Plaintiff v Defendant

2 On 31 December 2008, Mr Pattas lodged an application to Victorian Civil and Administrative Tribunal (the 'Tribunal') to review the Council's valuation. Mr Pattas submitted that, taking into account the heritage overlay, the site value of his portion of the Colosseum Building should be assessed at $880,000.

3 On 8 January 2010, the Tribunal made interim orders, reserving its final decision with respect to the site value of the property. It did, however, reduce the overall site value of the Colosseum Building from $14,278,000 to $12,500,000. On 28 May 2010, the Tribunal made final orders allowing Mr Pattas' application for review and determining that Mr Pattas should pay 10 per cent of the total site value of the Colosseum Building, being $1,250,000.

4 Mr Pattas sought leave to appeal against the Tribunal's orders in relation to site value under s 148 of the Victorian Civil and Administrative Tribunal Act 1998. He raised three proposed questions on appeal:

(a) Whether the Tribunal erred in interpreting the definition of 'site value' in s 2(1) of the Valuation of Land Act 1960 to exclude consideration of the impact of cl 43.01 of the Stonnington Planning Scheme on the value of the land;

(b) Whether the Tribunal erred by failing to take into account the impact of restrictions on the use and development of the subject land imposed by cl 43.01 of the Stonnington Planning Scheme in determining the value of the land, contrary to ss 2(1) and 5A(3)(b) of the Valuation of Land Act; and

(c) Whether the reasons of the Tribunal were inadequate because they failed to disclose its path of reasoning in respect of the heritage issue.

5 On 30 August 2010, the Court heard Mr Pattas' application for leave to appeal (including an application for an extension of time in which to seek leave to appeal) and determined that leave should be granted. In so doing, the Court set out the basis upon which it had concluded that the Tribunal's decision was attended by sufficient doubt to warrant the grant of leave. Counsel for the Council stated at that time that the Council had little direct interest in the determination of site value, as it has no bearing on Council rates, and would prefer to have the matter remitted directly for re-determination by the Tribunal rather than to be put to the further expense of defending an appeal.

6 Following a mention on 30 September 2010, the parties agreed that the Court should determine the appeal without hearing further from them, and that the matter should be remitted to the Tribunal for the site value of the property to be re-determined.

7 It is therefore necessary for the Court to set out briefly for the benefit of the Tribunal why error has been identified in its reasons for decision as to site value.

8 In a nutshell, Mr Pattas submitted that the heritage overlay had not been taken into account in the determination of site value. According to Mr Pattas, the Tribunal addressed heritage issues in a single paragraph which, in substance, simply quoted the submissions of the Council and did not expressly state whether the Tribunal took the heritage overlay into account. He contended that the Tribunal's consideration of heritage issues was limited to paragraph 24, in which the Tribunal stated as follows:

In relation to heritage issues and their affect [sic] on Council's calculation of the Site Value, we find helpful the following comments set out on page 7 of the Council written submission regarding the VLA.

"In undertaking the review of site value of the land we are mindful of Section 2 of [sic] (8) and (9). We note that with regard to subsection 2 (8) that the subject property is not included in the register of the Heritage Act of 1995, and with regard to Section (9), a permit has not been issued which prohibits the pulling down or removal of the building.

Consequently, when undertaking our site value, it was on the basis that the improvements had not been made."

9 This, so Mr Pattas contended, revealed that the Tribunal did not consider that it was required to take the heritage overlay into account when determining site value.

10 Mr Pattas submitted that if the Tribunal did not take the heritage overlay into account, it acted contrary to longstanding High Court authority, Royal Sydney Golf Club v Federal Commissioner of Taxation,[1] and/or the statutory command in s 5A(3)(b) of the Valuation of Land Act.

11 Finally, Mr Pattas submitted that the failure of the relevant paragraph to disclose the conclusion of the Tribunal or its path of reasoning meant that the Tribunal had failed to comply with its obligation to give reasons for decision.

12 It was common ground that the Tribunal was required to take the heritage overlay into account when determining site value. The Council agreed that the heritage overlay was relevant to site value when taking into account the market value of the property and having regard to the relevant planning controls and constraints on the site.

13 However, the Council submitted that the Tribunal did not find that it was not required to take into account the heritage overlay and the Court should not infer that the Tribunal did not take into account the heritage overlay in assessing site value. The Tribunal had recited the planning controls which were relevant to the site, including the fact that there was a heritage overlay on the site. Importantly, the Tribunal went into some detail about comparable sales that it had considered, which included properties affected by heritage overlays. In assessing these sales, it was implicit that the Tribunal was also addressing the impact of the heritage overlay.

14 As to the alleged shortcomings of paragraph 24 of the Tribunal's reasons, the Council pointed out that the submission referred to in that paragraph was directed to a different matter.

15 The Council also submitted that Mr Pattas himself had only put forward one key sale which was affected by the heritage overlay, in circumstances where the relevance of the heritage overlay had become his key point on appeal. Moreover, restrictions referred to by Mr Pattas as restrictions imposed by the heritage overlay were not put to the Tribunal below. The Tribunal was not provided with any information by Mr Pattas as to the relevance or the effect of the heritage overlay in terms of the development capacity of the site.

16 Mr Pattas himself conceded that it might have been possible for him to raise the issue more squarely with the Tribunal.

17 As to the adequacy of the Tribunal's reasons for decision, the Council submitted that while the provisions of the heritage overlay were not explicitly referred to by the Tribunal in its reasons, the reasons did reveal the path of reasoning that led to the Tribunal's conclusions on site value, and the nature of the decision did not suggest any error which might have been due to the heritage overlay not having been considered.

18 In any event, Council submitted that if there were any errors of law, they did not constitute vitiating errors of law. It was highly unlikely that the Tribunal's decision would have been any different if it had explicitly taken into account the restrictions imposed by the heritage overlay. This was because the Tribunal identified numerous errors in Mr Pattas' sales analysis and expressed a clear preference for the Council's case over that of Mr Pattas.

19 In my view, the Tribunal's reasons indicate that it did not take into account a relevant consideration when assessing site value, being the fact that the property in question is affected, at least in part, by the heritage overlay.

20 The approach taken by the Tribunal to the question of site value was essentially a comparative sales exercise. On balance, the Tribunal preferred the comparative sales figures presented by the Council. There were clearly problems with the sales figures put forward by Mr Pattas.

21 As part of this methodology, the Tribunal took a figure based on the sales figures provided by the Council and then revised the Council's estimate downwards on the basis of some factors identified by Mr Pattas. In paragraph 60 of the Tribunal's reasons, it referred to these factors as follows:

• the fact that some of the comparable sales relied upon by Council were corner lots which are inherently more suitable for redevelopment, whereas the subject land is a mid-block site;

• the need for any potential redevelopment to accommodate in its design reasonable access to northern solar orientation;

• the Council "Chapel Vision" planning document is promoting a preferred redevelopment height of 4-5 storeys, rather than a more ambitious higher future development.

22 The Tribunal observed that it did not see these factors as changing its basic view that the key comparable sales were more consistent with and supportive of Council's position on the site value of the whole property. However, the Tribunal accepted that these factors did justify some adjustment downwards of Council's overall site value. It was on this basis that the Tribunal modified Council's overall site value figure from $14,278,000 to $12,500,000.

23 The heritage overlay was not mentioned as one of the factors that might cause the estimate to be revised downwards. In my view, this would have been a logical place to consider the effect of the heritage overlay. Even if the Tribunal formed the view that the existence of the heritage overlay was not a reason for further reducing the Council's preferred overall site value, one might nonetheless have expected the Tribunal to refer to it and to state that it did not have that result.

24 In reaching this conclusion, I am aware of Council's submission that the sales figures presented by Council included properties that were affected by the heritage overlay, and the heritage overlay was taken into account by this means. However, it appears to me from the Tribunal's reasons that only one such property was included in the comparative sales analysis carried out by the Tribunal.

25 Moreover, the fact that the Tribunal's principal reference to heritage issues referred only to submissions on the operation of ss 2(8) and (9) of the Valuation of Land Act (in paragraph 24) adds to the uncertainty as to whether the heritage overlay was taken into account as it was required to be.

26 I am therefore satisfied that the Tribunal erred in failing to take into account the heritage overlay when determining site value. If the Tribunal did take the heritage overlay into account, it did not set out adequately in its reasons how it did so.

27 The error must be treated as a vitiating error, as it is not possible to conclude that there would have been no difference to the outcome (that is, the dollar figure reached for the site value of the property) had the heritage overlay been taken into account.

28 Finally, I am not persuaded that Mr Pattas did not raise the relevance of the heritage overlay in submissions below. Paragraph 29 of Mr Pattas' submissions to the Tribunal appears to deal with the relevance of the heritage overlay.

29 The appeal should be allowed. The Tribunal's decision as to site value should be set aside on the ground that the Tribunal failed to have regard to the effect of the heritage overlay when determining site value.

30 In accordance with the express wishes of the parties, I propose to order that the proceeding be remitted to a differently constituted tribunal for re-determination of the site value of the property in accordance with ss 2(1) and 5A(3)(b) of the Valuation of Land Act.

31 Although the parties have agreed that a remittal is the proper course in light of the grant of leave to appeal and the reasons therefore, they do not agree on who should pay the costs of the leave application.

32 On behalf of the Council it was submitted that costs should lie where they fall because the problem with the Tribunal's decision did not arise as a result of anything that the Council said or did. Moreover, the Council had facilitated the saving of time and resources in agreeing that the appeal should be decided on the basis of the submissions made in the leave application and the matter remitted to the Tribunal without further argument.

33 This is disputed by Mr Pattas, who asserts that the Council's valuer is partly responsible for the error made by the Tribunal. While Mr Pattas accepts that the Council's position has resulted in a saving of time and resources, it was nonetheless necessary for Mr Pattas to come to this Court in order for the matter remitted to the Tribunal. Mr Pattas contends that the general rule as to costs should apply and that he, as the successful party, should have his costs of the leave application and the mention.

34 In my view, in the circumstances of this case, the costs of the application for leave to appeal and the mention should lie where they fall. It is apparent from the Tribunal's decision that Mr Pattas was of limited assistance to it when it went about determining site value. Some of the sales figures put forward by Mr Pattas were apparently unreliable. Moreover, he has himself conceded that he could have raised the issue of the heritage overlay more squarely before the Tribunal.

35 Mr Pattas came to this Court requesting an indulgence by seeking an extension of time in which to apply for leave to appeal. He has been granted that indulgence. Moreover, there were plainly problems with the way in which Mr Pattas ran his case below. The Tribunal referred to 'glitches' in his calculations of comparable sales figures and generally preferred the Council's position on the site value of the building. Mr Pattas will now have an opportunity to remedy those 'glitches'. He is effectively being given an opportunity to put his case in order. In these circumstances, Mr Pattas should not be compensated for his costs of his application for leave to appeal or the mention.

36 Accordingly, there will be no order as to costs.

[1] [1955] HCA 13; (1955) 91 CLR 610.