” as defined in ss 7 and 8. DA 19 was a development application (as defined in the PDA) and was a development application for a chargeable variation of a nominal rent lease under s 276.

185. DA 19 was approved by a Notice of Decision dated 5 June 2023. This amounted to the approval of a development application for a chargeable variation (the chargeable variation).

186. It was a “s 277 chargeable variation” (as defined in s 276) because it was not a chargeable variation prescribed by regulation (otherwise it would have been a section “276E chargeable variation”).

187. Section 276B provided that no chargeable variation of a Crown lease could be executed unless the LVC was paid to the Territory or a deferral arrangement had been entered into.

27 Notice of Decision on Reconsideration dated 2 February 2023

188. Section 276C provided that the LVC for a s 277 chargeable variation was the charge (if any) worked out under s 277.

189. Section 276D provided that on approval of a development application for a chargeable variation, the Commissioner was required to give a notice of assessment of the LVC to the lessee.

190. With the LVC in mind, Molonglo submitted with its DA 19 application a valuation by Colliers Valuation and Advisory Services of the before and after 28 values of the land as at 13 February 2023. The Collier’s valuation annexed an Appendix D which was a costing of the full EDP works by Turner & 29 Townsend amounting to some $60m. To value the after value, Collier’s used the hypothetical development method. 30

191. On 5 June 2023, ACTPLA approved the lease variation.

192. There then followed various communications between Molonglo and ACTPLA concerning variations to the lease variation approval and questions regarding the Turner & Townsend costings.

193. On 23 October 2023, Molonglo provided a peer review report of the Turner & Townsend costings prepared by Mr Wolmarans.

194. On 21 November 2023, the ACT Valuation Office (ACTVO) provided a review of the LVC assessment to the Environment, Planning and Sustainable 31 Development Directorate. Included in that assessment were before and after valuations of the Molonglo land. Both those valuations used the comparable sales method.

195. The agreement between the parties were that the valuations and costings we have mentioned above were not to be treated as expert evidence but as matters of historical fact only. We have treated them accordingly.

28 AB 1106 29 Turner & Townsend Feasibility Cost Plan 4 October 2022 30 AB 1244 31 AB 1320

196. On 7 March 2024, the Commissioner provided a Notice of Assessment to Molonglo (based on the ACTVO valuations) in which the before value was assessed at a little over $22m, the after value at just under $72m, the difference at just under $50m and, after discounting by 25%, assessed the LVC at 32 $36,993,750. 33

197. Molonglo sought a reconsideration of that assessment pursuant to s 277C. After reconsideration the Commissioner confirmed the assessment referred to 34 above. That decision was a reviewable decision.

198. The applicants then commenced proceedings in the Tribunal to review the 35 reconsideration determination.

The land and the EDP works

199. It is now useful to describe the land and the EDP work in a little more detail.

200. As mentioned earlier, the Molonglo land is presently sufficiently serviced to its boundary in terms of water supply, sewerage, power, roads, footpaths and the like for the current usage on the land. To create 36 blocks out of the one, existing, Molonglo block (the Molonglo land), additional work is necessary to construct water supply, sewerage, power, roads, footpaths and the like to the boundaries of the 36 blocks proposed in the EDP approval.

201. The estate boundary depicted in the EDP included the Molonglo land together with some Territory land not owned by Molonglo, namely Block 11, Section 47, Fyshwick (Molonglo called this the Adjacent Unleased land).

202. It was proposed that Molonglo would later acquire part of the Adjacent Unleased land (now known as Blocks 12 and 13, Section 47, Fyshwick (the

32 Notice of Assessment dated 7 March 2024, AB 7 33 By application dated 11 June 2024 34 AB 5 35 AB 1 Direct Grant Land)), although, as we understand it, no formal agreement is 36 yet in place for this to occur.

203. Molonglo’s submissions said that the EDP required Molonglo to acquire the Direct Grant Land, remediate the contamination on it, construct a public road 37 on it, and then hand the road back to the Territory. We think what was meant was that Molonglo was required to remediate the Adjacent Unleased land, construct a public road on it, and then acquire the Direct Grant Land.

204. Whichever be the more accurate, our reading of the EDP approval is that that approval did not require Molonglo to acquire the Direct Grant Land nor to do the works referred to above on it. That is, there is no words of obligation in that approval which oblige Molonglo to do those things. We not taken to any part of the EDP approval which purported to have this effect, although it is 38 clear from the documents that those things were contemplated. The only point we are making is that it was not the EDP approval which required those things to occur.

205. The Direct Grant Land is not part of the LVC assessment the subject of this case (and its acquisition is a separate process), but it is within the estate boundary, and the works planned to be carried out on it by Molonglo were part of the EDP works.

206. What has been referred to in the case as the offsite works are works referred to in the EDP which are located outside the boundaries of the estate 39 boundary. It is sufficient to briefly describe those offsite works as being the construction of an on-ramp onto and off-ramp off the Monaro Highway (where it intersects Dairy Road), a Dairy Road site access, bus stop and roundabout, certain active travel paths and a western buffer rising sewer main. There was a plan headed “Off-Site Works Plan” no. 7426-13-400 submitted

36 The estate boundary is the dotted red line in the plan at AB 6706 37 Dated 23 December 2024 at [15] 38 AB 385 [3.1] – 388 [3.12], 7367 39 Clayton Utz letter of instruction at AB 485 at [2.9] 40 as part of the DA 86 application. The approved version of that plan was in 41 evidence.

207. The onsite works were works to be done inside the estate boundary and included regrading of land, the construction of roads and streets, on-street and additional parking, bus stop, active travel, local and community routes, engineering and services utilities, waste management and environmental management, including sediment ponds, on-site wetland, stormwater swales 42 and flow check bundling together with the work on the Direct Grant Land.

208. The onsite works, as we have said, included works which were not on the Molonglo land, but which were within the estate boundary. The importance of that fact is twofold. First, Ms Byrne incorrectly took into account the onsite works which were on Territory land. Second, s 277A(3)(f) purports to exclude works required on land outside the land “under the lease”, and therefore excludes the onsite works that were to be done on Territory land.

The parties’ contentions

209. The parties’ oral and written submissions on the proper interpretation of ss 277 and 277A were detailed and lengthy. We first summarise what was not in dispute and then summarise the parties’ respective cases. Our summary will not do justice to the parties’ submissions but should suffice to convey a general understanding of their respective positions.

Common ground

210. There were six areas of agreement between the parties. We also agree with those matters subject to one qualification to the first matter.

40 AB 5002 41 AB 6708 42 A plan depicting those works is at AB 6680, a general description is at AB620 in Molonglo’s town planning expert report

211. First, the after value of the lease was to be valued under s 277 on the basis that the land would be put to its highest and best use i.e. the most valuable use of the land objectively ascertained by reference to the hypothetical buyer which is physically possible, legally permissible and financially feasible.

212. We agree with that agreed position. It is consistent with Macedonian at [107] and with Valuer-General Victoria v WSTI Properties 490 SKR Pty Ltd [2025] HCA 23 (WSTI) in which the Court said at [37]: "Market value" involves the conventional concept of a hypothetical prudent seller who would require from the hypothetical prudent buyer "the fair price of the land" if the hypothetical prudent buyer was purchasing the land "for the most advantageous purpose for which it was adapted". The most advantageous purpose for which land is "adapted" is the "highest and best use" of the land. In modern terminology, "adapted" or "highest and best use" of land means the most valuable use of the land, objectively ascertained by reference to the hypothetical buyer, which is "physically possible, legally permissible and financially feasible".

213. Our qualification is to what the parties submitted was the highest and best use of the Molonglo land.

214. Both parties submitted that the highest and best use of the land (assuming the lease were varied) was what would result from the construction of the full EDP works, namely the (almost) subdivision. In our view that is not correct.

215. The highest and best use of the Molonglo land is the highest and best use that can be made of the purposes set out in the Purpose clause of the proposed 2 varied lease. That is, using the land for 192,000 m of GFA and 700 multi-unit dwellings. This focus on the lease (and not the approved EDP) is implicitly recognised in s 277(1)(a)(i) which says that the after value is to be valued as if the “lease were varied as proposed”.

216. We accept Ms Byrne’s evidence that the highest and best use of the land is 2 43 using the land for 192,000 m of GFA and 700 multi-unit dwellings. The

43 T 711.14 – 712.26; 717.45-718.10 highest and best use was not, and was not limited to, the (almost) subdivision which would be the result of undertaking the full EDP works.

217. Something like the full EDP works, or a substantial proportion of those works, would have been necessary to achieve that highest and best use because the 2 192,000 m of GFA and 700 multi-unit dwellings would require infrastructure of that approximate scale in order to provide sufficient services for those uses, but the highest and best use was not the (almost) subdivision.

218. There were, on the evidence, a number of different ways to realise the 2 development of 192,000 m of GFA and 700 multi-unit dwellings. The expert town planner, Mr van der Walt, whose evidence was led by Molonglo, which 44 was uncontested and which we accept, said: It is emphasised that various proponents, each with a unique development vision, product outcome and delivery model, could realise different development rights for Blocks 11 and 12 Section 38 Fyshwick, under the Crown lease as varied by DA202341419. In fact, there would be countless approaches to development of the land, commensurate to varied and diverse motivations and aspirations for realising an estate outcome (e.g., focus on more high-end larger residential apartments as opposed to smaller, more compact units; maximising non-retail commercial use, tourist facility and commercial accommodation among other uses).

219. In his report Mr van der Walt set out the general parameters of four such development schemes, being generally described as optimised Territory Plan compliance; optimised development yield; optimised construction cost and difficulty; and optimised gross realisation potential. Each involved, amongst other things, the construction of 700 multi-unit dwellings. No scheme was limited to the subdivision of the Molonglo land and nothing more.

220. The different schemes would differ as to the precise facilitative works required, but each scheme would require “core facilitative works”. Mr van der Walt said that whilst the costed EDP works were particular to the EDP approval, they contained many of the “facilitative works” which would be

44 AB 620 at [63] 2 required under any development scheme to arrive at 192,000 m of GFA and 45 700 multi-unit dwellings. 46

221. “[F]acilitative works” were: … the associated development works required to support the use of the land (for uses and activities permitted by the Crown Lease) and may include works relating to: • bushfire mitigation infrastructure management; • contamination works; • earthworks; • noise protection; • parklands and public communal open space; • roads, pathways and accessways; • stormwater infrastructure and water sensitive urban design measures; • tree management; • utility service infrastructure; and • waste management and like.

222. Put simply, roads, water, power, sewage, stormwater and the other works 2 referred to would be necessary to be done for the 192,000 m of GFA and 700 multi-unit dwellings to be realised. In Mr van der Walt’s opinion, which we accept, the EDP works in this case could accommodate those purposes. That is, if constructed, those EDP works would allow for the construction of 2 192,000 m of GFA and 700 multi-unit dwellings.

223. But the EDP works were a means to an end, not the end in terms of highest and best use. The EDP plan was not the only way to achieve the purposes 47 stated in the lease. Mr van der Walt said, and we accept, that: … there would be countless approaches to development of the land, commensurate to varied and diverse motivations and aspirations for realising an estate outcome …

45 AB 621 at [64]-[65] 46 AB 608 47 AB 620

224. Ms Byrne made the same point. We accept Ms Byre’s evidence wherein she 48 said: WITNESS BYRNE: I don't agree with you in terms of where the land is at and the rights of the land as at the date of valuation. So subdivision is not permitted as at the date of valuation. It is a future intention of the site which has been encapsulated in the EDP. But in terms of what rights someone would be purchasing as at that date of valuation, it is not 35 subdivided sites. It is one Crown lease. SENIOR MEMBER: So how can the highest and best use differ from the EDP? WITNESS BYRNE: I don't consider subdivision necessarily to reflect subdivision is a way in which the rights may be packaged, but the highest and best use, in my mind, is 700 residential dwellings and commercial and industrial style uses on the land. (Emphasis added)

225. Put another way, Ms Byrne’s point was that the approved EDP was just one 2 way of eventually realising the highest and best use of 192,000 m of GFA and 700 multi-unit dwellings. There were other ways to achieve that end result including, for example, differently designed EDPs.

226. The second area of agreement was that the after value is to be ascertained immediately after the variation (meaning the date of the development application approval).

227. Third, applicable public laws, such as those imposed by any prescribed planning schemes, ordinances, codes, statutes or otherwise, must be considered when assessing value. In this case that would include the Territory Plan, the Code the Fyshwick Precinct Code, the Multi Unit Housing 49 Development Code and the Commercial Zones Development Code.

228. Fourth, the word “improvement” where it appears in s 277A(3) in the phrase “… means an existing or improvement …” means the commonly understood meaning of that word, namely: “things done to land which increase the value 50 of the land”; or any human operation that has the effect of enhancing the

48 T 848.26 ff 49 AB 620 at [60] 50 See WSTI at [3] 51 value of land when compared to its natural state; or any human operations 52 on land that have the effect of enhancing its value for its highest and best use.

229. Fifth, the words “genuine seller” in s 277 means a person who is at arm’s length from the buyer and genuinely interested in purchasing the land, or that the sale is a bona fide market transaction.

230. Sixth, the words “must not” in s 277A(1) indicate a mandatory operation.

Molonglo’s interpretation of ss 277 and 277A

231. Molonglo’s case was that the proper interpretation of ss 277 and 277A was to ask what a hypothetical purchaser would have had to offer a hypothetical vendor immediately after the variation to induce it to sell the lease on genuine terms on the relevant date on the assumption that the only existing improvements on the site were by way of clearing, grading, draining, leveling and excavation, but otherwise having regard to all the advantages and disadvantages that would flow to the hypothetical purchaser acquiring the lease.

232. Molonglo submitted that s 277 was the principal provision, and s 277A was ancillary or subordinate to it. Section 277 sought a market valuation, and s 277A could not be inconsistent with that requirement. The sections needed to be read harmoniously. Put simply, Molonglo submitted that any part of s 277A which required some departure from a normal market valuation would be inconsistent with s 277 and thus should be read down.

233. As to s 277A itself, and the definition of “improvement”, Molonglo submitted that the definition only contained two categories of matters, namely existing and proposed improvements, but subject to the condition that those existing or proposed improvements also met the description of one of the matters in s 277A(3)(a)-(f). That is, the matters set out in s 277A(3)(a)-(f) operated to

51 Trust Company of Australia Ltd v Valuer-General [2007] NSWCA 181 at [10], [20] 52 Ibid qualify what would ordinarily be thought of as being existing or proposed improvements.

234. Thus, submitted Molonglo, improvements which may be hypothesised as being necessary to achieve the highest and best use of the Molonglo land were not caught by s 277A and could be considered in the valuation exercise.

235. Molonglo submitted this fitted neatly with s 277 which sought a market valuation. Molonglo’s valuers, Ms Byrne and Mr Flannery, both gave evidence to the effect that a genuine buyer would want to know, and would factor in, the costs of the EDP works when considering what price to pay for 53 the Molonglo land. As Ms Byrne put it: A key component of my instructions relates to whether the approved EDP should be taken into account in the assessment of the ‘After Value’. It is my opinion that the EDP must be taken into account as an assessment of market value based on the Crown Lease alone. [Not having] regard to the EDP, would be misleading and result in an assessed ‘After Value’ not consistent with the definition of market value. This is because a potential purchaser, having regard only to the Crown Lease could assume that as no off-site or on-site works are specified within the lease, that no works are required. (Emphasis original.) 54

236. Or, as Molonglo submitted: Critically, however, both valuers agree that reasonable purchasers would take into account the significant costs associated with the infrastructure works that are required to unlock the additional rights created by the varied lease when determining what they would be willing to pay for that varied lease. This is the most significant issue in this case.

237. Molonglo submitted that improvements are generally attached to the land, the value of land includes the value of the improvements, and thus not taking into account improvements (in s 277A(1)) meant not taking into account the value of the improvements. But, Molonglo submitted, ss 277 and 277A did not prevent taking into account the costs of improvements in making adjustments

53 AB 130 with a typographical error corrected 54 AB 39 at [84] for the purposes of the comparable sales method used by Ms Byrne and Mr Flannery.

238. Molonglo submitted that the word “proposed” in ss 277 and 277A (in the chapeau to the definition of “improvement”) meant something that was put forward by the applicant, or what the applicant intended (or proposed) to do. It did not include improvements that a hypothetical, genuine buyer might have in contemplation to achieve the highest and best use of the land.

239. Therefore, if an applicant such as Molonglo happened to propose improvements which were the same as improvements that would be hypothesised as being necessary to achieve the highest and best use of land, then those improvements could be taken into account.

240. As to s 277A(3)(e), Molonglo submitted that this sub-section only operated if any of the items mentioned within it required anything mentioned in sub-section (3)(a)-(d) in a detailed way. That is, did a condition of a development approval (for example) require a particular building or structure on or under the land.

241. Molonglo submitted that the approved EDP, whilst it was a development approval for the purposes of the sub-section, did not require any of the matters described in sub-section (3)(a)-(d) (save for works in relation to a perimeter fence) because it did not require any particular building, structure etc. It simply required Molonglo to go away and sort out a series of buildings, structures etc with several other Territory authorities. The approval did not 55 say that Molonglo had to do X, or had to do Y. Put another way, the EDP approval did not require the construction of anything because at the point when the EDP had been approved, those things referred to in the conditions of approval had not been ascertained.

242. As to s 277A(3)(e)(iii), Molonglo submitted that whilst there was in existence a Draft Deed which referred to works to be undertaken by Molonglo, the Draft

55 T 1719.35-.40 Deed had not been executed. Molonglo submitted that the subsection could only refer to executed agreements.

243. As to s 277A(3)(f), Molonglo submitted that the EDP was approved on 10 December 2022, and the development application for the lease variation was not lodged until four months later, on 10 March 2023. Molonglo submitted that a lease variation does not take place until the LVC is paid or a deferral arrangement is entered into and cited s 276B. Thus, submitted Molonglo, the lease variation had not taken place (and may never take place) and accordingly the EDP did not relate to a chargeable variation as required by the sub-section.

The Commissioner’s interpretation of ss 277 and 277A

244. The Commissioner submitted that there was no inconsistency or disharmony between ss 277 and 277A. All that s 277A did was to modify the operation of s 277. This was clear, the submission went, from the opening words of s 277A which said that “[i]n working out V1 and V2 under section 277 …”.

245. As to s 277A itself, and the definition of “improvement”, Molonglo submitted that the definition contained three categories of matters, namely existing improvements, proposed improvements and, to the extent they were not otherwise caught by those terms, the matters described in s 277A(3)(a)-(f). Or, in the Commissioner’s words: … so that the defined term ‘improvement’ includes existing or proposed 56 improvements, as well as, each of the matters in s 277A(3)(a)-(f). (Emphasis added.)

246. In oral closing submissions the Commissioner seemed to be retreat from this position, at least in part. He at first disagreed that s 277(3)(a)-(f) added a 57 category of matters, and later said s 277(3)(a)-(f) both clarified and extended 58 the chapeau.

56 AB 10756 at [23] 57 T 1754.23 58 T 1754.45

247. In any event, putting aside the way in which the submission was expressed, the Commissioner was clear in submitting that s 277(3)(e)-(f) captured the EDP works if they were not already caught by the terms ‘existing improvements’ or ‘proposed improvements’.

248. We were not clear what the Commissioner’s final position was in relation to the meaning of the word “proposed”. We thought at the beginning of the case that the Commissioner took the same position as Molonglo, namely that “proposed” was restricted to whatever was put forward for consideration by the applicant.

249. However, in final submissions the Commissioner appeared to take a different position, at least where that word appeared in in s 277A(3)(f). In relation to “proposed” in that sub-section, the Commissioner submitted that the word extended beyond what was put forward for consideration by an applicant, but also included a condition sought to be imposed by the planning authority.

250. In other submissions, the Commissioner said that some improvements that could be hypothesised as being necessary for the highest and best use of the 59 land could be considered in valuing the after value, but not hypothesised 60 works that fall within sub-s (3)(a)-(f). The Commissioner said that some improvements that could be hypothesised for a highest and best use analysis 61 could be considered, but others could not.

251. At another point the Commissioner submitted that s 277A prevented both the 62 costs and value of improvements being taken into account.

252. It was not put this way, but the substance of the Commissioner’s case, as best we understood it, was that when valuing the after value no account could be taken of (or no consideration could be given to) existing improvements, any improvements proposed by an applicant for approval, and any improvements

59 T 1767.31 60 T 1768.1 61 T 1768.7-.17 62 T 174714-.16 which might be hypothesised as being necessary to achieve the highest and 63 best use of land if those improvements fell within s 277A(3)(a)-(f).

Decision

Overview as to how the provisions work

253. We do not accept either party’s interpretation of ss 277 and 277A.

254. What is most important are the words of the sections, with the sections taken as a whole and read in the context of the PDA. We will discuss the words of the two sections shortly but will first provide the following overview.

255. In our opinion ss 277 and 277A, on their proper interpretation, require that in working out the after value, the cost of or value added by any of the following three things must not be taken into account: existing improvements, other than those referred to in s 277A(2); improvements proposed by an applicant, and; anything (presumably existing) which falls within sub-s (3)(e) or (f).

256. The words “must not be taken into account” in s 277A mean that the land to be valued should not be taken, at the time of valuation, to be benefitted or burdened by any of the matters just referred to.

257. That is, the land is to be valued as if: (a) any existing improvements other than those referred to in s 277A(2) were not present; (b) any improvements that the applicant proposed to put on the land were in fact not to be put on the land; 64 (c) anything mentioned in s 277A(3)(a)-(d) that is required as a condition of a development approval, or by a statutory approval obtained or required for a development proposal, or under an agreement between

63 T 1772.35-.41 64 Any buildings or structures on or under the land, any alterations or demolition of any existing building or structure on or under the land, any remediation of the land, and any earthwork, planting or other work that affects the landscape of the land the Territory or a territory entity and the lessee or the applicant for approval, were not in fact required; and (d) anything mentioned in s 277A(3)(a)-(d) proposed in a development application which has some direct or indirect connection with a chargeable variation, and which is to be carried out on land outside of the land under the lease, was not to be carried out.

258. The sections do not prevent the use of the hypothetical development method to value the after value and, within that method, consideration being given to the cost of and value added by any improvements that may be hypothesised as being necessary for a development which would realise the highest and best use of the land.

259. Equally, the sections do not prevent the use of the comparable sales method to value the after value and, within that method, consideration being given to the cost of or value added by any improvements that may be hypothesised as being necessary in order to make adjustments to the land being valued so as to make that land as comparable as possible to a basket of relevant comparable sales.

260. We do not consider that the Legislative Assembly intended that ss 277 and 277A would prevent the hypothetical development or the comparable sales method being available to be used to value land which is required to be valued under ss 277 and 277A.

261. We do not agree with the Commissioner’s submission that the sections require the hypothetical development method to be used in a modified way i.e. in a way that values land on the basis that value added by the addition of improvements may be taken into account, but the not the cost of those improvements.

262. To modify the hypothetical development method in that way would result in fictional land valuations in most if not all cases, a result we regard as being unreasonable or absurd per s 138 of the Legislation Act.

263. We agree with Molonglo that, within the comparable sales method, the sections allow for the cost of hypothetical improvements on the land to be valued being taken into account if that is necessary to allow the land to be brought to a state of comparability with a basket of relevant comparable sales.

264. In our view, our interpretation achieves the purpose of the provisions which was to value, and only value, the extra rights granted by a chargeable variation and without deducting (as had happened previously) the costs incurred by developers which would fall within s 277A(3)(e) or (f).

Section 277A modifies section 277

265. We agree with the Commissioner that s 277A modifies s 277, and there is, contrary to Molonglo’s submissions, no disharmony or inconsistency involved.

266. In our view the opening words of s 277A, namely that “(i)n working out V1 and V2 under section 277 …” are plain in their meaning. They impose a modification as to how the before and after values in s 277 are to be worked out.

267. This is consistent with the Explanatory Statement which expressly said that s 65 277A modified s 277.

268. In our opinion s 277A does not detract from what Molonglo submitted was s 277’s requirement for a market valuation. What must be remembered is that ss 277 and 277A are not concerned with valuing land as it is, they are concerned with valuing the extra rights granted under a varied lease. That is done by ignoring the matters set out in s 277A.

269. Molonglo’s submission was, in substance, premised on the basis that more than the extra rights were to be valued, namely, the extra rights less the cost of certain improvements.

65 See at clauses 116 and 118

270. The result of s 277A modifying s 277 in the way we have described is somewhat analogous to the exercise of valuing the unimproved value of land for the purposes of the Rates Act 2004. In the Rates Act s 6 says that the unimproved value of a parcel of land is the capital amount that might be expected to have been offered on a date for the parcel assuming that the only improvements on or to the parcel were the improvements (if any) by way of clearing, filling, grading, draining, levelling or excavating.

271. That assumption in s 6 of the Rates Act is in substantially the same terms as s 277A(2) which also allows for those improvements to be taken into account.

272. Section 277, as modified by s 277A, may, by way of analogy, be thought of as valuing leased land in a similar way under the Rates Act, but with two valuations being required: being one immediately before and one immediately after the variation.

273. In addition, whatever may be the after value, developers could not, as they had been allowed to do previously, deduct from the increased value of the rights granted the costs of works imposed on them by the approving authorities or the costs of works a developer proposed to do on land outside the land under the lease.

The meaning of “must not be taken into account”

274. Section 277A says that in working out V1 and V2 under s 277, an improvement (as defined) in relation to the land comprised in the lease “must not be taken into account”.

275. The ordinary meaning of “take into account” is along the lines of “to consider” or “to allow for”.

276. The word “must” used in relation to a function indicates that the function is 66 required to be exercised i.e. has a mandatory operation.

66 Section 146(2) of the Legislation Act 2001

277. Therefore, “must not be taken into account” means that in working out the after value, the land to be valued is not to be taken, at the time of valuation, as being benefitted or burdened by any of the matters in s 277A(3).

The definition of “improvements”

278. As mentioned earlier, the parties agreed that the word “improvements” in the phrase “… existing or proposed improvements …” in s 277A(3) means things done to land which increase the value of land, or any human operation that has the effect of enhancing the value of land when compared to its natural state, or any human operation on land that have the effect of enhancing its value for its highest and best use.

279. We agree with that interpretation.

280. Of course, the improvements expressly mentioned in s 277A(2), namely any clearing, filling, grading, draining, levelling or excavating the land, may be taken into account.

281. At times Molonglo contended that the cost of improvements could be taken into account, but not the value added to the land by those improvements. At times the Commissioner contended that the value added to the land by improvements could be taken into account, but not their cost.

282. In our view, when improvements are not to be taken into account, that means that both the costs of and value added to the land by improvements is to be ignored. That interpretations seems clear to us given that the sections simply use the word “improvements” and not “the cost of improvements” or the “value added to the land by improvements” or similar.

“Existing” improvements

283. There was no difficulty with the meaning of “existing improvements”. Self-evidently that expression refers to improvements which exist at the relevant point in time. In this case that is 5 June 2023. “Proposed improvements”

284. Molonglo submitted that the word “proposed” in ss 277 and 277A (in the chapeau to the definition of “improvement”) meant something that was put forward for consideration by the relevant applicant, or what the applicant intended (or proposed) to do. It did not include improvements that a hypothetical, genuine buyer might have in contemplation to achieve the highest and best use of the land. 67

285. We understood the Commissioner’s interpretation to be the same.

286. We agree with that interpretation although not for all the reasons put forward by Molonglo.

287. The ordinary meaning of the word “proposed” is to put forward for consideration or something along those lines.

288. The word “proposed” is not defined in the PDA but is found 156 times within it. Where it appears in other provisions in the PDA it is readily apparent that that word has its ordinary meaning. Ordinarily, the words should bear the same meaning throughout a statute unless there be some context which suggests otherwise. In this case we see no warrant for departing from the ordinary meaning of that word where it appears in ss 277 and 277A.

289. The Commissioner took an expanded position in relation to proposed in sub-s(3)(f) in final oral submissions. The Commissioner submitted that “proposed” in that sub-section included accepting a condition put forward by 68 the approving authority. The Commissioner directed our attention to correspondence between Molonglo and the approving authority.

290. In the Territory the EDP process consists of a consultation phase followed by 69 the EDP Development Application. During the consultation phase various

67 T 1767.7-.34 68 T 1764.5 69 AB 4155 ff entities assess the EDP submission and provide comments to ACTPL. ACTPL then provides the applicant with a whole of government response “outlining 70 required EDP modifications in line with Territory requirements”. The applicant is then “responsible for modifications to the EDP to fully meet Territory requirements or negotiate agreed changes with all relevant entities”.

291. In this way, suggestions made by the planning authorities to applicants end up in an applicant’s proposal for which it seeks approval, namely the “plans, drawings and other documentation approved and endorsed as forming part of 71 this approval”.

292. As we see it, those documents would contain that which Molonglo was putting forward for approval, albeit after discussions with the approving authority and other authorities in the consultation phase of the EDP application process. Even assuming something was included in Molonglo’s application because an approving authority requested it, the fact remains that Molonglo ended up proposing such things because it needed to do so (to comply with the Code and other planning instruments) in order to secure approval.

293. As far as we can determine, the costed EDP works were all works which had been approved pursuant to the EDP approval and therefore had been proposed by Molonglo.

294. “Proposed improvements” do not include improvements hypothesised as part of a hypothetical development methodology or hypothesised to make adjustments under the comparable sales method because they are not put forward for the consideration of the planning authorities.

“And includes any of the following”

295. In our view the better reading of the text of the definition, in the context of the extrinsic materials, is that by the words “and includes the following” the intention was that the matters described in sub-s (3)(a)-(f) had to either be in

70 AB 4156 71 AB 5861 existence or be proposed by a lessee/applicant, and are additional to what might otherwise be regarded as improvements as that term is traditionally understood, albeit there may be some overlap.

296. For example, some buildings, demolitions, remediations and earthworks may not be improvements but might be regarded as worsements. Their inclusion in sub-s (3)(a)-(d) was to avoid any doubt that they must not be taken into account. In this case one example would be the need to demolish certain public infrastructure located on the land, namely what Mr Wolmarans categorised under his heading Removal of Utilities (being the Icon Water sewer rising main, a TCCS stormwater main, and Icon Water sewer pumpstation, EVO Energy powerlines). They do not service the Molonglo land, but need to be relocated to allow the EDP to proceed. They do not add value to the land as Ms Byrne pointed out, but the effect of s 277A is to ensure that the cost of their removal is not taken into account (other than if necessary for the comparable sales method). That is, when valuing the land, the land is not to be taken to be burdened by those worsements.

297. Sub-sections (3)(e) and (f) are similar. Their purpose was to exclude what developers had previously been allowed to deduct (at least in part) from CUCs. Works on land outside the land under the lease (sub-s (3)(f)) would not ordinarily be regarded as improvements to the land being valued, which is another indication that the sub-s (3)(a)-(f) matters were to be added to what would ordinarily be regarded as existing or proposed improvements.

298. Of course, there is a degree of overlap between what would ordinarily be regarded as existing or proposed improvements and some of the matters within sub-s (3)(a)-(e) (such as buildings for example), but that is not an obstacle to the construction we have given.

299. There are two other possible interpretations.

300. The first is that the matters in sub-s (3)(a)-(f) are neither existing nor proposed, which is an interpretation the Commissioner contended for. If that were the interpretation s 277A(3) would include all hypothesised improvements that fell within sub-s (3)(a)-(f) and would therefore rule out in a case such as this the use of the hypothetical development and comparable sales methodologies to value the after value. That interpretation is also somewhat awkward because what falls within sub-s (3)(e) and (f) could only be existing or proposed given the language used.

301. The second is that for something to fall within sub-s (3) it had to be two things: it had to be one of the things that met fell within sub-s (3)(a)-(f); and it had to be either existing or proposed. This was an interpretation contended for by Molonglo. The effect of this interpretation was to reverse the order of the language of the sub-section. That is, to read sub-s (3)(a)-(f) first, and then subsequently to read the chapeau to the sub-section. Doing so would have the effect of narrowing the traditional interpretation of “improvement” that we have referred to earlier, and we see no support for that interpretation in the text or context. There was certainly no reference to such an interpretation in any of the extrinsic materials, and ordinarily statutory provisions (including 72 sub-sections) are read in the order in which they appear. We see no warrant for, in effect, reading the subsection in reverse.

302. The words “and includes any of the following” indicate to us that the matters which followed (if they were themselves existing or proposed) were to be included with existing and proposed improvements as matters which “must not be taken into account”.

303. That they were additions to (traditional) existing and proposed improvements is indicated by the conjunctive “and” together with the word “includes” (which ordinarily means something like comprised or contain as part of a whole, or to make part of a whole or set).

304. Our interpretation of “and includes the following” is consistent with the extrinsic material which clearly reveals that the purpose of the provisions was to exclude from the calculation of the LVC matters which had previously been allowed. These included, for example, mandatory offsite costs imposed on an

72 See Patman v Fletcher’s Fotographics Pty Ltd (1984) 6 IR 471 per Priestley JA at 474-5; Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256 per Basten JA at [213] applicant by development or other statutory approvals. In the Final Report it 73 was said: With respect to offsite costs, our understanding is that the majority of these are mandatory costs imposed by the Government as part of the DA process. Such costs include intersections and road upgrades, for example. The requirement from the developer to undertake these offsite works as part of a development/redevelopment appears to have worked well. This approach satisfies the requirement of timeliness and efficiency from the point of view of project delivery. As in the case of onsite costs however, these mandatory offsite costs should not be included as part of the CUC. Infrastructure costs should be considered separately from the determination of the CUC and each reported separately.

Section 277A(3)(e)

305. This sub-section said that any buildings or structures on or under the land, any alterations or demolition of any existing building or structure on or under the land, any remediation of the land, and any earthwork, planting or other work that affects the landscape of the land that was required by a development approval, or required by a statutory approval obtained or required for a development proposal, or was required by an agreement between the Territory/Territory entity and a lessee/applicant must not be taken into account.

306. Molonglo accepted, correctly in our view, that the EDP approval was a “development approval” for the purposes of sub-s (3)(e)(i). The application for the EDP, the DA 86 application, was a development application (as defined) containing a development proposal (as defined). Approval of DA 86 was given under Chapter 7 of the PDA. and thus, it was a development approval as defined.

307. It also seems to us that the EDP approval would fall within the meaning of “statutory approval obtained for a development proposal” since it was issued

73 Section 2.5.4 at pp 17-18 pursuant to the provisions of the PDA and was an approval of the proposal put forward for consideration by Molonglo in its DA 86 application.

308. The next question is what if any buildings, structures, alterations, demolition, remediation, earthwork, planting or other work that affected the landscape was “required” as a “condition” of a development approval.

309. The word “required” is not defined in the PDA. It’s ordinary meaning is along the lines of officially compulsory, or otherwise considered essential, or made necessary by.

310. The flavour of the word in this context is that the source of the obligation to do the work is a condition in the development approval. That is, somewhere in the development approval one must find words which impose the obligation on the applicant to do the specified thing.

311. Molonglo submitted, correctly in our view, that the terms of the EDP approval did not require, make necessary or make officially compulsory the EDP works. The EDP approval did, in some regard, impose conditions as to how those works might have to be achieved, or how their design may have to meet other requirements (such as approvals from Icon Water and EVO Energy), but that is not the sense of “required” in the first line of sub-s (3)(e). The sense of that word applied to the matters in sub-s (3)(a)-(d) is that the approving authority required a particular building to be built, for example, when no such building was proposed in the development application.

312. As we said at [175] above, the EDP works were all works (or substantially all works) which Molonglo put forward in its development application for ACTPLA’s approval. ACTPLA did not receive an application for approval of specified works, and then, by its EDP approval, impose obligations on Molonglo to undertake the EDP works (assuming those works fell within sub-s (3)(a)-(d)). The EDP approval did impose some generalised requirements that the approved works were required to comply with the requirements of various other agencies, but the works themselves were not required by the EDP, they had simply been approved by the EDP.

313. This reading of the EDP is consistent with Molonglo’s submission that what had to be in the EDP would have been required by the provisions of the Territory Plan, the Code and other planning instruments such as the Fyshwick Precinct Code, Multi Unit Housing Development Code and Commercial Zones Development Code. It is those planning instruments which in substance 74 required the EDP works, not the EDP approval. That is, the Territory Plan and other applicable planning instruments set out the various planning requirements which governed development of the Molonglo land. It was those planning instruments that required certain works for an EDP if a developer wanted an EDP approved.

314. For completeness we note that an argument put forward in Macedonian to the effect that a development approval obliged an applicant to undertake the subject works was rejected (at 78]). No party contended otherwise in this case.

315. Molonglo made another submission on the meaning of “required”. It submitted that that approval did not require the EDP works because the approval simply said that Molonglo had to go away and sort out a series of things with a number of other Territory authorities. It didn’t say Molonglo had to do X, or had to do Y.

316. The end result of that submission is correct in our view, although we prefer our reasoning to that contained within the submission.

317. In relation to sub-section (3)(e)(iii), Molonglo submitted that the sub-section must refer to executed agreements and not draft agreements. We agree. Neither the word “draft” nor any of its synonyms appear in the sub-section. Further, there may be any number of drafts of an agreement which may have been the subject of negotiation, and they would probably be in conflict. If the section intended to capture draft agreements it does not say how any such conflict could be resolved. Those are all indications the sub-section only refers to binding and enforceable agreements.

74 AB 22 [9(b)]

318. In our opinion, the EDP works were not required as a condition by any of the matters set out in sub-s (3)(e)(i)-(iii).

Section 277A(3)(f)

319. This sub-section said that any buildings or structures on or under the land, any alterations or demolition of any existing building or structure on or under the land, any remediation of the land, and any earthwork, planting or other work that affects the landscape of the land proposed in a development application in relation to a chargeable variation of a nominal rent lease to be carried out on land outside of the land under the lease must not be taken into account.

320. The sub-section requires that the buildings etc had to be “proposed in a development application” to be carried out on land outside of the land under the lease, and that the development application had to relate to a chargeable variation (a variation of a lease).

321. The Commissioner submitted that all the offsite works were caught by the sub-section.

322. The Commissioner submitted, and we accept, that any relevant proposal (for 75 a building etc) need not appear in the development application form itself, but could be contained in documents lodged with the application, in subsequent correspondence or other documents lodged with ACTPLA and which had the effect of adding to, refining, or otherwise affecting what the planning authority was being asked to approve. This is consistent with the definition of “development proposal” in the PDA which was defined as “a proposal for development, whether in a development application or otherwise” (emphasis added).

323. It also accords with common sense in that there is frequently subsequent correspondence between an applicant and an approving authority in relation

75 Which appears to be a form capable of being completed and submitted online – see AB 926 and the passage under the heading “Before Starting”. to development applications, and that subsequent correspondence can add to, delete from, alter or refine what was originally proposed.

324. The Commissioner took us to a document which preceded the development application by about three months, and which referred to some offsite works 76 (being outside the boundary of the EDP).

325. However, the better starting point is to identify that which Molonglo ultimately was putting forward for approval. In this case that would commence with the application and the plans attached to the Letter of Authorisation dated 12 August 2022. Amongst those plans was the Off-Site 77 Works Plan 7426-13-400 (for work outside the EDP boundary) and other documents included with the application which referred to the Direct Grant 78 Land.

326. Molonglo submitted that these works were not proposed by it but were imposed on it. Molonglo submitted that it did not propose the off-site works, 79 that the off-site works were “included as a condition”.

327. We do not accept Molonglo’s submission.

328. The development application included the plan headed “Off-Site Works Plan” 80 no. 7426-13-400 which was marked “FOR APPROVAL”.

329. Molonglo drew out attention to correspondence from Molonglo to the Environment, Planning and Sustainable Development Directorate dated 1 March 2022 in which Molonglo referred to offsite works and suggested they 81 be dealt with in a separate development application. Molonglo submitted that there was an insistence that the works be dealt with in the same

76 Letter dated 25 May 2022 from Molonglo to the Environment, Planning and Sustainable Development Directorate at AB 4197 77 AB 6708 78 AB 962, 973 79 T 1725.20-.24 80 AB 5002. The approved version of that plan was at AB 6708 81 AB 4170-4171 development application and that subsequently they were imposed on Molonglo by a condition of approval.

330. The submission said that Condition 6 of the EDP approval imposed this condition to do the offsite works. Condition 6 was headed “OFFSITE 82 WORKS”, but that condition, on our reading, did not require those offsite works to be done. If anything, it was the Code and other planning instruments which required that work to be done if an EDP was to be approved.

331. Condition 6, on our reading, certainly required details of those works to be submitted, and that the details had to address various matters, but they were details about the “offsite works proposed to be undertaken by the proponent” (emphasis added).

332. In our view the offsite works, together with the works within the Estate Boundary but outside the lease, were proposed by Molonglo in a development application, namely DA 86 (which included all associated documents and correspondence).

333. The next question is whether that development application related to the variation of the lease.

334. The words “in relation to” found in the subsection are normally given a wide meaning as was acknowledged by Molonglo. In other statutory contexts those words or their synonyms have been said to require no more than a direct or indirect relationship between two subject matters. In the PDA we consider them to have the same operation because of the context in which they appear.

335. Molonglo submitted that the “anything” in sub-s (3)(f) had to be found in the very development application which sought the variation of the lease. We do not agree.

336. If that was the intention, then the word “for” (or “deals with” as suggested by Molonglo) would have been used instead of “in relation to”. The latter words are well recognised and appear in many statutes. There is no textual or

82 It’s final form (T 1726.30-.35) was at AB 5898 contextual warrant for giving those words the narrow interpretation proposed by Molonglo.

337. It would also seem illogical to make that distinction. That is, we ask rhetorically, why would the Legislative Assembly wish to include or exclude the same works on the same land simply because they were proposed in one development application for land rather than another development application for the same land?

338. Such an interpretation would also have the obvious effect that developers would thenceforth sidestep the sub-section by putting any offsite works into a separate development application.

339. Development applications relate to identified land. So do chargeable variations. If the same land is the subject of both, then for the purposes of calculating the LVC the Legislative Assembly intended to exclude from being taken into account anything (in sub-s (3)(a)-(d)) that an applicant proposed to undertake on land outside the land under lease and which related to the change in the use of the land (the chargeable variation). Here that relationship was clear.

340. It may happen that a development application seeks approval of a development which is already permitted under an existing lease, and then the lessee applies for a variation of the lease to increase the permitted uses (but intends to continue with the original development application). That may be an example of where sub-s (3)(f) does not apply because although the original development application relates to the same land, it does not relate to the proposed change of use.

341. In our view there was a direct relationship between the offsite (and other) works proposed by Molonglo in DA 86 with the chargeable variation which arises out of the approval of DA 19. As we have mentioned earlier, the two applications were expressly interconnected. As Molonglo said in a letter to 83 Ms Byrne dated 8 April 2024:

83 AB 10924 The Lease Variation DA was specifically lodged in accordance with Condition 3(a) of the Estate Development Plan DA.

342. Ms Byrne, incorrectly in our view, said that the EDP required certain works. 84 She said: An EDP was subsequently prepared and the EDP Notice of Decision of Approval (EDP NoD) on 19 December 2022 includes requirements that public roads, road reserves (including water gardens), services and other aspects must be handed back to Transport Canberra and City Services (TCCS) as a condition of development. These are compulsory works within the land boundary.

343. We do not read anything in the EDP requiring these works or a handback. In 85 correspondence Molonglo identified Condition 8 as imposing that 86 requirement, but we do not read Condition 8 that way. Various emails demonstrate that the planning authority was also unaware of such a requirement, although it was anticipated that those things would occur through 87 a negotiated process.

344. The offsite works were proposed by Molonglo because it desired to obtain an approved Estate Development Plan. It was the planning instruments which required the roads (and other infrastructure) to be included and to meet various requirements if Molonglo was to receive an approved EDP.

345. The EDP application proposed these works. Under the heading “Fully Describe Your Proposal” it said: Proposal for an estate development plan for to create 36 blocks, four public roads, and associated relocation of existing utilities infrastructure, construction of new utilities infrastructure, and earthworks. This application also seeks approval for tree removal and demolition of fences and buildings. (Emphasis added.)

346. The EDP approval said that the delegate approved, subject to conditions: … the proposal for an Estate Development Plan (Dairy Road Estate Development Plan) that includes

84 AB 89 85 AB 1354 86 Condition 8 is at AB 5864 87 Summarised at AB 1630-1631 • the creation of 36 new CZ3 - Services Zone block • utility services, roads, footpaths, earthworks, tree removal, landscaping, public open spaces, publicly accessible open spaces; including demolition and other associated works; • offsite works • in accordance with the plans, drawings and other documentation approved and endorsed as forming part of this approval. (Emphasis added.)

347. We are satisfied that the offsite works (together with other works outside the land under the lease but inside the Estate Boundary) were proposed in Molonglo’s DA 86 application, that they were matters mentioned in sub-s (3)(a)-(d), and that DA 86 related to DA 19 (the chargeable variation).

Valuing the after value

348. In relation to the value to be given to the lease if it was genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require, the parties and we agree that the wording is no different, in substance, to the well-known formulation set out in Spencer 88 v Commonwealth [1907] HCA 82.

349. Both parties submitted that in assessing market value the valuation should be approached on the basis that the land would be used for its highest and best use. This is consistent with [107] of Macedonian quoted earlier in these reasons and what fell from the High Court in Valuer-General Victoria v WSTI Properties 490 SKR Pty Ltd [2025] HCA 23.

88 We observe that s 277 only refers to the reasonable terms and conditions that a genuine seller would require and makes no reference to a genuine purchaser. If anything, the omission of any reference to a genuine purchaser supports our construction of s 277A, although we do not rely on that fact. It seems more probable to us that meaning of (a)(ii) in the definition of the after value is a reference to a market price involving both a genuine seller and genuine buyer

350. Although the High Court was considering particular Victorian legislation, the Court said at [36] that the conventional concept of "market value" inhered in the definitions under consideration. The Court then said at [37]: "Market value" involves the conventional concept of a hypothetical prudent seller who would require from the hypothetical prudent buyer "the fair price of the land" if the hypothetical prudent buyer was purchasing the land "for the most advantageous purpose for which it was adapted". The most advantageous purpose for which land is "adapted" is the "highest and best use" of the land. In modern terminology, "adapted" or "highest and best use" of land means the most valuable use of the land, objectively ascertained by reference to the hypothetical buyer, which is "physically possible, legally permissible and financially feasible".

351. And at [42]: … And both alternative valuations are to be conducted based on the orthodox concept of market value, which carries with it the conventional understanding that the market pays for land at its highest and best use, properly understood not as the theoretical maximum development potential of the land which might be legally permissible and physically possible, but the most valuable objectively ascertained development potential which is legally permissible, physically possible and financially feasible. (Emphasis added.)

352. Therefore, the value must be based on the highest and best use allowed for by the varied lease, and that would be the most valuable objectively ascertained development potential which is legally permissible, physically possible and financially feasible.

353. The highest and best under the proposed varied Crown lease in this case is to 2 construct 192,000 m of GFA and 700 multi-unit dwellings. The highest and best use is not the lesser use of an (almost) subdivision contemplated by the approved EDP.

354. Keeping those matters in mind, we accept Ms Byrne’s direct comparison method does not offend ss 277 and 277A, and we accept that her comparable sales are the indirectly relevant comparables to use.

355. Whilst we accept that some of the EDP works were necessary to make the Molonglo land as comparable as possible, we do not accept the quantification of those costs as put forward by Molonglo which Ms Byrne used to arrive at an after value, but these are easily adjustable by us.

356. We do not accept Mr Flannery’s or Mr Dyson’s evidence for the reasons set out below.

357. In addition, and against the event that we are wrong in not accepting Mr Dyson’s evidence, we would have preferred Ms Byrne’s comparable sales methodology over Mr Dyson’s hypothetical development methodology in this case.

358. The comparable sales method is usually the preferred valuation method. As explained in Maurici v Chief Commissioner of State Revenue [2003] HCA 8 at [16]: The traditional, and usually unexceptionable method is to seek out relatively contemporaneous sales of comparable properties between parties at arm’s length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yardstick for the valuation of the relevant land. 89

359. It is usually preferred by the courts, although not always so. It is also 90 preferred by the ACT’s Revenue Office whose Guidelines say:

The direct comparison method is the preferred approach for LVC valuation matters. A hypothetical development method is regarded as a check method only and may be considered if it reflects a scale of development appropriate for the subject property and the assumptions appear reasonable.

360. As Parker AC said in Tenstat v Valuer General; Woolworths Limited v Valuer 91 General [2012] NSWLEC 1361: 35. It is well established that, if comparable sales are available, the direct comparison of sales evidence approach is the conventional method of valuation (Graham Trilby Pty Ltd v Valuer General [2009] NSW LEC 1087 at 41(Trilby); Redeam Pty Ltd v South Australian Land 89 For example, Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; City Hill Pty Limited v ACT Planning and Land Authority and ACT Civil and Administrative Tribunal [2015] ACTSC 40 (City Hill) at [72]; Commonwealth v Arklay (1952) 87 CLR 159 at 169-170 90 AB 11108; T 888.22 91 Followed in SNS Pty Ltd v Roads and Maritime Services [2018] NSWLEC 7 at [123] (Pain J) and Johnston v Valuer-General of New South Wales [2024] NSWLEC 90 (Pritchard J) Commission (1977) 40 LGRA 151 at 156; Riverbank Pty Ltd v Commonwealth (1974) 48 AJLR 483 at 484; Marroun v Roads and Maritime Services [2012] NSWLEC 196 at 196 (Marroun)). 36. The process of undertaking a valuation using comparable evidence comprises several steps, including the: (a) accumulation; (b) analysis; (c) adjustment; and (d) application of potentially genuinely comparable sales (Trust Company Limited v Minister Administering the Crown Lands Act 1989 [2012] NSWLEC 73 (Trust Company); Marroun, 197).

361. In Gwynvill Properties Pty Ltd v Commissioner for Main Roads (1983) 50 LGRA 322 at 326 Cripps J said (in an oft cited passage): The hypothetical development method is normally suspect because it depends on a number of assumptions and a number of estimates, eg. cost of building, estimated gross rentals obtainable, probably outgoings and, most significantly, the rate percentum of return which could be expected and the profit and risk factor expressed in percentage terms. It has been said that because many estimates and assumptions must be made, the hypothetical development method ought not be used where some use can be made of a comparable sale. 92

362. Ms Byrne made this very point when she said: WITNESS BYRNE: So you would need to take into account every cost that is required to be incurred by a developer in order to make those parcels saleable, and we do not have all of that information as it stands. A separate DA would need to be run for subdivision. There would be different development costs to extend services to each of those boundaries. That information is not before us. The other thing is that a hypothetical development approach requires the valuer to assess one particular plan of development for the land, which in this case has been Molonglo Group's future plans for the site. It requires the valuer to presuppose one particular development approach as opposed to looking at what - how the broader market would view the property and what a typical hypothetical purchaser would pay. The other thing is that with a hypothetical development approach, you have many, many inputs that can have a significant impact on the accuracy of the valuation. If one valuer assumes the development will take three years to reach its conclusion, another assumes seven years, another assumes ten years, you will have a very different outcome. If you assume different costs of construction, different costs related to planning, interest, bank and finance costs, there would be in excess of 30 different inputs where each time one valuer makes an assessment of something, it will trigger a

92 T 844.32-845.8 difference between what the residual land value would be. And you're presupposing one particular, one - the purchaser's specific scenario rather than the market. There's a number of reasons why the hypothetical development approach is not the preferred approach for valuations for lease variation charge.

363. Of course, as Refshauge J said in City Hill at [96]-[104], the hypothetical development method is a valid method of valuation. The question in any case is which is the preferred method.

364. In our view the comparable sales relied on by Ms Byrne were reasonably comparable and sufficient in volume to form a proper basis for comparison. Her adjustments brought the Molonglo land to a state reasonably comparable to the serviced land sales she used. There were some differences in not insubstantial ways, but Ms Byrne employed a process of reasoning which established their utility. Her reasoning process was logical and convincing.

365. As was said in Maurici at [18], sales which are to be treated as comparable sales need to be truly comparable, may not be unduly selective, must be relevant and sufficient in volume. In our view Ms Byrne’s comparables pass those tests in this case.

The valuation evidence

General comments

366. Ms Byrne and Mr Flannery were called by Molonglo. Mr Dyson was called by the Commissioner.

367. All valuers impressed us as honest witnesses attempting to assist us to the best of their abilities. Ultimately, for reasons to which we will come, we accept Ms Byrne’s methodology (in terms of adjusting for EDP works undertaken on the land under the lease, but not accepting the figures upon which she relied) over Mr Flannery’s. Ms Byrne’s logic and process of reasoning was the more exposed, was the more persuasive and we are able to make adjustments to her end result which we are unable to do with Mr Flannery’s end result.

368. We do not accept Mr Dyson’s opinions for several reasons. Most importantly, he did not seek to value the highest and best use of the land. That is, he did not use the most valuable objectively ascertained development potential for the Molonglo land which was legally permissible, physically possible and financially feasible. Mr Dyson’s hypothesised development to achieve the highest and best use of the land was the (almost) subdivision which would result from undertaking the EDP works. In our opinion, and that of Ms Byrne, 2 the highest and best use would be to construct 700 dwellings and 192,000 m of GFA.

369. In addition, and in relation to Mr Dyson’s Assessments 1-5, Mr Dyson (as he was instructed) did not deduct the full costs of the hypothetical development which that methodology requires. We do not accept the Commissioner’s submission that ss 277 and 277A required that those costs not be deducted.

370. We also preferred Ms Byrne’s evidence over Mr Dyson’s because of Ms Byrne’s greater experience of and familiarity with the Canberra market compared to that of Mr Dyson. Amongst other experience, Ms Byrne has had significant experience undertaking complex valuations including undertaking reserve pricing valuations for the Territory’s Suburban Land Agency (the SLA), and lease variation charge valuations, and her work is now primarily focused on land within the Territory.

371. All three valuers noted that there was no directly relevant comparable sales evidence in relation to the Molonglo land, it being such a large, rugged, semi-rural block with uneven topography, and requiring clearing and servicing 93 works to bring typical services to the land. As Ms Byrne put it: Ideally the subject would be compared to other similar rugged, semi-rural blocks with uneven topography, requiring clearing and servicing works to bring typical services to the land. In the absence of sales evidence of that type, the best available market evidence is of the serviced land sales …

372. There was some disagreement between the valuers as to some of the comparables used (Mr Dyson used the comparable sales method as a check

93 AB 85 method for his Assessment 6), but there was no disagreement that there simply were no comparable sales of land near 14 ha in area and having the characteristics described by Ms Byrne above.

373. Mr Flannery described the Molonglo land as “somewhat unique”, a description which, if anything, was a little understated.

374. In Mr Dyson’s opinion the land in issue was so different to the comparables used by Ms Byrne and Mr Flannery that the comparable sales method was unreliable other than as a check method. Although there were greater differences than would otherwise be desirable, we do not consider that the comparable sales method was not able to be used in this case. 94

375. The practical problem, as described by Ms Byrne, was: In a perfect world, when assessing the market value of a development site, there would be 3-4 examples of similar sized blocks, in a comparable location typically within the greater ACT region, with the same zoning, with a Crown Lease Purpose Clause near identical to the subject site, with readily available information on the rate per residential unit (for example) that a purchaser is willing to pay in a hypothetical sale under the existing market conditions. In reality in the ACT, large development site sales happen relatively infrequently and the sites are often far from homogenous due to different (City versus Town Centre, suburban or even semi-rural) locations, changes over time to market conditions, some properties having a requirement for affordable housing and/or requirements to provide public carparks, differing maximum dwelling yield etc.

376. Notwithstanding the problems inherent in using the comparable sales method in this case given the size of the adjustments that have to be made, there is little doubt that the extra rights granted by the lease variation had value.

377. Courts sometimes must do the best they can with the available evidence when assessing damages. So must we do the best we can with the available evidence to arrive at a value for the increased rights. When we say the “available evidence” that does not mean that the parties were deficient in the evidence

94 AB 119 they tendered. It is simply a recognition that the Molonglo site is unique and there are no directly relevant comparable sales with which to compare it.

378. The parties’ valuers adopted different approaches to valuing the after value. It is useful now examine their evidence.

379. In doing so it is apt to remember that s 138 of the Legislation Act says that “working out the meaning of an Act” means, amongst other things, finding the meaning of ss 277 and 277A when their apparent meaning leads to a result that is manifestly absurd or unreasonable.

Ms Byrne

380. Ms Byrne used the comparable sales method as her only valuation method.

381. In substance, Ms Byrne’s evidence was that the onsite and offsite costs should be factored into the assessment of the after value in two ways.

382. First, she said that in the real world any reasonable purchaser would factor in the costs of the EDP work into its calculation of market value.

383. Second, she used the costs of the EDP work as an adjustment to be made in order to be able to compare the Molonglo land with what she judged to be the most comparable sales that were available (and which she called “serviced land sales”). These serviced land sales were, in basic terms, land which Ms Byrne described as being “shovel ready” for development i.e. with adequate services (roads, power, water etc) to the boundary of those sites. 95

384. Or, as she said in her report: … my understanding of serviced land is that it is land on which all infrastructural works, including those relating to roads, walls, drains and utility services have been completed. It is often described as ‘shovel ready’ (although there are varying degrees of this), where there are adequate services available to the site to support the proposed development (but not a situation where services are extended throughout the site to the location of each future building for example).

95 At AB 122

385. The Molonglo land was not shovel ready in the sense that there were not adequate services to the boundaries of the 36 sites which were proposed in the EDP, or there were not sufficient facilitative works (using Mr van der Walt’s 2 expression) to support 700 multi-unit dwellings and 192,000 m of GFA.

386. Ms Byrne used the EDP works costed by Mr Wolmarans to hypothetically bring the Molonglo site up to a comparable standard (in terms of services like roads, power water etc) to the serviced land sales sites she used for comparison.

387. Ms Byrne used what she regarded as the most comparable sales available, made an adjustment to hypothetically bring the Molonglo land up to a state of comparability with those serviced land sales by using Mr Wolmarans’ costings for the onsite works, made other adjustments for scale, location and the like, and arrived at three rates: one rate for the 700 multi-unit dwellings; one for the restaurant/shop use; and one for other uses. She then multiplied those rates against the number of dwellings and the amount of GFA.

388. Totalling those figures Ms Byrne arrived at an after value of approximately $30m. She then deducted $15m for the cost of the offsite works to arrive at an after value of approximately $16m.

389. Initially, Ms Byrne had been provided with costings of the full EDP work undertaken by Turner & Townsend (a quantity surveying firm whose costings were not tendered). But those costings, in Ms Byrne’s opinion, included matters which went beyond what was required (as best she could determine) to make the Molonglo site the most comparable it could be to her serviced land sales.

390. It was for that reason that on 6 May 2024 Ms Byrne requested Molonglo to provide to her revised costings of the EDP works (from Molonglo’s quantity surveyor) so that the only costs included were those ensuring availability of all typical services to the Molonglo site. In her request Ms Byrne asked that 96 in the revised costings the:

96 AB 10929; T 795.38-796.21 … costs included are limited to ensuring availability of all typical services to the Subject Property (being Block 11 & 12 Section 38 as a whole) rather than to the future subdivided sites – as this is the standard we would apply to the comparable market evidence.

391. The result was Mr Wolmarans report dated 12 December 2024 (Mr Wolmarans’ 2024 report) which contained the costings used by Ms Byrne in her report dated 13 December 2024 (Ms Byrne’s 2024 report). Included in those costing were works on land other than Molonglo land.

392. In Ms Byrne’s 2024 report, and in her oral evidence, Ms Byrne made the point that the costed EDP works (as costed by Mr Wolmarans) did not include all work which would be necessary to make the 36 proposed blocks saleable as 97 subdivided or subdividable blocks.

393. Ms Byrne explained that undertaking the full works required by the EDP would take the Molonglo site to a subdividable state, at least in a physical sense.

394. Although Ms Byrne used the costings of the EDP works, those works contained many of the “facilitative works” which would be required under any 2 development scheme to arrive at 192,000 m of GFA and 700 multi-unit 98 dwellings according to the uncontested evidence of Mr van der Walt.

395. Ms Byrne’s serviced land sales were a collection of sales which had adequate utilities, roads and footpaths and the like (which we will simply call utilities for ease of expression) to the boundary of each site sufficient to support whatever development was proposed on that site. With the Molonglo site, there were no utilities to the boundary of each (or most) of the proposed 36 sites.

396. It was an impossible exercise to attempt to make that adjustment the other way, that is, by quantifying the value of those services to the boundary of the serviced land sales and then deducting that value from the market value of those sites. An attempt to explore that option was explored during the hearing

97 T 736.38-.46; 780.15-.24; 797.24-.38 87 98 AB 621 at [64]-[65] of the matter with the result being that some of the relevant services were unquantifiable. For example, rhetorically speaking, how does one value a public road on the boundary of a serviced land sale which then proceeds past many other properties.

397. The only other alternative if one was to use the comparable sales method was to make an adjustment to bring Molonglo up to the standard of the comparable sites so far as servicing by utilities was concerned. Mathematically, it is the same as deducting the value of those services from the serviced land sales values if that were possible to do.

398. The end result was that Ms Byrne used the onsite works costings to hypothetically bring the Molonglo site up to a comparable standard to the serviced land sales so that, after other typical adjustments valuers make in the comparable sales method, she could then make a judgment as to the value of the Molonglo site in its current state i.e. immediately after the variation, compared to the most comparable basket of sales she could find. 99

399. Ms Byrne explained her method as follows: So the intention is that the sales are, as much as is possible, directly comparable to each other. You’ve still got differences for location; is it going to be a premium site; is it going to be an average site; is the block a regular shape or is it irregular; is it an island site or does it have four adjoining neighbours? There are still differences that have to be taken into account, but in as many respects as is possible, they can be compared to each other.

400. Ms Byrne said that if the full EDP works were done, (and costed on that basis) the Molonglo site would have been (at least in physical form) brought up to a subdividable state. If that were done, she said, the land would be valued 100 differently. She explained the difference in her oral evidence as follows: So the rights here being valued is the bulk sum of 700 dwellings and the GFA. On a subdivided basis, it is the right to sell 35 lots with smaller parcels of dwellings or smaller amounts of GFA, which could be released in any manner that a purchaser - or that the owner of the land intended. Whereas at this point we're talking about the pool of hypothetical purchasers prepared to purchase the Crown lease 99 T 699.3 100 T 803.24 including these rights on an overall basis with significant risk and a significant envisaged timeframe in which to exercise those rights. So a lot greater risk in purchasing 700 units and all the GFA than in considering, you know, the sale of individual parcels at a later date after extra works have been done.

401. In our view Ms Byrne’s first rationale for taking into account the (revised) EDP costs (what a reasonable purchaser would consider in the real world) is not appropriate because it explicitly or implicitly offends s 277A. It would result in all of the costs of the EDP works to be taken into account, even when it was work to be undertaken on Territory land, because a purchaser would have regard to all costs it had to pay if it purchased the land. That is why he final deduction of the offsite works costs is not allowable, it is prohibited by s 277A(3)(f).

402. However, in our view her second rationale does not offend ss 277 and 277A because it involved using only those hypothetical improvements (within the comparable sales method) which would make the Molonglo site as comparable as possible to the basket of comparable sales. Those hypothetical improvements, were, in this case, only those works to be carried out on the Molonglo land.

403. In our view, as we have previously set out, using hypothetical improvements for the purpose of making adjustments to make the subject site as comparable as possible to the basket of comparable sales is allowable.

404. Ms Byrne, as far as she was able, excluded the costs of any EDP works other than those necessary to make the Molonglo land as comparable as possible to her serviced land sales. She excluded matters such as staging or escalation costs because she did not think those matters were appropriate to take into account. That was because those things were developer dependent in the sense that they would vary between developers depending on each particular developer’s plans. In that way those things would not be reflective of market 101 value at the date required by ss 277 and 277A.

101 T 781.4-.46; 933.12-.20 102

405. As Ms Byrne explained: And it was my approach to create a situation where the subject site could be compared to the sales, but consciously without incorporating a whole range of developer costs that were only related to a future subdivision which wasn't what I was valuing as at this date.

406. Given Ms Byrne had valued the before value at approximately $24m, and the parties agreed that the before value was $21,408,000, the Commissioner submitted that Ms Byrne’s after value of $16m was manifestly absurd given it was about $5m less than the before value despite the fact that extra rights had been granted.

407. In our view the result of Ms Byrne’s calculations was absurd, but not because of her general methodology. Rather, the absurd result was reached for three different reasons. First, the EDP costs she used were overstated. Second, she incorrectly included the onsite costs in their totality when some of those works were for work on land outside the land under the lease. Third, she incorrectly deducted the costs of the offsite works. When those matters are corrected, and using Ms Byrne’s methodology, the after value is greater than the before value and arrives at what we consider to be the correct after value.

408. Ms Byrne’s logic was to determine what the Molonglo land lacked in terms of utility servicing compared to her serviced land sales, and to make an adjustment for that lack in her analysis. Therefore, the costs to be taken into account would be the costs of works on the Molonglo land alone, not the costs of works on the Territory land which was within the estate boundary, and not the offsite costs.

409. Thereafter, when only those costs on the Molonglo land are taken into account so as to make the Molonglo land as comparable as possible to Ms Byrne’s serviced land sales, Ms Byrne was able to arrive at a value of the Molonglo land using those comparables. After that point, in examining the state of the Molonglo land for the purpose of valuation, and as required by s 277A, the

102 T 797.34 land was to be valued on the basis that it was not benefitted or burdened by any of the matters referred to in s 277A(3).

410. The Commissioner said that Ms Byrne’s evidence should not be accepted because Mr Dyson gave evidence to the effect that if Ms Byrne allowed for the costed EDP works (that is, assumed that those works were done and the costs taken into account), then the land would be (hypothetically) in a subdividable state and therefore should be valued on the basis of 35 individual blocks (Ms Byrne valued the land as one block).

411. We disagree. First, the land was required to be valued as one block, not on the basis there were 35 or 36 individually saleable blocks. Second, Ms Byrne did not proceed on the basis that the EDP work was done, but that the Molonglo land would require $54m to be spent on it to make the land as comparable as 103 possible to her basket of comparable sales. She then made adjustments for location and like matters including, most importantly, for scale. It was the adjustment for scale that brought the Molonglo land back to one 14 ha site, an adjustment not made by Mr Dyson.

412. We accept Ms Byrne’s methodology in relation to adjusting for EDP works on the land under the lease in order to make the Molonglo land as comparable as possible to her serviced land sales, but not her calculations.

Mr Flannery

413. Mr Flannery used the comparable sales method as his primary valuation method, although his comparables were not identical to Ms Byrne’s comparables. Mr Flannery used the hypothetical development method as a check method.

103 AB 15-157

414. Mr Flannery said that in valuing the after value he had regard to the various factors he believed a potential purchaser would have had regard to in assessing 104 the appropriate value of the Molonglo land.

415. Mr Flannery assumed in his report, correctly in our view, that the highest and best use of the Molonglo land included the development rights for 700 multi- 2 105 unit dwellings and 192,000 m of GFA. Later, in his oral evidence, he seemed to say that Molonglo’s EDP proposal amounted to the highest and best 106 use.

416. In general terms we do not accept Mr Flannery’s evidence. Although he was an honest witness, he often did not answer questions directly and often provided lengthy, non-responsive answers. His evidence was often filled with uncertainties such as “maybe the EDP is the best example of a highest and 107 best use” (emphasis added). His reasoning process was also not as exposed for examination as that of Ms Byrne.

417. That is not to say that Mr Flannery was other than honest, just that his evidence was not as logical, not as exposed for examination and not as convincing as that of Ms Byrne.

418. Mr Flannery referred to ss 277 and 277A, but did not explain how he thought those sections operated in terms of his valuation methodology, and said that 108 in relation to the after value a prudent purchaser would have had regard to: (a) Development potential of the site as outlined in the varied Purpose Clause. (b) Costs associated with achieving the After Value potential of the site. (c) Expected timeframes of development, including staging of any development to meet market demand. For this reason, I have assumed a staged take up of development rights.

104 AB 332 at [5.8] 105 AB 354 106 T 252.45 107 T 252.41 – 253.4 108 AB 332 (d) Likely timing of any future development opportunities. It is my strong view that the additional uses (residential or commercial) development rights would not be fully utilised for many years. (e) Requirement to remediate adjoining land as part of direct sale process. (f) The existence of existing utilities and infrastructure that are situated on the land but do not service the land.

419. Mr Flannery examined what he regarded as the most comparable sales available. He said if he assumed the Molonglo land was “fully serviced and developable” then, compared to those comparables, the after value would be 109 approximately $153m.

420. He said, however, that the Molonglo land was not fully serviced and developable, and he therefore made adjustments for: (a) The development of the residential component site to occur over a 10 year timeframe. (b) The siting, scale and density of the residential component permissible. (c) The development of the commercial (non residential) GFA over a 15 year timeframe. (d) The quantum and permitted uses of the commercial component. (e) Allowance for the cost of the essential infrastructure based on the quantity surveyor’s cost estimates and timing of such infrastructure.

421. In allowing for staged development and selling, Mr Flannery calculated the present day values of those future sales in several tables in his report and took into account Mr Wolmaran’s costings, although he added a further 5% 110 contingency allowance. He provided different tables depending on whether the costs of works on land outside the land under the lease were or were not 111 to be taken into account.

422. We do not consider it appropriate to take staging into account in this case. Whilst there is logic behind Mr Flannery’s reasoning, we accept Ms Byrne’s

109 AB 353 110 AB 362 111 AB 358-359 evidence that that is a matter which would be developer dependent and thus 112 should be ignored. For example, Ms Byrne said (and which we accept): If one valuer assumes the development will take three years to reach its conclusion, another assumes seven years, another assumes ten years, you will have a very different outcome.

423. Mr Flannery’s approach was that a prudent purchaser would take into account all of Mr Wolmaran’s costings of the onsite and offsite EDP works, with the resultant after value being $22,350,000.

424. Mr Flannery said he used a hypothetical development method as a check method. We have some difficulty understanding his evidence in this regard, but it appears he used a hypothetical subdivision of the Molonglo land as the highest and best use of the Molonglo land, and, on the costs side, used the costed EDP costs.

425. In our opinion, a hypothetical subdivision is not the highest and best use of the land. The highest and best use of the land under the lease is the use for the purposes stated in the proposed varied lease, namely 700 multi-unit dwellings 2 and 192,000 m of GFA.

426. Although Mr Flannery’s after value was not wildly different from Ms Byrne’s, we do not accept his valuation because his reasoning process, as we read his report, did not grapple with s 277 and 277A, his calculations did not set out how he accounted for some or all of the EDP costs in the same exposed and precise fashion that Ms Byrne did, his reasoning process was somewhat opaque and his evidence was not as convincing as that of Ms Byrne.

427. For example, at AB 332, Mr Flannery said that in his valuation approach he had regard to various factors that he believed a potential purchaser would have regard to in assessing the appropriate value of the Dairy Road. He set out some of those factors at the bottom of the page. Those factors included the requirement to remediate adjoining land (which is excluded by s 277A(3)(f)) and the existence of existing utilities and infrastructure situated on the land (but do not service the land). These are excluded by s 277A(3) because they

112 T 844.45 fall within sub-s (3)(f) being works proposed to be done outside the land under the lease and under proposed improvements, being the demolition of the identified existing public infrastructure.

428. Putting those matters aside, Mr Flannery did not, unlike Ms Byrne, set out in any exposed way precisely what costs and which amounts he did take into account. Thus, we are unable to adjust his after value (even were we to accept it) given what we have said about what costs should and should not be allowed for.

429. We are also of the opinion that Ms Byrne’s basket of comparable sales is, taken as a whole, more comparable than Mr Flannery’s basket of comparables.

Mr Dyson

430. Mr Dyson used the hypothetical development method as his primary method of valuing the after value and used the comparable sales method as his check method for his Assessment 6.

431. Mr Dyson was instructed to make six after value valuations without taking into account certain costs in Assessments 1-5. The assessments he was instructed to make, and the costs he was instructed not to take into account for each assessment, were described as follows: (a) Assessment 1 – the Onsite Works, the Offsite Works, the Direct Grant Remediation costs, the Removal of Utilities, the EVO Substitutions, and the Residential Development Earthworks; (b) Assessment 2 – the Onsite Works, the Offsite Works, the Removal of Utilities, the EVO Substations, and the Residential Development Earthworks (omitting Direct Grant Remediation costs); (c) Assessment 3 – the Offsite Works, the Direct Grant Remediation costs, the Removal of Utilities, the Residential Development Earthworks and, in respect of the Onsite Works, you cannot take into account the following works: 1.(i) alteration or demolition of existing buildings or structures; 2.(ii) remediation of existing contamination; 3.(iii) earthworks and landscaping; (d) Assessment 4 – the Onsite Works, the Direct Grant Remediation costs, the Removal of Utilities, the EVO Substations, and the Residential Development Earthworks (omitting Offsite Works); (e) Assessment 5 – the Offsite Works (omitting all but Offsite Works).

432. He was instructed to assume that by not “taking costs of works into account” he was being asked to assume that “these works are unnecessary to prepare the land for redevelopment for its highest and best use”.

433. He was asked to make a sixth assessment (Assessment 6). This differed from Assessments 1-5 in that he was instructed he could take into account the Onsite Works, the Offsite Works, the Direct Grant Remediation costs, the Removal of Utilities, the EVO Substations, and the Residential Development Earthworks.

434. Assessment 1 (undertaken on the basis that none of the costs of the EDP works were taken into account) was the Commissioner’s primary position. Assessment 6 took into account all of the costs of the costed EDP works (but using costings prepared by the Commissioner’s quantity surveyor, Mr 113 Tucker).

435. In relation to the after value, Mr Dyson was of the opinion that there were no comparable sales which were “directly comparable” to the Molonglo land. So much may be accepted, but in his report he did not explain why he could not use the best comparables available. He did explain this in his oral evidence, but there was much he explained in his oral evidence which was not in his report. This was counter to his repeated claims to have been transparent in his report.

436. Whilst on the comparable sales method, Mr Dyson said that he did not feel he could use that method as his primary method because he would have to make

113 th Mr Dyson could only see 35 sites on the EDP and assumed the 36 was for the roads. However, it makes no difference in the case whether there were 35 or 36 sites for the uses permitted under the varied lease a large subjective adjustment which, in his opinion, made that method 114 unreliable. He said that as a check method the comparable sales method was 115 “a little bit” more unreliable.

437. That is not to say that Mr Dyson was other than honest. But it made his evidence less convincing compared to that of Ms Byrne whose reasoning process was fully exposed for examination in her reports.

438. An example of the lack of exposure of his reasoning process is the process by which he calculated this gross realisation figure. The totality of his reasoning 116 was contained in a table of comparable sales, and four short paragraphs of 117 his report taking up less than half a page. Those paragraphs did nothing more than recite various facts from his comparables, but nowhere in his report did he explain how he got to his end figures for the value of each of the 35 lots (set out in his table at AB 705) which the EDP subdivision would have produced.

439. In the event, Mr Dyson used the hypothetical development method as his primary valuation method, with a comparable sales method used as a check method for his Assessment 6.

440. The traditional hypothetical development methodology is to estimate the gross realisation on sale of the hypothetical development when completed, subtract the costs of that development and the developer’s profit, leaving the balance as the value of the land. The gross realisation sum Mr Dyson arrived at for the Molonglo land was the same for each of his six assessments, namely approximately $235m.

441. To arrive at that figure, he examined a basket of comparables to determine what the 35 lots of the (almost) subdivision would likely realise.

114 T 956.1-.42 115 T 956.40 116 AB 701 117 T 958.1-.9

442. For his Assessment 1, the Commissioner’s primary case, Mr Dyson deducted various non-EDP works costs such as GST, selling expenses, profit and risk, rates and taxes, interest on costs, interest on land and acquisition costs and arrived at a gross realisation value (net of the costs just mentioned) of approximately $156m.

443. After deducting his before value of $20.2m Mr Dyson arrived at what he called an “uplift” (or increase in value) of $135.4m. After applying the 25% discount set out in s 277 the LVC was accordingly calculated at $101,550,000.

444. Molonglo submitted that Mr Dyson’s calculation of uplift in Assessment 1 was absurd. Mr Dyson himself did not consider that figure represented “the Added Value of the Uplift” because it did not take into account the costs of 118 the work to be done in order to achieve the gross realisation value. The same applied to his Assessments 2-5 to varying degrees.

445. We do not accept any of Mr Dyson’s assessments.

446. First, in our opinion Mr Dyson did not value the correct hypothetical development which would realise the highest and best use of the land, namely 2 the construction of 700 multi-unit dwellings and 192,000 m of GFA. Instead, Mr Dyson valued the Molonglo land on the basis that the highest and best use was the (almost) subdivision described in the EDP approval.

447. Molonglo made what appeared to us to be two inconsistent submissions. It submitted that the highest and best use was the “utilisation of all 700 multi- 2 119 unit residential dwellings and 191,844 m of commercial GFA” and also submitted that Molonglo’s (almost) subdivision “was a good representation of 120 highest and best use of the” Molonglo land.

448. The Commissioner submitted that the highest and best use was a subdivision. 121 The Commissioner submitted:

118 AB 707 at [92] 119 AB 11034 at [13] 120 AB 11034 at [14] 121 T 1781.23-.39 But the lease doesn't prohibit subdivision or force the applicants to develop all 700 units and the GFA themselves. That's not what they're going to do and that's not what the highest and best use is. A hypothetical purchaser of the lease, acting reasonably and prudently, would realise that that's not the smart way to go, and the smart way, and indeed, the highest and best use that could be made of the land would be to subdivide it. … And a hypothetical purchaser, acting prudently, would work out that the best thing would not be to try and develop all 700 dwellings and GFA rights but to sell the individual lots with a mix of development rights, townhouses, apartments, restaurants, shops, commercial and the like, up to 35 different purchasers to thereby significantly reduce their risk.

449. We do not accept this submission, and do not accept Molonglo’s submission that the (almost) subdivision was a good representation of highest and best 2 utilisation of 700 multi-unit residential dwellings and 191,844 m of GFA. Clearly the (almost) subdivision proposed in the EDP (which did not appear in the proposed varied lease) did not include the construction of 700 dwellings and 192,000 m2 of GFA.

450. Ms Bryne, whose evidence we accept, said that the highest and best use of the land per the proposed varied lease was the 700 multi-unit residential dwellings 2 122 and 191,844 m of GFA. She accepted that some of the EDP works would have been necessary (as did Mr van der Walt) to achieve that highest and best use, but the (almost) subdivision was not what she regarded as the highest and 123 best use. She said: WITNESS BYRNE: I don’t actually consider the EDP works reflect the highest and best use. To me the highest and best us of the land are the uses that will be applied on the land. PRESIDENTIAL MEMBER: After you’ve spent the money on the EDP works? WITNESS BYRNE: Yes. The highest and best use in my mind relates to the intended uses on the land rather than particular activities that are required.

122 T 711.14 – 712.26; 796.7-.15 123 T 718.1-10

451. Mr Dyson seemed to agree when he described the highest and best use as the 124 “total GFA and units”. Mr Flannery seemed to embrace both positions at different times and did not distinguish between the use of the land (as in highest and best use) and the manner in which that use may be realised. As Mr van der Walt (the town planner) said, there were multiple ways to realise 2 the rights to develop the land for 700 dwellings and 192,000 m of GFA.

452. Molonglo submitted that all three valuers considered that Molonglo’s approved EDP proposal was a good representation of the highest and best use. That submission is not accurate. Neither Ms Byrne nor Mr Dyson accepted that proposition and the transcript references provided did not support the submission. Mr Flannery seemed to agree with that proposition, but in not in any convincing way.

453. In the result, the highest and best use was the development of 700 multi-unit 2 residential dwellings and 191,844 m of GFA. The EDP approval contained works necessary to achieve that use and was one method to arrive at that end result, but it was not, of and in itself, the highest and best use of the Molonglo land. We do not accept the Commissioner’s submission that the highest and best use was the (almost) subdivision described in Molonglo’s EDP approval.

454. Second, as Ms Byrne said and which we accept, in the hypothetical development method all the costs of construction must be taken into 125 account. If the highest and best use is the construction of 700 multi-unit 2 dwellings and 192,000 m of GFA then all of those construction costs are 126 required to be taken into account in each of his six assessments. If the highest and best use of the Molonglo land was the (almost) subdivision proposed in the EDP, then Mr Dyson’s Assessment 6 would approach acceptability (putting aside our other reasons for not accepting Mr Dyson’s opinions), although there were, on Ms Byrne’s evidence, some further costs to be incurred in order for a full subdivision to be realised. But the proposed

124 T 96525 125 T 704.31-.37 126 We understood the Commissioner to agree with this methodology at T 1781.5 subdivision was not the highest and best use of the land under the proposed lease variation.

455. In the absence of the full costs of construction being taken into account the hypothetical development method will not produce a genuine market value. In that sense, purporting to apply a hypothetical development method without taking into account the estimated costs of that development is an attempt to apply a false equation and will produce absurd results in most if not all cases.

456. The Commissioner submitted that this was allowable because ss 277 and 277A created valuations which were what the Commissioner called statutory fictions, or which resulted in valuations which did not represent a realistic 127 value.

457. We do not agree that these were the purposes intended for nor the results of the proper interpretation of ss 277 and 277A.

458. With respect, it is implausible to imagine that the purpose of the statute was to create fictional or unrealistic assessments of the value of increased rights such as those in Mr Dyson’s Assessments 1-5. That is no criticism of Mr Dyson because he was asked to undertake those Assessments in that way, and it is no criticism of those instructing Mr Dyson because the difficulty in interpreting ss 277 and 277A is grossly inversely proportional to their brevity and the simplicity of their language. It was appropriate for the Commissioner’s legal advisors to put forward Mr Dyson’s Assessments 1-5 given the difficulty in interpreting ss 277 and 277A.

459. Nevertheless, the result of Mr Dyson’s Assessments 1-5 are manifestly absurd or unreasonable and nowhere in the Final Report or other extrinsic materials is there any reference to fictional valuations or the like. The purpose of the legislation was to arrive at genuine market values for the increase in rights granted under a lease variation, and without developers being able to deduct

127 T 1774.15 from the LVC the costs of the things like those described in sub-s (3)(e) and (f) and which they had previously been allowed to deduct, at least in part.

460. Third, Mr Dyson’s Assessment 1 results in a development which is not economically feasible (which runs counter to the highest and best use being developments which are physically possible, legally permissible and financially feasible) if the costs of construction (of the hypothetical development) were, as Molonglo submitted, in the order of $70m. On that assumption, the developer would make a loss of approximately $20m. 128

461. The Commissioner accepted that conclusion, but submitted that this consequence for the Molonglo site wouldn’t necessarily apply to other sites, and so this manifestly absurd result could be ignored taking into account the discretionary power to make remissions under s 278.

462. We do not agree. It is difficult to conceive of any circumstances in which the hypothetical development method will not produce an absurd result when the full costs of construction are not taken into account.

463. Indeed, as the highest and best use concerns developments which are financially feasible, not taking the full costs of a development into account when using the hypothetical development method would prevent any analysis as to whether what was proposed was in fact financially feasible.

464. Section 138 of the Legislation Act says that working out the meaning of an Act means, amongst other things, finding the meaning of the Act when its apparent meaning leads to a result that is manifestly absurd or is unreasonable. We think it is open to us to assume that the Legislative Assembly does not intend legislation to produce absurd results, although, we accept, that that may be the unintended result on rare occasions.

465. Further, in the Legislative Debate a number of detailed remission provisions 129 were proposed but were not adopted. All that was enacted was the Ministerial discretion to remit under s 278. The Final Report said that the

128 T 1748 129 The Commissioner’s Extrinsic Materials Bundle at p 476-480 objectives underlying the proposed system included simplicity, transparency, 130 timeliness, certainty and universality. In our view a scheme (for which the Commissioner contends) which taxes construction costs (see below), then leaving it to a developer to negotiate for the exercise of a minister’s discretion to remit some of the resultant LVC, would not meet those objectives. Amongst other things, there is no statutory guidance as to what material should be placed before the Minister, what considerations the Minister should apply, no reasons are required to be given by the Minister for his/her decision, the negotiations are not public and there are no rights of review of the Minister’s decision.

466. On the other hand, on our interpretation of the legislation, all those objectives are met. What is not to be taken into account is clear. Two well recognised valuation methods can be used. Any valuation disputes may be resolved in the usual way either by the Commissioner (who must provide reasons) or on merits review in ACAT (which is open to the public) after which reasons are given and rights of appeal exist.

467. Fourth, we do not agree it was correct for Mr Dyson to assume, as he was instructed to assume, that some or all of the necessary construction costs which would need to be spent to produce the hypothetical development were not “necessary” to prepare the land for redevelopment for its highest and best use.

468. Sections 277 and 277A do not include any concept that the works defined in s 277A(3) are unnecessary to prepare the land for redevelopment for its highest and best use. Rather, the sections assume that works are indeed necessary to achieve a highest and best use, but say that in valuing the after value some of those works are not to be taken into account. Not taking into account certain improvements (in effect ignoring) is not the same as saying improvements are unnecessary to produce a particular development. For example, saying no improvements are necessary to realise the highest and best

130 Final Report at p 26 use automatically means that no costs of construction may be considered, and it was this flaw which rendered Mr Dyson’s Assessments 1-5 unusable.

469. Fifth, by not deducting the costs of construction in Assessment 1, the effect is to inflate the after value by the amount of those costs. The result would be that a developer would pay 75% of the construction costs as an LVC, and then have to pay 100% of the construction costs when construction took place. In substance, a developer would end up paying 175% of construction costs if it developed the site.

470. Another way of putting it was, as Molonglo submitted, the LVC would then be a charge or tax of 75% on construction costs of the hypothetical development. The Commissioner agreed that this would be the effect of his 131 interpretation of the section.

471. In our view this end result is manifestly absurd or unreasonable per s 138 of the Legislation Act and is contrary to the purpose of the provisions. As the 132 Final Report said: The CUC is not a tax, but a charge for an asset … 133

472. And: It is important to recognise that a CUC is not an infrastructure or development charge, but a payment for a lease variation which results in increased rights to be associated with the lease. 134

473. And: Underpinning the proposed codification scheme are 10 core principles, which will be applied to the whole LVC system and not just those transactions subject to codification. 1-7 … 8 Exclusivity – the system should only assess land values and not improvements, onsite or offsite costs.

131 T 1747.45-.46; AB 10765 at [50] 132 At p 49, footnote 37 133 At p 17 134 Proposition 8 on p 26

474. Sixth, the methodology behind Mr Dyson’s Assessments 1-5 was not a true hypothetical development method. It was called that, but it was in fact different because it excluded all construction costs. A true hypothetical development method deducts all costs to arrive at a value of land.

475. We accept Ms Byrne’s evidence that it is impossible to undertake a (true) hypothetical development analysis without taking into account improvements 135 on the land. In substance, Mr Dyson agreed with this conclusion because he said that his Assessment 1 did not reflect the value of the “uplift”, was not 136 “a market value under valuation terms”, and that only his Assessment 6 represented the true “uplift” because it deducted the full costed EDP costs (as costed by Mr Tucker).

476. Seventh, there is a further problem with the acceptance of Mr Dyson’s assessments at least as far as the Commissioner’s submissions were concerned. The Commissioner submitted that Mr Dyson assessed his gross realisation value on the basis that the works required to produce that result were not taken into account by Mr Dyson in the sense that such works were 137 unnecessary or pretending that that works were not required or not done. It was submitted that Mr Dyson had put from his mind, made no consideration or allowance for, the works necessary, he pretended the land didn’t need any 138 works proposed in the EDP.

477. We do not agree. Mr Dyson’s evidence was to the opposite effect. In his report he said that his Assessment 1 assumed that all the services and costs had been 139 expended and the completed lots were ready to be sold. In cross-examination he said that his gross realisation figure was calculated on the 140 basis that all the EDP works had been done and paid for. It was only because

135 T 744.6-.22 136 T 1124.16 137 T 1752.35-.41; 1769.26-1771.13 138 T 1771.10-.13 139 AB 703 at [79] 140 T 1018.28-.1019.1; 1021.27-39; 1072.36-1073.7; 1073.22-.38; T 1123.46 - 1124.17 he assumed that those works had been done that the land would, on Mr Dyson’s analysis, had a value of some $234m.

478. In this way, Mr Dyson’s Assessment 1, and Assessments 2-5 in varying degrees, took into account the full value added by the hypothesised improvements, but did not allow any costs (Assessment 1) or did not allow for varying degrees of costs (Assessments 2-5). This seemed contrary to the Commissioner’s position that both costs and value of improvements could not 141 be taken into account.

479. Although not explained this way, it seems to us that the Commissioner incorrectly equated the after value of the land (valued immediately after the variation) with the value of the land assessed on the assumption that hypothesised highest and best use improvements were present on the land. That is not the effect of ss 277 and 277A in our view.

480. Eighth, the other notable feature of Mr Dyson’s gross realisation figure was that it was the sum of the gross realisation of all the 35 individual sites (which 142 would be the result of a subdivision in accordance with the EDP approval). However, what is to be valued is one Crown lease, not 35 proposed individual Crown leases. In our opinion the market for smaller individual sites would likely be different to the market value of one, 14 ha Crown lease.

481. This approach led to a failure to adjust for the scale of the Molonglo land as 143 Ms Byrne opined.

482. In Maurici v Chief Commissioner of State Revenue [2003] HCA 8 the High Court said the following at [18]: As Waddell J said in Sher v Commissioner for Main Roads, sales of properties of a different character are likely to attract a different class of buyer and are unlikely to provide a reliable indication of value.

483. Similarly, here.

141 T 1747.14-.16 142 T 1019.29 143 T 719.14 – 720.6

484. Mr Dyson used a comparable sales method as a check for his hypothetical development method. However, he did not place much weight on it because he regarded it as unreliable and his reasoning process was somewhat opaque. We place no weight on that method in Assessment 6 and prefer Ms Byrne’s methodology in relation to adjusting for EDP works on the Molonglo land.

485. There were also some problems with some of his comparables. For example, he did not use any comparable sites which had commercial zoning (as the 144 Molonglo land had). One site he used, at Cotter Rd, Weston Creek, was not 145 comparable at all in our view given the factors identified by Ms Byrne.

486. For those reasons we do not accept any of Mr Dyson’s assessments. Most fundamentally, he did not value the correct highest and best use development, either on the revenue or the costs side.

The quantity surveyors’ evidence and our findings

487. The parties each adduced evidence from a qualified and experienced quantity surveyor. Molonglo adduced evidence from Mr Sephton Wolmarans, and the Commissioner adduced evidence from Mr Ian Tucker.

488. Mr Wolmarans had peer reviewed the original costings of the full EDP works undertaken by Turner & Townsend. Mr Wolmarans then produced costings of the revised EDP works as requested by Ms Byrne. He measured the quantities 146 required from first principles, then applied various rates and allowances to arrive at costings for the revised EDP works both as a total and broken down into separate elements. The results were set out in his report dated 12 December 2024 upon which Ms Byrne relied in her 2024 report. Mr Wolmarans’ costing of the EDP works was just under $70m.

489. Mr Tucker was provided with Mr Wolmarans’ 12 December 2024 report. He inspected Mr Wolmarans measurements and some of the documents on which

144 T 852.39 ff 145 T 718.32 – 719.6. 146 Meaning he did not rely on the measured quantities calculated by Turner & Townsend Mr Wolmarans relied. He satisfied himself that Mr Wolmarans’ measurements of the quantities were reasonable, he then applied various rates and allowances (which differed from those used by Mr Wolmarans) and arrived at costings for the revised EDP works both as a total and broken down into separate elements. The results were set out in his report dated 4 April 2025. Mr Tucker’s costing of the EDP works was just over $51m.

490. Mr Wolmarans was provided a copy of Mr Tucker’s report and produced a report in reply dated 2 May 2025.

491. As we have said above in relation to Ms Byrne’s evidence, it was appropriate for her to make an allowance for such of the EDP works as would take place on the Molonglo land.

492. In her third table at AB 156 Ms Byrne said the onsite works were costed (by Mr Wolmarans) at a little over $54m. That was correct, but those onsite works included work on Territory land, namely what Mr Wolmarans called Stages 2B1 and 2B2. In total, on Mr Wolmarans figures, those works were costed at a little over $23m.

493. In relation to the differences in opinion between Messrs Wolmarans and Tucker, we prefer Mr Wolmarans evidence in relation to the rates various trades would charge for the work. However, we prefer Mr Tucker’s evidence in relation to the margins and adjustments which would then be applied to those rates.

494. We prefer Mr Wolmaran’s rates because in his reply report he provided some reasonably contemporaneous and objective evidence which corroborated some of his rates. Admittedly that evidence was limited, but it was more corroborative evidence than was produced by Mr Tucker who produced no objective corroborative evidence other than for his reliance on Rawlinsons.

495. In addition, Mr Wolmarans is based locally and is the more likely to be familiar with the rates that local trades will charge.

496. Both quantity surveyors said they relied on their internal databases, but other than those bald statements no information was given as to the content of the databases relied on or the reasoning process employed when taking them into account.

497. When it comes to the various margins and adjustments however, we prefer Mr Tucker’s evidence because his experience was the greater in private as opposed to government work, was the greater in Australia, and was the greater in terms of his on-the-ground experience in projects most akin to the EDP works.

498. That is not to say that Mr Wolmarans was not experienced. He was. Our point is that a lot of his experience was in South Africa where he started his career as a junior quantity surveyor working on government projects. Thereafter, he gained experience in all aspects of the quantity surveying profession from initial feasibility through to project closeout. He came to Australia in 2019 when he joined his present firm as a senior quantity surveyor before rising to become a partner in 2024.

499. During his times at his present firm Mr Wolmarans has worked on a wide range of projects with particular expertise in health infrastructure, government fit-out, and data centres. About 70% of his work was government related and his experience in relation to subdivisional infrastructure works (such as were required by the EDP) was limited to his much smaller data centre projects. That did not make his opinions of no value, but we prefer the greater experience of Mr Tucker in projects more akin to those involved in the EDP works.

500. Mr Tucker has had about 36 years’ experience, working almost exclusively for private clients, and became a partner of his present firm in 2005.

501. In terms of subdivisional / civil works of the nature of the EDP works, Mr Tucker has had personal experience with such projects as the BORAL SEL Eastern Precinct Development, the BORAL SEL Western Precinct Development, the BORAL SEL Stage 3 & 5B Bridges / Southern Access Way Project, the Delfin Lend Lease Calderwood Urban Project (Wollongong) (of about 50 ha in size), the Maitland Sub-Divisional Works (Stage 1, 2 & 3), the Enfield Demolition, Infrastructure and Site Remediation Works and the Morisset Sub-Divisional Works.

502. Mr Tucker’s experience has not been limited to quantity surveying. He has had much experience in contract administration in which a building contract is on foot and financial reporting is important. In that role, we infer, someone such as Mr Tucker would see what works actually cost. He has also been involved as a superintendent under a building contract and independent certifier roles, both of which involved him in the delivery phases of projects. That experience would no doubt assist him in quantity surveying. As he said: … I’ve worked on subdivisional works as a superintendent, so I understand every aspect of the off-site works, because we had a project where we had off-site works, and the complexity around not only the roads authorities, but, you know, the traffic management. Also with the infrastructure coming into the site - yes, it was smaller in scale, but constructing roads, bringing infrastructure in, bulk earthworks, all of those things were very very similar.

503. It is true that Mr Tucker had no experience in civil works in the Canberra market, although he has had some Canberra experience in other areas, but we do not see that as of much weight given his experience elsewhere. No doubt there are some local variations but, on the evidence, they are not large. As Mr Tucker said in cross-examination, the actual physical work is the same.

504. In terms of his Canberra experience, Mr Tucker said that he’d been travelling to Canberra for about the last 10 years. One of his premium clients is a financial institution that owns quite a few assets in the Canberra region, mostly consisting of government buildings, and over this period of time he’s been involved with a significant amount of work to most of those assets. He’s acted as the building consultant or superintendent, he has engaged with local builders and local project managers. Admittedly these were not civil infrastructure works, but neither had Mr Wolmarans much experience with civil infrastructure works, certainly not of the scale and complexity involved in the EDP works.

505. Mr Wolmarans’ relatively lesser experience with private infrastructure projects is reflected in his use of what was called a Monte Carlo assessment for risk, which amounted to 29% (Mr Tucker used 15% on more traditional grounds). The short point is that on the evidence Monte Carlo risk assessments are used in government but almost never in private works. The use of this method of risk assessment was not appropriate and undermined the reliability we could place on Mr Wolmarans’ evidence.

506. The other point to note is that Mr Wolmarans did not perform the Monte Carlo assessment himself. That was done by Turner & Townsend whose report was 147 tendered not as an expert report but as a matter of historical fact. Therefore, there was no expert evidence before us in which the Monte Carlo assessment was made.

507. The reliance on what is used for government projects and almost never for private projects undermined the reliance we could place on Mr Wolmarans’ other estimates for margins and adjustments.

508. For those reasons we accept Mr Wolmarans’ evidence on rates, but Mr Tucker’s evidence on margins and adjustments.

509. Mr Wolmarans’ costed revised EDP works on the Molonglo land (and before any margins or adjustments) were: Stage 1A – EDP Works $3,919,283 Stage 1B – EDP Works $2,950,250 Stage 2A $2,377,698 Stage 3 – EDP Works $1,892,206 Removal of Utilities $483,907 EVO Substations $3,502,818 Residential Development Earthworks $1,665,593 Total $16,746,755

510. Mr Tucker’s rate for head contractor preliminaries and supervision was 13%, his rate for head contractor overheads and margin was 8%, his lump sum amount for traffic management was $2.1m, his lump sum for EVO Energy

147 T 1807.30 1808.25 Design was $62,246, his rate for design consultant’s costs was 10% and his rate for risk or contingencies was 15%.

511. Both Messrs Wolmarans and Tucker applied their rates in the order they appear above on a cumulative basis. That is, using Mr Tucker’s figures, the rate of 13% was applied to the total cost of $16,746,755 which resulted in a figure of $18,933,833. His next rate of 8% was then applied to this new total of $18,933,833 and so on.

512. Mr Wolmarans applied a rate of 0.1% for the EVO Energy Design Cost. We could find no evidence to support that rate. Mr Tucker used a lump sum of $62,246. Its source was not identified but there was a letter from EVO Energy to Molonglo dated 7 August 2023 which contained that exact amount as an “initial allowance” to commence work on early connection stages, planning, 148 coordination, and management of future stages. As there was evidence for Mr Tucker’s figure but not Mr Wolmarans, we have used Mr Tucker’s figure.

513. The end result is that we accept the sum of $28,588,982 as being the reasonable cost of the revised EDP works on the Molonglo land.

514. We should note that the parties were requested to provide further oral submissions on two issues. The first was what onsite works in the costings was to be carried out on Territory land rather than the Molonglo land. The agreed position was that all of the onsite works other than Stages 2B1 and 2B2 was to be carried out on the Molonglo land.

515. The second issue was whether what Mr Wolmarans called the Removal of Utilities work was required by an approval or was proposed by Molonglo. In the event we do not need to decide this issue. We are satisfied that that work was on the Molonglo land and was necessary for Ms Byrne to take into account in the way we have earlier described.

148 AB 7505 The calculation of the LVC

516. We accept Ms Byrne’s assessment of the after value before adjustments to bring the Molonglo land up to a similar level as the serviced land sales set out in the first table at AB 156, namely $85,304,900.

517. From that total Ms Byrne deducted $54,316,009 being the costs of the onsite EDP works as costed by Mr Wolmarans. The result was a figure of $30,988,891 for what she called the: … calculated deduction to the market derived rate for each component on a ‘shovel ready’ component basis, the market value of the subject property on an ‘After Value’ basis, having regard for its condition …

518. It was this figure which was Ms Byrne’s after value for the Molonglo land per s 277. The difference between that figure and her assessed before value ($23,875,000) was $7,113,891. This latter figure was what she described in her cross-examination as the “uplift of $7 million in the after value compared 149 to the before value” as a result of the increased rights proposed to be granted under the lease variation approved in DA 19.

519. Ms Byrne then deducted the costs of the offsite works.

520. The proper figure for Ms Byrne to deduct for the EDP works on the Molonglo land was $28,588,982. That results in a figure of $56,715,918 as the after value.

521. Less the agreed before value of $21,408,000, the result (of V1 – V2) is $35,307,918.

522. Seventy five percent of that last figure, and the amount of the LVC, is $26,480,938.

523. For completeness, had we accepted the totality of Mr Wolmarans’ evidence 150 on costings for works on the Molonglo land ($38,530,494 ), Ms Byrne’s

149 T 836.15; 841.33 150 AB 499: the total of the costs on that page, less the offsite works and Stages 2B1 and 2B2 151 after value would have been $46,774,406. Less the agreed before value figure of $21,408,000, the difference would have been $25,366,406. Accordingly, the LVC would have been $19,024,804.

524. Had we accepted the totality of Mr Tucker’s evidence on costings for works on the Molonglo land ($23,175,643) Ms Byrne’s after value would have been $62,129,257. Less the agreed before value figure of $21,408,000, the difference would have been $40,721,257. Accordingly, the LVC would have been $30,540, 943.

Conclusion

525. We accept Ms Byrne’s assessment of the after value before adjustments to bring the Molonglo land up to a similar level as the serviced land sales set out in the first table at AB 156, namely $85,304,900.

526. We accept the reasonable costs which would be incurred to bring the Molonglo land up to a standard so that it was as comparable as possible with Ms Byrne’s basket of comparable sales was $28,588,982.

527. We find that the after value was $56,715,918.

528. We accept the parties’ agreement that the before value was $21,408,000.

529. We find that the LVC should be $26,480,938.

Orders

530. On 22 August 2025 we made the following Orders: (a) The respondent’s confirmation dated 1 July 2024 of the Notice of Assessment, Lease Variation Charge, dated 7 March 2024 is set aside. (b) In lieu thereof, the lease variation charge for Development Application no. 202341419 is determined to be $26,480,938.

151 $85,304,900 less $45,157,510 (c) Liberty to apply in relation to costs.

……………………………….. Acting Presidential Member G Curtin SC

Date(s) of hearing: 12-16 May, 16-20, 23-24 June, 2-4 July, 21 August 2025 Counsel for the Applicant: Mr P Walker SC with Mr J Bird Solicitors for the Applicant: Clayton Utz Counsel for the Respondent: Mr A Berger KC with Mr N Oram and Ms J Cunliffe Solicitors for the Respondent: ACT Government Solicitor