Plaintiff v First Defendant Second Defendant

1 This is an appeal brought by the Port of Melbourne Corporation ('PoMC') pursuant to s 23(3) of the Valuation of Land Act 1960 ('the Act') challenging the assessment of the site value of land owned by PoMC within the City of Melbourne ('subject land') as at 1 January 2012 ('relevant date').

2 Pursuant to s 25(1) of the Act, the Court may confirm, increase, reduce or otherwise amend any valuation and make any other order it thinks fit.

3 The Melbourne City Council ('MCC') assessed the collective site value of the subject land at the relevant date as $523.295 million. However, MCC now says that the site value of the subject land at the relevant date ought to be assessed by the Court as $650 million; Valuer-General Victoria ('VGV'), which was jointly represented at the trial by Senior Counsel for MCC but tendered separate valuation reports, contends that it should be assessed as $665 million.

4 POMC contends that the site value of the subject land at the relevant date was only $150.5 million.

5 The discrepancy between the site value for which PoMC contends and the values contended for by MCC and VGV stems from the different valuation methods used by the valuers to assess site value. There is disagreement as to whether the assessment of site value involves valuing the land as a whole and then carrying out an apportionment in respect of individual occupancies on the land or whether the occupancies must be valued on a stand-alone basis without reference to the value of the land as a whole. There is also a significant dispute as to which works and materials are to be disregarded as 'improvements' when assessing site value.

6 The appeal therefore turns on the construction and application of provisions in the Act concerning the valuation of occupancies for site value purposes and as to what are 'improvements' on land relating to a port, where there is a special rule about the treatment of improvements made by the Crown or public statutory bodies.

7 The resolution of these issues involves some fact finding concerning the history and operation of the Port of Melbourne ('port') and the development of the port of Melbourne land and waters since 1876.

8 As Australia's largest container and general cargo port, the port has been extensively developed over a period of 130 years, evolving from a series of berths on the Yarra and Maribyrnong Rivers and on Hobson's Bay to a modern port comprising 34 commercial berths at five docks, along with river wharfs and Gellibrand and Station Piers. The development of the port land has involved, among other things, changing the course of the Yarra River (involving the construction of the Coode Canal and the filling of part of the original river course), and the transformation of hundreds of hectares of unstable swamp land into land capable of supporting the infrastructure that makes up a modern port. Over the years, the port of Melbourne land has been extensively reclaimed and remodelled to effect and support the construction of berths, wharfs, container terminals and other port infrastructure, including canals, railways and roads. Webb Dock, on Port Phillip Bay, has been almost entirely reclaimed from the water.

9 In 1876, when the original Harbor Trust was established, the port area looked as represented in this historical map:

11 At the relevant date, the port occupied approximately 530 hectares of land spanning four different municipalities, 431 hectares of which were in the City of Melbourne.[1] PoMC held all but two small parcels[2] of the port of Melbourne land in fee simple on 36 different titles.[3]

12 The port of Melbourne land was (and is) divided into four main areas: the area to the north of the Yarra River and south of Dynan Road comprising Swanson, Appleton, and Victoria Docks; South Wharf, which runs along the southern bank of the Yarra River at Lorimer Street; Webb Dock, which has two large areas of land protruding into Port Phillip Bay; and a smattering of areas to the west of the Maribyrnong River. These four principal areas are separated from one another by the port of Melbourne waters and, in the case of Webb Dock, by (non-port) land. The four areas were (and are) covered by a single planning scheme administered by the Minister for Ports and were managed by PoMC as the Port of Melbourne.

13 PoMC does not undertake any stevedoring or logistics work at the port, but manages the use of infrastructure and common land and waterways to facilitate the movement of ships into the port, the loading and unloading of cargo and the movement of that cargo outside the port by its tenants. It provides commercial facilities in the form of container terminals, multi-purpose terminals (including for break bulk, motor cars and coastal trade), dry bulk berths and storage, and bulk liquid berths and storage. It provides a number of common user berths as well as berths licenced to particular users.

14 As the owner of the port of Melbourne land, PoMC acts as a landlord and has leased large parts of the port of Melbourne land to tenants, who conduct business operations from the leased land and, in most cases, from adjacent licenced berths. Typically, where a lease directly abuts a wharf there is a 'preferential berthing licence'. That licence relates to the wharf and entitles the tenant to operate on the wharf as a licensee of PoMC under the terms and conditions of the berthing licence. At the relevant date, it was common for the berthing licence to be referred to within and cross-linked to the lease. Preferential berthing rights were also in place in favour of some tenants whose leasehold land did not directly abut a wharf.

15 At the relevant date, 282.7 hectares of the port of Melbourne land were tenanted.[4] The tenancies were ground leases, and the leased areas did not necessarily, or even usually, correspond with the freehold titles held by PoMC. Broadly speaking, at the relevant date, PoMC's tenants conducted stevedoring and logistics operations involving the loading and unloading of cargo and the transportation of cargo to and from the port. The five major tenancies were as follows:

(a) Patrick Stevedores Operations No 2 Pty Ltd at Swanson Dock East;

(b) Patrick Stevedores Operations No 2 Pty Ltd at the rear of Swanson Dock East;

(d) Patrick Stevedores Operations No 2 Pty Ltd at Webb Dock East; and

(e) Australian Amalgamated Terminals Pty Ltd at Webb Dock West.

16 There were also a number of businesses providing associated services, such as car detailing for imported vehicles and equipment hire for container transport. The Australian Customs Service was an important tenant.

17 The tenancies, as occupancies on the subject land, were separately rated by MCC pursuant to s 13DC(1) of the Act, which requires the computation of capital improved value, net annual value and, if required, site value for each occupancy on rateable land. However, s 2(3) of the Act makes provision for the computation of the capital improved value and site value of an occupancy to take place by way of an apportionment based on the value of a 'larger property' where the occupancy 'forms part of' that larger property.

18 Section 13DC(9) of the Act also calls for an apportionment of value where land comprising one undertaking extends continuously beyond the boundaries of any municipal district.

19 Under the Act, site value is to be determined assuming that any improvements on the land had not been made. There is a general definition of 'improvements' in s 2(1) of the Act that excludes from the definition 'work done or material used for the benefit of the land by the Crown or by any public statutory body'. However, s 2(2AA) of the Act provides for '[w]orks relating to a port, being buildings, breakwaters, berths, wharfs, aprons, canals or associated works' to be improvements, irrespective of who carried out those works.

20 Aside from the berths, wharfs, roads, railways and services infrastructure on the port of Melbourne land, most of the visible improvements at the relevant date were improvements made by the tenants. For the purposes of assessing site value at the relevant date, the treatment of the tenants' improvements was uncontroversial. The tenants' improvements included nearly all the buildings on the subject land and extensive areas of hardstand. However, the reclamation or filling works carried out by PoMC and its predecessors since 1877 are the foundation on which the port has been developed. Whether the reclamation or filling works are to be treated as improvements under s 2(2AA) when assessing site value at the relevant date is a matter of controversy.

(a) Is the port of Melbourne land (or any part or parts of it) a 'larger property' of which the individual occupancies form a part for the purposes of s 2(3) of the Act, such that the determination of the site value of each occupancy involves an apportionment based on the site value of the larger property?

In the alternative, does s 13DC(9) require an apportionment?

(b) What works and materials on the subject land are 'improvements' to be disregarded when assessing site value? In particular, do reclamation or filling works carried out by PoMC or its predecessors fall within the definition of 'improvements' in s 2(2AA) of the Act?

22 PoMC submits that the evidence, including lay evidence and expert planning and valuation evidence, establishes that the whole of the port of Melbourne land, including the subject land, constitutes one 'larger property' and that the occupancies on the subject land are to be valued in accordance with s 2(3) of the Act. In the alternative, PoMC submits that s 13DC(9) applies to require the computation of values by way of an apportionment, because the port of Melbourne land and the port of Melbourne waters comprise one 'undertaking' that extends beyond municipal boundaries.

23 For their part, the defendants (MCC and VGV) contend that the land to be valued in assessing site value is each separate occupancy on the subject land, and that no occupancy forms part of a larger property for the purposes of s 2(3). They say that s 13DC(9) is inapplicable for a host of reasons.

24 As to the second key issue, the scope of operation of s 2(2AA) of the Act, PoMC submits that the port of Melbourne land should be valued for site value purposes assuming that it existed in its 1876 condition, being a swamp with a river running through it. This is because works associated with the buildings, breakwaters, berths, wharfs, aprons and canals included the reclamation and filling works carried out since the birth of the port.

25 For their part, the defendants contend that, as a matter of law, s 2(2AA) does not encompass the reclamation or filling of land. On the assumption that all the buildings at the port were constructed by the tenants, the only works falling within s 2(2AA) were the wharfs, aprons and berths, together with work directly associated with those structures such as piling or other foundation work. The defendants strongly dispute that the subject land is to be valued for site value purposes in its original state.

26 Each of the parties retained a valuer to prepare an expert valuation report based on their preferred assumptions. PoMC filed reports by Les Brown dated 18 July 2014 and 31 October 2014; MCC filed reports by Richard Bowman dated 8 August 2014 and 7 November 2014;[5] VGV filed reports by Christopher Torr dated 8 August 2014 and 20 November 2014.[6]

27 Prior to trial, the parties agreed upon joint questions for the valuers ('joint questions').[7] The joint questions identified 20 scenarios, ranging from PoMC's primary case that the port of Melbourne land must be valued as a single property in its virgin state, to VGV's primary case that there are 74 different occupancies that must be valued individually as though each was an unencumbered fee simple, and only the strips of hardstand overhanging water where ships pull in are to be disregarded as improvements under s 2(2AA) of the Act.

28 The valuers prepared a joint report[8] in response to the joint questions. They were able to agree a value for each of the 20 scenarios, with values ranging from $150.5 million on PoMC's primary case[9] to $665 million on the primary case of VGV.[10]

29 PoMC adduced lay evidence on the history of the port, the role and operations of PoMC and its predecessors, and the operations of its tenants as at the relevant date. The parties relied upon both oral and written valuation evidence from Messrs Brown, Bowman and Torr. The Court undertook two views of the port.[11]

30 Section 11 of the Act provides that a valuation authority must cause a general valuation of rateable land within its municipal district to be made as at 1 January in every even calendar year and returned to the council before 30 June in that year. Section 10 of the Act provides that the valuation authority in relation to a municipal district is the council.[13] MCC is a valuation authority in relation to the subject land.

In every valuation for the purposes of the Local Government Act 1989, each separate occupancy on rateable land must be computed at its net annual value, its capital improved value and, if required by a rating authority, its site value ...

32 Hence, whilst the net annual value and the capital improved value of every occupancy must be computed for rating purposes, a computation of site value is only necessary if required by a rating authority. 'Rating authority' is defined in s 2(1) to include the Commissioner of State Revenue. The Commissioner requires the computation of site value under s 13DC(1) because, pursuant to s 19(1) of the Land Tax Act 2005, the taxable value of land for a tax year is an amount equal to the site value of the land as at the relevant date.[14]

33 'Rateable land' is defined in s 2(1) of the Act to have the same meaning as in s 154 of the Local Government Act 1989,[15] which provides that all land is rateable save for certain exceptions set out in ss 154(2) to (4). The exemptions include unoccupied land vested in a public statutory body and land vested in a public statutory body that is used exclusively for public or municipal purposes. This may include some of the subject land, although this question was not explored in the evidence or in submissions. Certainly, the bulk of the subject land at the relevant date was rateable land.

34 The Act contains a number of provisions that specify how rateable land is to be valued.

If it is necessary to determine the capital improved value or site value of any rateable land in respect of which any person is liable to be rated, but which forms part of a larger property, the capital improved value and site value of each part are as nearly as practicable the sum which bears the same proportion to the capital improved value and site value of the whole property as the estimated annual value of the portion bears to the estimated annual value of the whole property.

36 Sections 13DC(6) to (9) also specify how the valuer is to approach the valuation task in respect of certain land:

(a) If several parcels of land in the same municipal district are occupied by the same person and separated from each other only by a road or railway or other similar area across or around which movement is reasonably possible, the parcels must be regarded as together forming rateable land and valued accordingly (s 13DC(6)).

(b) If any person is liable to be rated in respect of two or more unoccupied parcels of land in the same municipal district and the parcels form one continuous area, the parcels must be regarded as together forming rateable land and valued accordingly (s 13DC(7)).

(c) If a portion of a parcel of land on which a building is erected is occupied separately, or is obviously adapted to being occupied separately, from other land in the parcel, that portion must be regarded as forming a separate rateable property and must be valued accordingly (s 13DC(7A)).

(d) If any portion of a parcel or parcels of land forming rateable land for the purposes of a municipal rate or of a rate to be levied by any other rating authority using the valuation is subject:

(i) to a rate levied in respect of that portion only; or

(ii) to a differential rate which differs from the rate levied in respect of the remainder of that parcel or those parcels;

the value of the land must be apportioned so as to show separately the value of the portion (s 13DC(8)).

(e) If land comprising one undertaking extends continuously beyond the boundaries of any municipal district the value, for the purposes of any rate, of so much of the land as is within any one municipal district, must be assessed as part of the value of the whole of the land (s 13DC(9)).

37 Section 5A sets out certain principles of valuation to which consideration must be given in all cases to which the Act has application, including the valuation of rateable land. It provides:

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

38 'Land' is not defined for this Part of the Act. However, 'land' is defined in s 38 of the Interpretation of Legislation Act 1984 as follows:

land includes buildings and other structures permanently affixed to land, land covered with water, and any estate, interest, easement, servitude, privilege or right in or over land; ...

39 Section 2(1) of the Act contains the following definition of 'site value':

site value of land, means the sum which the land, if it were held for an estate in fee simple unencumbered by any lease, mortgage or other charge, might in ordinary circumstances be expected to realise at the time of the valuation if offered for sale on such reasonable terms and conditions as a genuine seller might be expected to require, and assuming that the improvements (if any) had not been made; ...

40 The assumption that improvements had not been made requires consideration of the definition of 'improvements' in s 2(1):

improvements, for the purpose of ascertaining the site value of land, means all work actually done or material used on and for the benefit of the land, but in so far only as the effect of the work done or material used increases the value of the land and the benefit is unexhausted at the time of the valuation, but, except as provided in subsection (2AA), does not include-

(a) work done or material used for the benefit of the land by the Crown or by any statutory public body; or

(b) improvements comprising-

(i) the removal or destruction of vegetation or the removal of timber, rocks, stone or earth; or

(ii) the draining or filling of the land or any retaining walls or other works appurtenant to the draining or filling; or

(iii) the arresting or elimination of erosion or the changing or improving of any waterway on or through the land-

unless those improvements can be shown by the owner or occupier of the land to have been made by that person or at that person's expense within the fifteen years before the valuation; ...

41 Section 2(2AA) also specifies what is an improvement, in the context of a port. It provides:

Works relating to a port, being buildings, breakwaters, berths, wharfs, aprons, canals or associated works are improvements within the meaning of this Act.

42 As a result of s 2(2AA), certain work done or material used for the benefit of land by the Crown or a statutory public body is to be treated as an 'improvement' and disregarded when assessing the site value of land.

Statutory, regulatory and policy framework for the port

43 Since 1 July 2010 and at the relevant date, the development and operation of the port has been governed by the Port Management Act 1995 ('PM Act'), together with the Transport Integration Act 2010 ('TI Act').

44 The PM Act provides generally for the establishment, management and operation of commercial trading ports and local ports in Victoria. It contains definitions of the 'port of Melbourne land' and the 'port of Melbourne waters', as well as a requirement for port authorities to provide every four years a 'Port Development Strategy' setting out trade projections, current and projected land use, infrastructure and transport infrastructure requirements.[16]

45 The TI Act was enacted in 2010 to provide a framework for an integrated and sustainable transport system.[17] It covers a variety of transport systems and corporations, including PoMC. Section 141D(1) provides that the primary object of PoMC is to manage and develop the port consistently with the 'vision statement' and the 'transport system objectives' (found in s 6 and Division 2 of Part 2 of the TI Act respectively). The primary object of PoMC includes:

(a) to ensure, in collaboration with relevant responsible bodies, that the port of Melbourne is effectively integrated with the transport system and other systems of infrastructure in the State;

(b) to facilitate, in collaboration with relevant responsible bodies, the sustainable growth of trade through the port of Melbourne;

(c) to ensure that essential port services of the port of Melbourne are available and cost effective;

(d) to establish and manage channels in port of Melbourne waters for use on a fair and reasonable basis.

46 Pursuant to s 141E of the TI Act, PoMC has the following functions:

(a) to plan for the development and operation of the port of Melbourne;

(b) to provide land, waters and infrastructure necessary for the development and operation of the port of Melbourne;

(c) to develop, or enable and control the development by others of, the whole or any part of the port of Melbourne;

(d) to manage, or enable and control the management by others of, the whole or any part of the port of Melbourne of Melbourne;

(e) to provide, or enable and control the provision by others of, services for the operation of the port of Melbourne;

(f) to promote and market the port of Melbourne;

(g) to facilitate the integration of infrastructure and logistics systems in the port of Melbourne with the transport system and other relevant systems outside the port of Melbourne;

(h) to manage and, in accordance with the standards developed by the Director, Transport Safety, to dredge and maintain channels in port of Melbourne Waters;

(i) to provide and maintain, in accordance with the standards developed by the Director, Transport Safety, navigation aids in connection with navigation in port of Melbourne waters;

(j) to generally direct and control, in accordance with the Marine Safety Act 2010 (Vic), the movement of vessels in port of Melbourne waters;

(k) to perform functions in accordance with a direction given by the Minister under section 141H; and

(l) to perform any other functions or duties conferred on the PoMC by any other Act or any regulations under any other Act.

47 PoMC must carry out these functions consistently with State policies and strategies for the development of the Victorian port and freight networks.[18]

48 In accordance with the requirements of s 91K of the PM Act, PoMC has prepared a Port Development Strategy ('PDS'). A PDS must be prepared every four years and must include trade projections, current and projected land use requirements, current and projected infrastructure and transport infrastructure requirements for land and water in the port. The relevant iteration of the PDS is the 2009 'Port Development Strategy - 2035 Vision'. The PDS states that it 'aims to create a clear picture of the short to medium and long term development plans of the Port of Melbourne. This will give the port's tenants, stakeholders and the wider Victorian community a clearer understanding of:[19]

• forecast trade volumes and terminal productivity in the port freight and logistics industry that will have an impact on the port and its development
• the infrastructure improvements required by the port and the implications for land and water use
• the funding strategy the port will use to deliver infrastructure projects
• the environmental and social principles the port will follow in its development of the port and facilitation of port growth.

49 The short to medium term plans in the PDS included:

(a) the development of Webb Dock East for international containers;

(b) the consolidation of motor vehicle operations at Webb Dock West;

(c) increased size and intensification of international container terminal facilities at Swanson Dock;

(d) the integration of the Dynon and Swanson precincts to support the port's activities; and

(e) the consolidation of general cargo at Appleton, Victoria Dock and South Wharf.

50 The long term plan for 2035 reflects an anticipated fourfold increase in containerised cargo, the tripling of Bass Strait trade, and the doubling of the quantity of bulk products moving through the port. The 2035 Strategy anticipates, among other things, extensive re-development of the Webb Dock and Dynon precincts, the extension of Swanson Dock northwards, the connection of the Webb Dock precinct to the rail network and the integration of port operations with the Metropolitan Freight Transport Network identified in the State policy document 'Freight Futures'.

51 'Freight Futures' was identified in the expert planning evidence as is a key policy affecting the port by setting out the strategy to integrate the port with other transport modes, including rail.

52 The use and development of the port of Melbourne land is also regulated by the Port of Melbourne Planning Scheme made and administered by the Minister under the Planning and Environment Act 1987.[20]

53 Pursuant to the Port of Melbourne Planning Scheme, the principal zoning of the port of Melbourne land is Special Use Zone 1 ('SUZ1'), which applies to the landside areas of the port and provides for its development as a major commercial port of State significance, accommodating a range of port related uses. The specific purposes of SUZ1 are to provide for the ongoing operation and development of the port as a key area of the State for the interchange, storage and distribution of goods and to provide for uses which derive direct benefit from co-establishing with a port. Within SUZ1, permitted uses include 'industry', 'shipping container storage', and 'warehousing', provided that such uses are directly associated with and reliant upon the port.

54 The water bodies, including the Yarra River and the individual docks, are covered by Special Use Zone 4 ('SUZ4'). The relevant purpose of SUZ4 is to provide navigable channels and access for shipping to the port as 'a key area of the State for the interchange, storage and distribution of goods'. No permit is required for use of the waterways; however, a permit is required for their use for industry, as a transport terminal or as a warehouse, with the condition that those uses must be directly associated with and reliant upon the port.

55 The Planning Scheme contains the Port Strategic Statement (cl 21). Relevantly, cl 21.01 describes PoMC's strategic focus to be to secure the port as a national gateway for Australia's international and domestic sea freight by facilitating improved transport links to and from the port and cargo handling capacity for cargo owners and shipping lines. It recognises that PoMC's physical services relate to the provision and use of specialised, high quality port land and facilities, and that PoMC provides the road, rail and associated infrastructure within the port and develops this infrastructure to offer long-term security for port customers and opportunities for business growth.

56 Clause 21.04 sets out a plan for the port to accommodate future growth. Its objectives are to ensure that adequate port land and infrastructure is available to meet the forecast trade and passenger growth in the port over the next 10 years and beyond; to ensure that the use of land in the port is flexible in its ability to respond to changing economic conditions; to provide efficient land and sea transport links and intermodal connections; and to identify land use and development opportunities throughout the port that will meet short and long term planning outcomes and facilitate continued economic growth.

57 To this end, it is proposed, among other things, to extend Swanson Dock to encourage increased international container trade, and to redevelop Victoria and Webb Docks in accordance with the relevant concept plans. The concept plans involve changes to the physical layout of the land, changes to roads and railways, the reconfiguration of lease boundaries and so on.

58 PoMC's Annual Report for 2011/2012 describes the Port Capacity Project that is presently underway. The Port Capacity Project is illustrative of the way in which areas of the port can be reconfigured by PoMC to meet strategic requirements. It involves the redevelopment and reconfiguration of Webb Dock East to provide significant additional container-handling capacity. It also involves the establishment of new road links to connect Webb Dock directly to the West Gate Freeway, the development of a new automotive facility at the northern end of Webb Dock and the construction of additional shipping berths at Webb Dock West. The Port Capacity Project is responsible for the single biggest change at the port since the relevant date, which involves the development of a new container terminal at Webb Dock East and the cessation of the Patrick automotive terminal on that site.

Application of s 2(3)

59 Section 2(3) of the Act sets out a method for ascertaining the capital improved value and the site value of certain rateable land. Relevantly, it provides that where it is necessary to determine the site value of any rateable land in respect of which any person is liable to be rated but which forms part of a larger property, the site value is to be determined by means of an apportionment.

60 It was common ground that the occupancies on the subject land were on 'rateable land in respect of which a person was liable to be rated'. The parties also agreed that whether an occupancy on rateable land formed part of a 'larger property', and the metes and bounds of that larger property, were questions of fact. However, the parties were at odds as to whether s 2(3) applied to require the site value of the different occupancies on the subject land to be computed by reference to the site value of the port of Melbourne land as a whole.

61 PoMC contends that the whole of the port of Melbourne land (including the subject land) is, as a matter of fact, a 'larger property' for the purposes of s 2(3) of the Act, and as such must be valued as one property, and value apportioned to individual occupancies in accordance with the method set out in s 2(3). In the alternative, PoMC contends that the port of Melbourne land and port waterways together satisfy the description 'larger property'. As a further alternative, PoMC contends that if the port of Melbourne land, alternatively the port of Melbourne land and port waterways, is not a 'larger property', then there are three 'larger properties': the Appleton/Swanson/Victoria Dock precinct, the South Wharf precinct and the Webb Dock precinct.

62 For their part, the defendants submit that the occupancies must be valued on a stand-alone basis and not as part of a larger property. This is because s 13DC(1) of the Act is the starting point for all valuations under that Act and, by its terms, s 13DC(1) identifies what must be valued as each separate occupancy on rateable land.

63 According to the defendants, occupancy is the basic unit of valuation for rating purposes. A single occupancy might - but need not - correspond with the land identified in the certificate of title. There might be more than one occupancy on a single lot or title, or a single occupancy might span more than one lot or title. So much, the defendants say, is explicitly recognised by ss 13DC(6) and 13DC(7A) of the Act. In valuing the land, the valuer is required by s 13DC(1) to assume that the occupancy corresponds with an estate in fee simple, even when it does not.

64 According to the defendants, the identification of occupancy rather than title as the basic unit of valuation is supported by the way in which the Act and the Local Government Act 1989 work in harmony. Section 158A of the Local Government Act provides that if a council levies a rate or charge on any land, it must separately levy that rate or charge in respect of each portion of the land for which it has a separate valuation. The defendants argue that s 158A contemplates that the council will have a separate valuation under the Act for different portions of the land that together form one title and, given the context, it is clear that each portion represents an occupancy. Likewise, s 21(2) of the Land Tax Act 2005 provides that the Commissioner may use for land tax purposes a valuation made under the Act that has determined the value of each separate occupancy on land, and include in the notice of assessment a description of the occupancy.

65 Thus, so the defendants contend, both the Local Government Act and the Land Tax Act contain specific provisions to deal with the fact that valuations under the Act are performed on an occupancy basis and there is no difficulty from either a rating or land tax perspective with the fact that an occupancy might not correspond with a lot or title.

66 As to when an occupancy on rateable land will form part of a 'larger property', the defendants submit that this is a question of fact that will depend on all the circumstances of the case. Such circumstances might include the extent to which it is possible to treat the separate occupancy as a hypothetical estate in fee simple, the existence of other separate occupancies, the physical proximity of the occupancies, the physical relationship between the occupancies, and the extent to which the occupancies are, from an operational or functional perspective, integrated or inseparably interdependent.

67 Critically, however, the defendants submit that a separate occupancy on rateable land will only form part of a 'larger property' so as to engage s 2(3) of the Act if the occupancy cannot be valued fairly and accurately in isolation from the other occupancies or shared facilities that also form part of that property. Then, and only then, will a separate occupancy be regarded as forming part of something larger.

68 This proposition was described in the course of argument as imposing a form of 'necessity test' for the engagement of s 2(3). There was some debate between the parties as to whether the defendants' were proposing one test or two, in the form of 'soft' and 'hard' versions of the test. The 'hard' version would allow for s 2(3) to be applied only if no other valuation method could be used; the 'soft' version would allow it to be applied if necessary to produce a fair and accurate valuation.

69 In fact, based on the submissions made by Senior Counsel for the defendants and the evidence given by the valuers, I understand the test proposed by the defendants to be a 'hard' test, notwithstanding the use of the words 'fairly' and 'accurately'. If occupancies can be described separately (where there is a defined land area for each occupancy and an exclusive occupant) and valued on that basis as hypothetical estates in fee simple, then they must be valued separately (that is, on a stand-alone basis) and s 2(3) does not apply. Section 2(3) is to be applied only when necessary, that is, when the site value of an occupancy cannot be established on the basis of a stand-alone valuation because the occupancy is integrated or 'inseparably interdependent'[21] with other occupancies.

70 The defendants submit that Parliament created the mechanism in s 2(3) to solve a problem, and there will only be a need to engage s 2(3) if a problem arises because an occupancy cannot be fairly and accurately valued in isolation from other occupancies. They say that this produces consistency between valuations and therefore the fairest valuation outcomes. However, in my view, the necessity test is concerned not so much with what is the best valuation 'fit' - which method produces the most accurate value - as with identifying a particular approach that must be followed unless it is impossible to do so.

71 According to the defendants, that circumstance exists most strikingly where the site value of a separate occupancy in a multi-storey apartment building must be determined. However, a similar problem might arise when determining the site value of a single level occupancy where there was a shared roof, shared air-conditioning, shared car-parking, shared access or other shared amenities. An occupancy in a shopping centre, for example, could not be valued in isolation if its use and development was dependent upon the continued use and development of the other occupancies in the centre and shared facilities.

72 The defendants submit that it is not necessary to engage s 2(3) in this case. They say that there is nothing about any of the separate occupancies at the port that requires them to be considered together with the whole of the port land (or with any one or more of the three areas identified by PoMC as potential 'larger properties') in order to fairly and accurately assess their value because:

(a) there is no difficulty in describing the separate occupancies as hypothetical estates in fee simple to be valued;

(b) once described, the separate occupancies can readily be valued on an individual basis; and

(c) there is no other reason why the separate occupancies must be valued together. They do not, for example, form an homogenous whole and they are not inseparably interdependent.

73 For its part, PoMC submits that the plain terms of s 2(3) do not include a 'necessity test' such as that proposed by the defendants. The ordinary meaning of the words in ss 13DC(1) and 2(3) of the Act is clear, namely that each separate occupancy on rateable land must be computed at its site value (if required), as well as its capital improved value and net annual value, and whenever a separate occupancy on rateable land forms part of a larger property, its site value and capital improved value must be computed as directed by s 2(3) of the Act, that is, by using the specified method of apportionment. Whether a property is a 'larger property' is a question of fact.

74 In the alternative, PoMC submits that, having regard to the evidence, even if the necessity test were applicable, the port of Melbourne land would have to be valued as one ('larger') property because the occupancies on the port of Melbourne land could not practically be sold individually, and because subdivision and securing roads would be contrary to the planning scheme for the long term use of the land as a port. The 'fair and accurate' way to determine the value of the port and the various parts of it is to value the port as a whole and then carry out an apportionment. According to PoMC, this approach is required on the basis that:

(a) it was agreed by the planning expert, Robert Milner, and by the valuers, that the highest and best use of the land, including for site value purposes, was as a port;

(b) it was agreed by the valuers that the port of Melbourne land would be sold as one property, and that it would in fact be impossible to sell individual parcels;

(c) it was clear that the configuration of the port of Melbourne land at the relevant date was not its highest and best use, such that the occupancies did not reflect the highest and best use of the land; and

(d) even if it were possible to subdivide the land in accordance with the occupancies, it would not be accurate to compare the value of the occupancies net of the costs of the subdivision with sales of land in an already saleable form.

75 Les Brown gave evidence that the port should be assessed as one holding even though the port of Melbourne land is not contiguous. He treated the port of Melbourne land as one property for the following reasons:[22]

Given the way the land is controlled by legislation under the Port Services Act, the Planning Scheme ... The port operations are clearly operated as one undertaking. Whilst there are various tenants throughout the port, it is controlled by the port [PoMC] itself in terms of where activities will and will not occur... the port is divided into various precincts or sectors in relation to the activities that will be undertaken in those areas. So, for example, Webb Dock is where the car loading unloading occurs. That doesn't occur at Swanson Dock. Coode Island is where the storage of bulk materials will occur. That doesn't occur at Webb Dock. So the port [PoMC] controls the operations in terms of usage and the tenants that will be in the respective areas.

Clearly the port is a significant economic driver for Victoria. We need a port to bring goods in and send goods out. It is something that needs to be in a governmental sense ... protected in terms of its operations. That again is something that the port [PoMC] is responsible for looking after in addition to things like security, maintenance of roads and all sorts of things in providing services to the respective tenants.

76 Mr Brown gave evidence that the Port of Geelong was sold as one property, continues to be operated as one property by its owner and, in his opinion, would be valued as one property. In Mr Brown's view, the Port of Portland would also be valued as one property.

77 Mr Brown was cross-examined about the conceptual difference between his position and that of Messrs Torr and Bowman as to the 'starting point' for a rating valuation. He said that the starting point in any valuation is to establish the land that is being valued and, wherever possible, to obtain the title or titles for that land. He confirmed that 'a fundamental in valuation must relate to a saleable parcel of land which at a minimum must refer to a title'. He did not accept that the basic unit of valuation is an occupancy.

78 In this context, Mr Brown opined that a valuation approach based on valuing the individual occupancies on a stand-alone basis was unsatisfactory because it inflated their value. It involved valuing occupancies which could not be sold in their current (un-subdivided) condition by reference to comparable sales of properties that were in saleable form. This ignored the costs of putting the occupancies into a separately saleable form.

79 Mr Brown conceded that his approach was not consistent with VGV's guidelines, 'General Provisions for Specialist Guidelines',[23] which provide that an occupancy should be assessed, as required by s 13DC(1) of the Act, as if it were held for an estate in fee simple in accordance with the definitions of 'capital improved value' and 'site value'. The assumption that the land is held as an estate in fee simple is to be made irrespective of the actual status of the land.

80 As to the question of whether the port was a 'larger property', it was Mr Brown's view that the port of Melbourne land stood in the same position as a shopping complex like Chadstone, where individual occupancies would be valued for site value purposes by apportioning value, based on the value of the shopping complex land as a whole. He gave evidence in relation to the valuation principles that would apply in valuing a number of multi-occupancy industrial estates and shopping centres in and around Melbourne,[24] opining that they would be valued as one larger property for the purposes of s 2(3) of the Act and that they were relevantly very little different from the port. According to Mr Brown, the relevant similarities between the industrial estates, shopping centres and the port included:

(a) a common owner responsible for managing the undertaking, with the ability to undertake future developments that change the configuration of the site;

(b) the presence of a number of separate occupancies, some of which are competitors, like Coles and Woolworths, and DP World and Patrick;

(d) the shared use of common areas, such as internal roads or walkways;

(e) shared facilities, such as sewage, drainage and potentially electricity services; and

81 Mr Brown considered that the occupancies at the port should be valued on the basis that they formed part of the port as a 'larger property' pursuant to s 2(3) of the Act.

82 Mr Torr treated the subject land as 74 separate occupancies because he identified the occupancies as separate occupancies that could be practically valued individually. He described occupancy as the 'foundation stone of what is to be valued' under the Act, and said that only where an occupancy could not practically be valued as a stand-alone parcel should s 2(3) be applied.

83 Mr Torr explained that when valuing, for example, the Murray Goulburn tenancy at the Swanson Dock East, his first step was to determine whether he was dealing with a separate occupancy. This involved establishing that there was an identified occupant of the land, that the occupancy was exclusive and that the land that was occupied was definable. In the port tenancies, the occupied land was clearly defined in the lease. Mr Torr then considered the condition of the land around the occupancy and determined whether the occupancy could be practically valued as a stand-alone parcel on the assumption that it was an unencumbered fee simple. In the case of the Murray Goulburn tenancy, the occupancy sat within a developed and operating port surrounded by roads and services. Once it was assumed that the land was an unencumbered fee simple, it became compatible with sales and rental evidence. Mr Torr did not treat the Goulburn Murray occupancy as forming part of a larger property because in the first step of his valuation process, he identified the property as a separate occupancy that could be practically valued in that form.

84 Mr Torr did consolidate some leases. He treated the three Patrick leases at Swanston Dock East as a single occupancy because the use of the land across the leases appeared to him to be fairly closely integrated and there were no obvious divisions between the leased areas such as boundary fences. In relation to the DP World leases, however, Mr Torr treated land to the north of Coode Road as a separate occupancy, in part because of the physical separation caused by Coode Road and in part because the land north of Coode Road had a separate function.[25]

85 When it was put to Mr Torr that his approach involved comparing unsaleable occupancies with actual sales of freehold titles and the two were not comparable, Mr Torr confirmed that he had not adjusted for costs associated with such things as the creation of certificates of title or easements, or the provision of services to separate titles. He agreed that in the 'real world', to put the port occupancies into a saleable condition, services to the land would need to be dealt with in some way.

86 Mr Torr gave evidence about the difference between the Chadstone shopping centre and the port. He said that because Chadstone had overlapping tenancies 'in a horizontal sense', that made the assessment of site value by reference to comparable sales highly arbitrary. It involved splitting the interest in the physical land between different strata levels. Furthermore, Chadstone had many occupancies that seemed to be very highly integrated in a single set of buildings. That, he said, along with the pooled car parking, made it very difficult to relate occupancies to a physical land area.

87 Mr Torr accepted that a number of areas that he had identified as separate occupancies at the port, such as rail corridors and electricity substations, were the sorts of things that in a shopping centre context would be provided by the shopping centre owner to enable the occupancies in the centre to function effectively as an integrated development.

88 Mr Bowman identified 64 separate occupancies on the subject land but, pursuant to s 13DC(6), he aggregated a number of tenancies to create 11 aggregated occupancies.[26] Mr Bowman explained that he grouped leased areas into a single occupancy based on a coincidence of occupant and use. For example, in relation to the Patrick leases at Swanston Dock East, Mr Bowman considered the use of the land and the occupant of the land and concluded that they were one and the same. He took the same or similar approach to a number of other leases.[27] He also combined some of the tenancies at Coode Island on the basis that there was one lease and one occupant although there were, in each case, two leased sites that were not contiguous.

89 In Mr Bowman's opinion, s 2(3) of the Act had no application to the port of Melbourne land. While the port demonstrated some attributes of a larger property, a valuation could be undertaken without the need to resort to s 2(3). As a valuer, he was able to reasonably hypothesise a separate estate in fee simple for each of the occupancies and was reasonably able to value each of those occupancies by reference to a recognised valuation methodology using comparable sales evidence.

90 Mr Bowman stressed that it was not difficult to identify the individual parcels to be valued. The occupancies were essentially self-contained in that each occupancy had its own dedicated boundary, each had its own buildings and car park contained within that boundary, and the tenants could operate their businesses completely independently of any other occupant in the port. Each tenant had its own road frontage and could come and go from its tenancy at any time of the day.

91 In Mr Bowman's view, if it was possible to hypothesise an estate in fee simple for an occupancy and to measure the value of that occupancy by assuming that the site could be transacted in the hypothetical marketplace, then the valuation could and should be carried out on that basis. Only if it was not possible to value the occupancy on this basis should s 2(3) be applied. Mr Bowman observed that in the case of Chadstone, the valuer would head down the s 2(3) path rather quickly, because it was difficult to see how you could arrive at a site value for, say, a fashion shop on its second floor without using the s 2(3) process.

92 Mr Bowman disagreed that it was difficult for a valuer to make use of comparable sales to value the occupancies in the port because they were not in fact separately saleable. Like Mr Torr, he said that he was required by the legislation to assume a hypothetical estate in fee simple for each occupancy and he could then compare that to sales that had occurred in other areas proximate to the port. No adjustments needed to be made for the purposes of this comparison. This approach was consistent with the VGV's guidelines, 'General Provisions for Specialist Guidelines'.

93 The parties agree that s 13DC(1) requires net annual value, capital improved value and, if required, site value, to be 'computed' for each occupancy on rateable land and that, where s 2(3) applies, it tells the valuer how to value the occupancy. Whether a separate occupancy forms part of a larger property is a question of fact and depends on all the circumstances of the particular case.

94 Although the parties were in heated agreement that it was a question of fact whether the tenancies in the port formed part of a larger property for the purposes of s 2(3), there was a clear conceptual difference between them as to when s 2(3) will apply. PoMC says that s 2(3) provides for the site value of an occupancy to be determined by way of an apportionment under s 2(3) if it forms part of a larger property and that is simply a question of fact; the defendants say that s 2(3) will only apply when the occupancy cannot be fairly and accurately valued in isolation from other occupancies. This difference of approach involves the interpretation of s 2(3) of the Act and a determination of whether the words 'which forms part of a larger property' are to be construed so as to require some form of functional or structural interdependency before an occupancy will 'form part of' a larger property.

95 In Thiess v Collector of Customs,[28] the High Court of Australia reaffirmed that the task of statutory construction begins and ends with a consideration of the text. The statutory text must be considered in its context, which includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text.[29]

96 In line with this authority, in Treasurer of Victoria v Tabcorp Holdings Ltd,[30] the Court of Appeal recently stated that because the legislature expresses its intention through the language that it uses in the statute itself, if the words in the statute are clear and unambiguous and can be intelligibly applied to the subject-matter, the provision must be given its ordinary and grammatical meaning.[31]

97 In this case, the task is to ascertain the meaning of s 2(3) and, in particular, the words 'rateable property ... which forms part of a larger property'. 'Rateable property' has a legal rather than an ordinary meaning which is ascertained by reference to s 154 of the Local Government Act. It poses no particular difficulties in the present context. The words 'which forms part of a larger property' can be given their ordinary and grammatical meaning.

98 However, the defendants argue that s 2(3) must be read in the context of s 13DC(1) and the requirement that 'each separate occupancy' be computed at the values specified. They say that this shows 'each separate occupancy' to be the starting point or 'basic unit of valuation' in a rating valuation and that, as a result, occupancies must be valued on a stand-alone basis unless and until there is a need to resort to s 2(3).

99 PoMC submits that the test formulated by the defendants involves reading additional words into s 2(3), namely, 'If valuation of that occupancy cannot be made or computed fairly or accurately, then ...' and that the preconditions for reading words into the statute, let alone these words specifically, have not been satisfied in this case. The defendants respond that there is no need to read words into s 2(3) because, properly construed, the words used in s 2(3) mean that a separate occupancy will only form part of a larger property in the circumstances they describe: it is only when an occupancy is integrated or inseparably interdependent with others that it can be said to 'form part of' the larger property.

100 According to the defendants, this construction is supported by the purpose of s 2(3), its history and the context in which it appears in the Act. The defendants base their preferred construction on a number of things, specifically:

(a) the primacy s 13DC(1) accords to occupancy as the basic unit of valuation;

(b) the need to interpret s 2(3) of the Act by reference to surrounding provisions in the Act, notably ss 2(4), 2(5), 13DC(1), (6), (7), (7A) and (9);

(c) (what they appear to contend is) a principle of land valuation[32] that land is not to be valued using an apportionment mechanism if it can be fairly and accurately valued on a stand-alone basis; and

101 In support of the proposition that an occupancy is the basic unit of valuation, the defendants referred to the legislative history of s 13DC(1) of the Act. Section 13DC(1), when originally enacted in the Local Government Act in 1989, provided:

In every valuation for the purposes of the Local Government Act 1989, the rateable land must be computed at its net annual value, capital improved value and, if required by a rating authority, its site value [emphasis added]

102 According to the defendants, this changed the basic unit of valuation for rating purposes from 'occupancy' to 'rateable land'. However, the provision in this form was never proclaimed and the Local Government (Rating) Act 1991 (the '1991 amending Act') was enacted in order to restore occupancy as the basic unit of valuation.[33] The 1991 amending Act introduced a new s 13DC(1) in the terms that were in force at the relevant date.

103 I am not persuaded that the 1991 amending Act and the requirement in s 13DC(1) for 'each separate occupancy' to be computed at the specified values sheds light on when s 2(3) is to be applied. On its ordinary and grammatical meaning, s 13DC(1) requires a council to 'compute' each separate occupancy at its net annual value, its capital improved value and, if required, its site value. While computations must be made in respect of each occupancy on rateable land, the word 'compute' is not limited to the act of carrying out the valuation of the occupancy as a stand-alone parcel. Even where it is impossible to do so (whether because of the 'inseparable interdependency' of occupancies on the land or otherwise) and the methodology in s 2(3) must be used, s 13DC(1) requires the computation of each separate occupancy at the specified values. The task mandated by s 13DC(1) applies whether site value is to be determined by way of an apportionment under s 2(3) or by way of the valuation of each occupancy on a stand-alone basis.

104 I therefore reject the proposition that, by reason of the language in s 13DC(1), occupancy is the 'starting point' or 'foundation stone' for a ratings valuation. Section 13DC(1) tells a council that it must produce at least two, and possibly three, values for each occupancy on rateable land, but it does not say how this is to be done. The method to be used depends on other provisions in the Act, including s 2(3).

105 As to the broader legislative context of s 2(3), the defendants submit that ss 2(4) and 2(5) of the Act, which deal with the valuation of units in a strata subdivision and lots in a cluster subdivision respectively, inform when s 2(3) applies because those provisions specify when a property will or will not form part of a larger property. Section 2(4) provides for a unit in a strata subdivision to be part of a larger property for site value purposes, but s 2(5) provides that a lot in a cluster subdivision does not form part of a larger property for either site value or capital improved value purposes.

106 The defendants submit, in substance, that as a strata subdivision involves the division of land in three-dimensional space, while lots in a cluster subdivision can be represented in two-dimensional space (that is, they have individual footprints), ss 2(4) and (5) indicate that the 'larger property' methodology was intended to apply to divisions of land in three dimensional space but not to properties that have an individual footprint and can be valued fairly and accurately in isolation from their neighbours. The different treatment of strata units and cluster lots by reference to the larger property concept, so the defendants say, supports the necessity test in s 2(3).

107 In my view, ss 2(4) and (5) of the Act cannot be read as part of a coherent scheme displaying an underlying logic that would inform the meaning of s 2(3). Sections 2(4) and 2(5) are concerned with the treatment of very limited categories of land, evidenced by the fact that only some forms of 'unit' development are captured by s 2(4), specifically units that are historical relics governed by Schedule 2 of the Subdivision Act 1988. Why the legislature singled out these categories of land for special attention is not apparent. The historical material identified by the defendants[34] points to a concern by the legislature to avoid different valuation methodologies for what were similar types of property or different ways of owning the same kinds of property.[35]

108 In my view, ss 2(4) and 2(5) are narrow provisions dealing with narrow circumstances and, while part of the legislative context, are of limited assistance in construing other provisions in the Act. They do not preclude or limit the application of s 2(3) to the valuation of other kinds of rateable land.

109 The defendants also point to s 13DC(7A) as limiting the operation of s 2(3). Section 13DC(7A) provides that if a portion of a parcel of land on which a building is erected is occupied separately from other land in the parcel, that portion must be regarded as forming a separate rateable property. The defendants argue that because a portion of a parcel of land on which a building is erected that is capable of being separately occupied is taken to form a 'separate rateable property' it cannot, therefore, form part of a 'larger property' for the purposes of s 2(3).

110 Again, I disagree. There is no reason why a 'separate rateable property' cannot form part of a 'larger property'. The term 'separate rateable property' in s 13DC(7A) appears to be a remnant of the terminology used in the predecessor provisions to ss 13DC(6) - (9) enacted in 1969 (which are discussed below). As such, it is not inconsistent with the larger property concept, the antecedents of which have existed since 1914.

111 I do not consider that s 13DC(7A) supports the construction of s 2(3) advanced by the defendants.

112 The defendants also rely on s 13DC(9), which they say serves the same purpose as s 2(3) and is declaratory of the established common law position that occupancies are to be valued independently of a larger property or undertaking of which they form a part unless they are inseparably interdependent or there can otherwise be no fair and accurate determination of rateable value based on individual occupancies.

113 This position, so the defendants say, is established by a number of authorities.

114 In Melbourne Tramway and Omnibus Co Ltd v Mayor of Fitzroy,[36] the Full Court of this Court considered the method for rating an undertaking in the form of a cable tramway which traversed a number of municipalities. The question for the Court was whether the City of Fitzroy, through which the tram tracks ran, was at liberty to rate separately the tramway buildings and fixtures that were situated entirely within its municipal area. Such a rate would be separate from, and in addition to, its share with all the other rating municipalities of the general rate on the system of tramways by mileage. The Chief Justice described the relevant 'principles of apportionment' as follows:[37]

The principles of apportionment of the rateable value of such an undertaking as this tramway, as established by the authorities, is, first, that wherever it is possible reasonably to attribute accurately to each municipality the whole of the advantage which arises from all portions of the rateable property which is locally within its limits, that must be done; and, second, when this 'parochial plan' as it is called, cannot, by reason of the inseparable interdependence of all the parts of the rateable property, or of the impossibility on any account of arriving at a fairly accurate appropriation of the rateable value according to the local distribution of the parts of the undertaking, then the Court is to make the fairest distribution which it can, and this often is arrived at by dividing the whole in the proportion of the local mileage of the undertaking within each municipal district, or some other equivalent equitable plan.

115 The defendants take from this the proposition that the 'parochial plan' - the valuation of the occupancies independently of the larger property or undertaking - is to be applied in rating valuations unless the parts of the rateable property are inseparably interdependent or there can otherwise be no fairly accurate determination of rateable value based on them.

116 There are two old English authorities in which the parochial plan was also preferred for the rating of docks.

117 In The Mersey Docks and Harbour Board v The Overseers of Liverpool,[38] the appellants were the owners and occupiers, under Acts of Parliament, of docks in different parishes on different sides of the River Mersey. Under the relevant legislation, the docks constituted one estate under one management. If the parochial principle of assessment had been adopted, the rateable value of the property in the parishes on the Cheshire side of the Mersey would have been very small compared to the rateable value of the property on the Lancashire side. Notwithstanding the common ownership and management of all of the docks, the Chief Justice held that the 'acreage principle' (apportionment based on area) was not to be applied except where necessary,[39] that is, 'where you really cannot apply the other principles'.[40] His Honour distinguished the 'Hull Docks case',[41] where the acreage principle was applied over the parochial principle in respect of a series of docks lying contiguous to one another and forming part of one concern, finding that the docks on different sides of the Mersey did not come within the designation of a series or system of docks, notwithstanding that they were to be treated as one for the purpose of general management.

118 In The Guardians of the Poor of the Sculcoates Union in the Borough of Kingston-Upon-Hull v The Dock Company at Kingston-Upon-Hull,[42] the House of Lords considered a similar issue concerning docks. The Dock Company owned and occupied a number of docks, some of which were in the appellants' union (a union being a collection of parishes). The appellants maintained that the proper method of ascertaining the rate for the docks in their union was to distribute the profits among the different docks in proportion to the water area in the particular parishes. The respondents contended that the proper method was to ascertain what were the profits in fact earned by each part of the system in order to arrive at rateable values. The question left to the House of Lords was which of the two methods was to be used.

119 Lord Herschell observed that there would be cases where it was impossible to deal with a property in a particular parish by itself, for example, when the property was not capable of being let to anybody by itself or when its only value was as part of a system or undertaking. In such a case, it would be necessary to take the entire system and ask what a tenant would give for the property, considered as part of that system.[43] However, the present case was not one of that description. His Lordship said:[44]

The question is as to the amount at which certain docks ought to be rated which would have a rateable value if the whole of the rest of the dock system were extinguished tomorrow; they would still be docks, and be capable of being used as docks, and certainly a tenant from year to year would be willing to pay a rent for them as docks. They are capable of being considered, and their rateable value is certainly capable of conception without any reference to the general undertaking, as a part of which, in fact, they are at present used.

120 Lord Herschell concluded that a system of docks of different dimensions, adapted to different purposes in different local situations, was not to be regarded as a homogenous whole, so that the earnings of the whole, if distributed according to the water area, would properly give the earnings of every part. The parts were to be independently assessed.[45]

121 The Tramway Case and Sculcoates were considered by the Court of Appeal in Esso Exploration and Production Inc v Shire of Morwell.[46] The Court applied the predecessor provision to s 13DC(9)[47] in relation to the valuation of a pipeline system for rating purposes. Justices Kaye and O'Bryan observed that the same principle of valuation had been enacted for rateable property forming part of a larger property: a valuer is required first to value the whole property and then to proportion the value to the rateable portion.[48] Their Honours concluded that the pipeline system in question was 'one wholly integrated undertaking' which could only be valued fairly according to the 'mileage basis'[49] and distinguished Sculcoates on the basis that it was clear that the House of Lords did not regard the system of docks as an 'homogenous whole'.[50]

122 According to the defendants, the decision in Esso shows s 2(3) and s 13DC(9) to be directed to a similar purpose, which is to produce valuations that are fair and accurate assessments of the value of occupancies that are contained within a larger unit, whether that be an 'undertaking' traversing municipal boundaries or a 'larger property'. In both cases, so the defendants say, the provision solves a problem associated with valuing the separate occupancy individually and in both cases the solution is only to be invoked when it is necessary to do so.

123 I reject the submission that the 'solution' provided by s 2(3) is only to be invoked when no other course (or no other 'fair' or 'accurate' course) is open. The ordinary and grammatical meaning of s 2(3) calls for a factual inquiry into whether the occupancies form part of a larger property. It does not require, as matter of legal principle, stand-alone valuations of occupancies whenever possible. In my opinion, the authorities relied upon by the defendants do not provide support for any such principle. They do not deal with legislative arrangements like those that are presently applicable or, indeed, with questions of statutory interpretation at all. In those cases, the courts were concerned to identify the most appropriate valuation methodology for the circumstances in question, and they did so in the absence of any particular legislative requirements. Thus, in the Mersey Docks Case, the decision hinged on the finding that there was no series or 'system' of docks as there was in the Hull Docks Case; in Sculcoates, it was found that the individual docks would survive commercially even if the rest of the docks were to be extinguished. Statements made in those cases as to whether the parochial or acreage principles applied ought not to be elevated to principles of law governing the construction of s 2(3) of the Act.

124 The defendants also argue that the legislative history of s 2(3) supports a construction incorporating the necessity test.

125 The defendants traced the origin of s 2(3) to s 14(1)(ii)(c) of the Rating of Unimproved Values Act 1914, which dealt with the valuation of 'rateable properties in one ownership'. In 1957, the Local Government (Amendment) Act 1957 replaced the words 'rateable property in one ownership' with the expression 'larger rateable property' to ensure that the same basis of valuation would apply to 'own your own flats' as already applied to individual flats in one ownership.[51] While the 1957 amending Act extended the method of apportioning value from individual flats in one ownership to any property which formed a portion of a larger rateable property,[52] there was, so the defendants say, a 'real focus' on the block of flats as the quintessential larger property. A block of flats is one property made up of component parts because those component parts are functionally interdependent, depending as they do on the existence and maintenance of shared improvements (such as the building structure) and other common property. That being so, each occupancy must be considered to form part of the larger property in order to arrive at a fair and accurate computation of its site value.

126 The defendants submit that in contrast to a block of flats, the occupancies at the port can be fairly and accurately valued in isolation from one another: each occupancy has its own footprint and is physically separate from the other occupancies; there is road frontage and separate access to each; there are no common facilities such as car parking or toilets; and each business is operationally independent from the others. Messrs Bowman, Torr and Brown agreed that each area of port land leased from PoMC was (or formed part of) a 'separate occupancy' for the purposes of s 13DC(1) of the Act. The defendants contend that there is therefore no need in the interests of fairness or accuracy to apply s 2(3) in assessing the site value of the occupancies at the port. Each of these occupancies can, and therefore must, be valued separately.

127 In my view, even if it were necessary to have recourse to legislative history to construe s 2(3), neither the legislative history of s 2(3) nor that of s 13DC(1) reveals any legislative intention to treat occupancy as the 'starting point' in a valuation so as to require stand-alone valuations of occupancies like those at the port unless that task is made impossible by their 'inseparable interdependency'.

128 Historically, site value has been used as a basis for calculating land tax liability, which is based on the ownership of land rather than its occupancy. The brief review of legislative history that follows shows s 2(3) and its predecessors to be directed to integrating the title-based valuation methodology used for land tax valuations with the occupancy based system used for council rates, so as to permit the use of land tax valuations for rating purposes and vice versa.

129 The first rating legislation in Victoria, the Local Government Act 1874 ('1874 LG Act'), was based upon the Parochial Assessment Act 1836 (UK), which imposed a personal tax upon the occupier of land to care for the poor using an estimate of the 'net annual value' of the land.[53] The 1874 LG Act also imposed a tax upon land, payable by the occupier.[54] To this end, s 265 of the 1874 LG Act required the council of every municipality to cause a valuation to be made of all rateable property within the municipal district for the purpose of setting rates:

And in every such valuation the property rateable shall be computed at its net annual value that is to say at the rent at which the same might reasonably be expected to be let from year to year free of all usual tenants, rates and taxes and deducting therefrom the probable annual average cost of insurance and other expenses (if any) necessary to maintain such property in a state to command such rent: Provided that no rateable property shall be computed as of an annual value of less than five pounds per centum upon the fair capital value of the fee simple thereof ...

130 Thus, while the 1874 LG Act imposed rates on the basis of the net annual value of the land, it included an alternative basis, which was a response to land speculation and the fact that landowners were holding vacant land that had no net annual value but a skyrocketing capital value.[55] As a result, the 1874 LG Act also provided for rates to be calculated on the basis of the 'fair capital value' of the fee simple.

131 The Local Government Act 1890 and the Local Government Act 1903 continued to require the computation of rates by reference to the higher of net annual value and five per cent of the 'fair capital value' of the fee simple.[56] Primary liability for the payment of rates remained with the occupier.[57]

132 Land tax was introduced by the Land Tax Act 1910, which imposed a tax on the owner of land or lands having an 'unimproved value' of £250.[58] 'Unimproved value' was relevantly defined as follows:[59]

'Unimproved value' or 'unimproved capital value' of land means the sum which the owner's estate or interest therein if unencumbered by any mortgage or other charge thereon, might in ordinary circumstances be expected to realize at the time of valuation or assessment if offered for sale on such reasonable terms and conditions as a bona fide seller might be expected to require and assuming that the improvements (if any) had not been made;

133 'Unimproved capital value', the forbear of site value, was therefore to be determined by reference to the estate or interest of the owner rather than by reference to occupancy. The Commissioner of Taxes was responsible for valuations but was permitted to use valuations made by or for a municipal council.[60]

134 Four years later, the Rating on Unimproved Values Act 1914 permitted councils to impose rates based upon the unimproved capital value of rateable property as an alternative to net annual value.[61] It used the definition of 'unimproved capital value' in the Land Tax Act 1910,[62] namely, the unimproved value of the fee simple.

135 As council rates were based upon occupancy, the 1914 Act went to some lengths to provide a framework for the computation of a rate referable to occupancy in circumstances where occupancy and title were not the same. The starting point was the unimproved capital value of the whole fee simple determined under the Land Tax Act 1910. Section 14(1)(ii)(a) required a council to adopt the valuation made for the purposes of land tax; s 14(1)(ii)(b) required the Commissioner to cause a separate valuation to be made upon request by a council where a property was not included in a land tax valuation; and s 14(1)(ii)(c) dealt with the circumstance where a person was liable to be separately rated but where the property formed a portion of a property in one ownership. In such a case, the capital improved value or the unimproved capital value of each portion was to be 'as nearly as practical the sum which bears the same proportion to the capital improved value or the unimproved capital value (as the case may be) of the whole property as the net annual value ... of the portion bears to the net annual value of the whole property as so defined'.

136 Section 14(1)(ii)(c) is the precursor to s 2(3) of the Act. It is a product of the need to adapt for rating purposes determinations made by the Commissioner for Taxes of the unimproved value of land on a single title. When used for rating purposes, the Commissioner's determination had to cater for the existence of multiple occupancies on the title and the provision contained a formula to enable this to occur.

137 The 'starting point' for the valuation exercise for 'unimproved capital value' was therefore title rather than occupancy. Although what had to be given a value for rating purposes was the unimproved capital value of each separate occupancy, the valuer commenced by determining the unimproved capital value of the fee simple and proceeded from there to derive values for each occupancy by way of an apportionment.

138 Subsequently, the Rating on Unimproved Values Act 1922 was enacted. It was described as 'An Act to consolidate and amend the Law relating to the Optional Rating by Municipalities on the Basis of the Unimproved Capital Values of Rateable Property' and provided for councils to decide to undertake their own valuations of rateable property within the municipality, computed at the unimproved capital value, the improved capital value and the net annual value.

139 The Local Government Act 1928 ('1928 LG Act') continued to give councils the choice to rate based upon unimproved capital value as well as net annual value. The primary liability for rates was imposed upon any person who occupied a rateable property.[63] Section 329 of the 1928 LG Act was accompanied by the margin note 'Provisions in case of several occupancies in one ownership'. Section 329(a)(i) provided that in every valuation, rateable property was to be computed at its unimproved capital value, its capital improved value and its net annual value and that the respective values would be set out in the valuation, the return and the rate. Section 329(b) then provided:

(b) where it is necessary to determine the capital improved value and the unimproved capital value of any rateable property in respect of which any person is liable to be separately rated but which forms portion of a rateable property in one ownership the capital improved value or the unimproved capital value of each such portion shall be as nearly as practicable the sum which bears the same proportion to the capital improved value or the unimproved capital value respectively of the whole property as the net annual value of the portion bears to the net annual value of the whole property: ...

140 Section 329(a)(i) broadly corresponds to s 13DC(1) of the Act, and s 329(b) broadly corresponds to s 2(3), although it refers to a portion of a property in one ownership rather than to a 'larger property.'

141 In the Local Government Act 1946, s 329(b) of the 1928 LG Act was re-enacted as s 330(1)(b), which was then amended by the Local Government (Amendment) Act 1957 to replace the words 'rateable property in one ownership' with the words 'larger rateable property'.[64] The requirement that the property be in one ownership was abandoned.

142 The Local Government Act 1958 ('1958 LG Act') continued to give councils the option of rating based upon unimproved value. If a council proposed to rate upon this basis and the occupancy formed part of a larger rateable property, s 332(1)(b) again required the apportionment of unimproved value based on the proportionate relationship between the net annual value of the occupancy and the net annual value of the whole property.

143 'Site value' and a definition of 'improvements' for site value were introduced into the 1958 LG Act by s 12(1) of the Local Government (Amendment) Act 1968. The new definition of 'improvements' took the form that we now recognise in s 2(1) of the Act by providing that certain improvements, including the draining and filling of land, were not improvements unless they could be shown to have been made within 15 years of the valuation.

144 The 1958 LG Act was further amended in 1969. Among other things, the 1969 amending Act[65] introduced a new division for the interpretation and use of site value.[66] After the commencement of the 1969 amending Act, every council valuation had to compute the net annual value, the capital improved value and, where required, the unimproved capital value.[67] At the same time, s 315A provided that when required pursuant to the 1958 LG Act or the Valuation of Land Act 1960 to assess unimproved capital value, particular councils had to assess site value in respect of each rateable property in the municipal district. Provision was made for the Governor in Council to make orders fixing dates for references to unimproved capital value to be construed as references to site value.

145 The Local Government Act 1969 re-enacted 332(1)(b) (the predecessor to s 2(3) of the Act) as s 254(3) but removed the word 'rateable' from the expression 'larger rateable property'[68] and made further provision for rating based on occupancy by inserting into the 1958 LG Act provisions equivalent to ss 13DC(6), (7A) and (8).[69] The Local Government (Rates) Amendment Act 1976 introduced a provision broadly in the form of s 13DC(7).[70]

146 The Local Government Act 1989 imposed the primary liability for rates upon the owner of land.[71] At about the same time, the Valuation of Land (Amendment) Act 1989 moved valuation and related provisions to the Act[72] and inserted s 2(3) in the Act along with the initial form of s 13DC(1), which, as mentioned above, referred to the computation of 'rateable land'.[73] As the defendants pointed out, the Local Government (Rating) Act 1991 amended s 13DC(1) with the stated purpose of requiring 'rating valuations to be based on occupancy rather than ownership'.[74] Section 13DC(1) was amended to its current form, which requires 'each separate occupancy' to be computed for the relevant values.[75]

147 While the 1991 amending Act amended both the Act and the 1989 LG Act, it did not amend the Land Tax Act or the basis upon which site value was to be calculated for the purposes of that Act.

148 In summary, while rates in Victoria have been returned on an occupancy basis since the late 19th century, land tax has been calculated on the basis of the unimproved value of the unencumbered estate in fee simple. When, in 1914, councils were given the option of using unimproved capital value as the basis for the imposition of rates upon occupiers of land, the legislature devised a way to convert the unimproved capital value of the estate in fee simple into the unimproved capital value of any portion of the land under separate occupancy. The predecessor provisions to s 2(3) sought to reconcile the requirement to rate on a basis other than title or ownership with title or ownership-based valuations. The 'staring point' was the valuation for site value purposes of land held under common ownership, now the 'larger property'. The 1991 amending Act, which introduced the requirement to compute 'each separate occupancy' for the values specified in s 13DC(1) did not change this. The extrinsic materials do not reveal any intention to effect substantive change to the approach to the valuation methodology for site value which preceded the 1991 amendment, namely, the valuation of the larger property, followed by the computation of the site value for each occupancy.

149 Section 13DC(1), while confirming that each separate occupancy on rateable land is to be computed at the specified values, does not say how that computation is to be carried out. It says nothing about the methodology to be used, which is left to provisions such as ss 2(2) - (10), s 5A and ss 13DC(6) - (9). In this context, I observe that the predecessor provisions to ss 13DC(6) - (9) also contain an unstated assumption that title will be the starting point for the valuation by providing rules or guidance on how parcels of land and/or 'separate rateable properties' are to be identified and treated in a range of circumstances.

150 In my view, therefore, nothing in the history of s 2(3) or s 13DC(1) reveals a legislative intention to impose a necessity test of the kind contended for by the defendants. It is not the case that the predecessor provisions to s 2(3) were enacted to deal only with occupancies that were 'inseparably interdependent' and therefore impossible to value in isolation.

151 Having regard to the ordinary meaning of the words, 'which forms part of a larger property', and the legislative context of s 2(3), there is no warrant for imposing the necessity test contended for by the defendants so as to limit the circumstances in which rateable land will form part of a 'larger property'.

152 Furthermore, the necessity test advanced by the defendants ignores or diminishes the importance of the valuation principles expressed in s 5A(3) of the Act and, in particular, the requirement to take into account, where relevant, the highest and best use to which the land might reasonably be expected to be put at the relevant time and any potential use.[76]

153 In considering the highest and best use of a parcel of land at the port, the highest and best use of the port of Melbourne land as a whole will be relevant. Evidence given by Mr Torr shows why. Mr Torr agreed that the highest and best use of the larger property will be relevant to the valuation of its parts[77] when asked about one of the industrial estates that Mr Brown had identified as a 'larger property', the Francis Street industrial development in Brooklyn. Mr Torr opined that the Francis Street development would be a difficult site to value because it would be necessary to determine its highest and best use and work out how the site would best be configured. He agreed that the existing configuration did not represent the best development of the site, that it was an out-dated form of industrial subdivision and that something different would be done with the site were it to be re-developed. Mr Torr also agreed that the valuation of individual occupancies might not reflect the highest and best use of the whole of the land. When asked whether that would be undesirable in valuation terms, he said:[78]

The answer is what it is. If you are valuing on a configuration of occupancies that don't represent current day highest and best use, then the answer is what it is because that's the way you have to do it under the Act.

154 I find this position unsatisfactory when there is a mechanism in s 2(3) that enables the highest and best use of the land to be taken into account by valuing the 'larger property' according to its highest and best use and carrying out an apportionment based on the value of the larger property.

155 The defendants submitted that the highest and best use of the land will only become relevant once the land to be valued - each separate occupancy - has been identified. I disagree. The requirement to value in accordance with the highest and best use of the land is relevant to determining whether to value an occupancy on a stand-alone basis or as part of a larger property, because valuing the occupancy in isolation may not reflect the highest and best use of the land comprising the occupancy or the land of which it forms a part.

156 In my view, the requirement to take into account both the use to which the land is being put and its highest and best use puts paid to the 'necessity test' advanced by the defendants. Section 2(3) will provide the fairest and most accurate way of valuing an occupancy where the configuration of occupancies in a larger property does not represent the highest and best use of the land.

157 In so concluding, I have given careful consideration to the submission made by the defendants that to value occupancies on port land otherwise than on a stand-alone basis will result in inconsistent valuations as between, for example, the bulk liquid facilities at Coode Island and similar facilities that are not on the port of Melbourne land but located nearby, such as the Mobil facility located on private land adjacent to the port in the City of Maribyrnong.

158 It may be the case that the application of s 2(3) in some cases but not in others produces anomalies. Nonetheless, the language of s 2(3) is clear. The legislature has provided for an apportionment to take place when rateable land is to be computed for site value and the land forms part of a larger property. In addition to where the site value of an occupancy cannot be practically or accurately valued because of the inseparable interdependency of occupancies, s 2(3) will produce the fairest and most accurate valuation of an occupancy where ignoring its situation within a larger property, such as a shopping centre, will not reflect the occupancy's real value or where the configuration of occupancies is not the highest and best use of the land comprising the larger property.

159 I do not accept that the application of s 2(3) is limited in the manner contended for by the defendants. It is necessary to determine as a matter of fact whether at the relevant date the port of Melbourne land (or any part of it) was a larger property of which the occupancies formed a part.

160 PoMC contends that the port of Melbourne land was a 'larger property' for the following reasons:

(a) PoMC was the registered proprietor of all but a very small part of the port of Melbourne land;

(b) s 3 of the PM Act defined the term 'port of Melbourne' to mean 'port of Melbourne land' and 'port of Melbourne waters', which covered the port of Melbourne land and waterways between the non-contiguous parcels of land forming the port of Melbourne land;

(c) s 141E of the TI Act gave PoMC functions and powers in relation to the port of Melbourne land and the waterways between the non-contiguous parcels of land forming the port of Melbourne land for their management as an integrated whole for use as a port;

(d) the Port of Melbourne Planning Scheme identified the port as comprising the port of Melbourne land and compelled the use and development of the port of Melbourne land and the waterways between the non-contiguous parcels of land forming the port of Melbourne land as an integrated port;

(e) pursuant to its statutory functions and its dedicated planning scheme, PoMC managed the port of Melbourne land and waterways as one property to be reconfigured and altered, both as to the location of land and waterways and as to the boundaries of tenancies, roads and railways, to meet the constantly changing needs of the port;

(f) PoMC in fact operated the port of Melbourne land as one property, consistently with the aforementioned statutory and planning frameworks; and

(h) the highest and best use of the port of Melbourne land was as a port.

161 The defendants submit that the port was not a 'larger property' because the separate occupancies could not be considered to form part of an integrated or homogenous whole. They argue that the magnitude and physical layout of the port land militates against the conclusion that it was one homogenous or indivisible whole. The port was a system of docks spread over a wide area and separated by water and it was not possible to get from some parts of the port to other parts of the port without leaving the port of Melbourne land entirely and using the external road network. They say further that neither the infrastructure provided by PoMC nor the waterways united the port, that there was no evidence of any functional connection between any occupancies over the port waterways and only limited evidence of road traffic between occupancies taking place entirely within the port environment. The port waters might have been 'marine highways' connecting the port to other domestic and foreign ports, but they did not knit any part of the port land or lands together.

162 As to the TI Act and Planning Scheme requirements, the defendants submit that neither compelled the use of the land as an integrated port. Most land in Victoria must be used and developed in accordance with applicable planning scheme requirements, and the fact that certain geographical areas share the same planning controls does not prevent them from being valued on an occupancy basis.

163 While the defendants accept that the port of Melbourne land was managed in an integrated way and that PoMC was charged with the task of developing the port strategically, they say that the port was not used or operated in an integrated way. There were numerous independent operations on the port of Melbourne land and each of these operations, in effect, occupied its own world. While each tenant had to use its land in a way that supported the sustainable development of the port, the tenants were not required to use their land in a manner that was inseparably interdependent with the other operations at the port. No infrastructure united the occupancies and they did not share buildings or facilities such as car-parking. While PoMC supplied common access and services infrastructure to the occupancies, each occupancy provided its own car-parking and relied upon its own improvements. Further, insofar as there were commercial relationships between some of the tenants operating at the port, this cooperation reflected individual commercial decisions rather than any requirement imposed by PoMC or by the physical configuration of the port. Generally speaking, the tenants operated their businesses independently and each occupancy was used, and was capable of being used, independently of other occupancies.

164 PoMC adduced evidence about the overall operations at the port and the strategic management and development of the whole by PoMC and its predecessors from John Bennett and Ian Schafter, each of whom has a long history of employment with PoMC and has held a variety of senior positions. At the relevant date, Mr Bennett was General Manager, Bid Management and Mr Schafter was PoMC's Systems & Quality Manager, Property.

165 Mr Bennett gave the following evidence about the nature of port operations and the use of the PoMC facilities to effect the movement of goods through the port:[79]

Currently and as at the Relevant Date the Port is and was a complex system of logistics, transport and financial operations involving many specialist service providers (comprising PoMC itself, tenants and others) working in an integrated fashion. The great majority of ship loading and unloading within the Port is undertaken by the tenants. However, the tenants could not operate without PoMC. Neither the tenants nor PoMC could operate without the specialist service providers (such as tug boat operators, pilots, rail track operators, train operators and trucking companies).

166 Mr Bennett described categories of port activities by reference to particular methods of cargo packing and handling and continued:[80]

Each of these categories of cargo packing and handling involves, in the case of imports, steps typically comprising shipping, mooring, stevedoring, storing (sometimes also unpacking) and delivery by road or rail, and all of the ancillary activities associated with these fundamental operations (for example, pilotage, navigation control, bunkering and towage). In the case of exports, the steps are essentially reversed.

167 PoMC also adduced evidence about its strategic and operational role at the port in the allocation and management of leases, in the construction, maintenance and management of roads and railways, in the provision of services such as electricity and sewerage to tenants and in the management of the waterways upon which the operations of the port depended.

168 The management of tenancies and roads is illustrative of the strategic nature of PoMC's role and of the way in which it managed the use and development of the port of Melbourne land.

169 As a member of PoMC's property department, Mr Schafter was responsible for leasing parts of the port of Melbourne land. His department made the choice of tenants and undertook the management of lease agreements with each of the tenants.[81] Mr Schafter gave evidence that PoMC evaluated tenancies, and the prospective tenant's proposal to use the tenancy, having regard to PoMC's corporate goals and strategies. If there was no suitable proposal for the use of a tenancy from the expressions of interest, the land remained vacant.

170 Mr Bennett gave evidence that at the relevant date, PoMC owned the roads in the port, except certain roads on leased land. The roads were located on the relevant freehold titles, and PoMC could close, realign or otherwise alter roads at its absolute discretion. PoMC controlled the use of the roads in order to accommodate necessary developments in the port. Mr Bennett gave the following evidence in relation to the reconfiguration of port precincts and the control of roads within the port:[82]

In general terms, roads are closed at the Port to enable Port developments of increased sizes, including shipping terminals and rail terminals, and roads are opened to satisfy a logistics requirement to match a point of entry to a proposed lease. In effect, the MPC used to, and PoMC does, re-subdivide and reconfigure precincts of the Port to suit changing operational conditions and tenancy configurations in whatever manner may be required from time to time. Occasionally, the alignment of new roads is subject to negotiating surrenders of land from relevant lessees. Most leases entered into after March 1996 incorporate a contractual right permitting the MPC and now PoMC to compulsorily obtain partial surrenders for Port developments, such as new roads.

171 Mr Bennett said that he had seen roads created, closed and realigned to accommodate developments in the port. New roads were constructed at the cost of PoMC or one of its predecessors. Road closures and movements were frequent, and examples included the realignment of the north end of Mackenzie Road (to Coode Island), the closure of Williamstown Road and construction of new roads in the Webb Dock precinct as part of the Port Capacity Project.

172 The evidence establishes, and I do not believe it to be contested, that, at the relevant date, the occupancies at the port were dependent on infrastructure and services provided by PoMC. The tenants gained access to the occupancies via the roads provided by PoMC. Furthermore, all were ultimately dependent on PoMC's maintenance and management of the waterways and most on the provision of licensed berths. Some relied on the availability of common berths; others upon the provision of rail facilities. The fact that the tenants had independent 24 hour access to the areas that they leased does not detract from the fact that their customers - the shipping companies - relied for their access to the port on the maintenance of the waterways and channels and the provision of navigational and related services by or through PoMC. The shipping companies directly, and the stevedores indirectly, also relied on on-water service providers such as tug-boat operators, and the presence of customs and quarantine facilities at the port was necessary to secure the movement of cargo through the port. At the other end of the transport chain, logistics companies moving cargo in and out of the port relied on the provision road and rail facilities by PoMC.

173 Nonetheless, the defendants submit that in determining whether the port operated in an integrated way, the focus must be on the relationships between the tenants themselves. This, they say, speaks to the actual use or operation of the port as opposed to its management and development. They contend that while the port may have been managed in an integrated way, it was not used in an integrated way and was therefore not a 'larger property' of which the occupancies formed a part.

174 I have already rejected one of the planks underlying this argument, the proposition that the port will not be a larger property for the purposes of s 2(3) unless the occupancies are 'inseparably interdependent' like units in a block of flats. I also reject the proposition that PoMC was concerned with the 'management and development' of the port as distinct from the actual use and operation of the port. In my view, because of its control over land use, roads, railways, services and waterways, PoMC's management and development of the port was critical to the day to day operations of the port users and to the actual use that could be made by the tenants of the port of Melbourne land and waters.

175 I find, as a matter of fact, that the port of Melbourne land was planned, managed, operated and used as a 'larger property' and that the occupancies formed part of this larger property.

176 The statutory and regulatory framework that governed the use and development of the port required it to be managed and developed strategically to serve the interests of the State as well as the tenants. Because of the capital expenditure required, the nature and scale of port development and the need for long term strategic planning, land use plans for the port were made and implemented over lengthy periods. Like its predecessors, PoMC was required to (and did) exercise stewardship over the port of Melbourne land to ensure that the necessary investment in channels and infrastructure, both land-side and water-side, occurred. PoMC was required to (and did) secure the land, waters and infrastructure necessary for the development of the port in order to ensure that the port could accommodate projected growth in trade along with changes in trade composition and ship size, and that the port was effectively integrated with other transport networks in the State. The use that could be made of the port of Melbourne land by the tenants depended on this strategic management and development.

177 I find, based on the evidence of Mr Bennett and the descriptions of port operations given by the relevant personnel at Patrick, DP World, Qube Logistics, AAT and Toll that at the relevant date the various port operations were integrated, with the major stevedoring and logistics operations reliant, among other things, on port, road and rail infrastructure and services provided by PoMC and as well as services provided by tug boat operators, pilots, rail track operators, train operators, trucking companies and the like. Furthermore, while some tenants were able to operate with little or no interaction with other tenants, many tenants used and relied upon the services provided by others. Patrick's logistics business at Swanson Dock relied upon DP World for 55 percent of its business; Qube Logistics serviced the container terminals of both Patrick and DP World. There was movement of cargo within the port. For example, international exports originating in Tasmania were generally shipped to Webb Dock East by Toll Shipping or SeaRoad Shipping, unloaded and then moved by road to Swanson Dock for export, with the process operating in reverse for imports to Tasmania.

178 Furthermore, the port of Melbourne land was a 'larger property' of which the occupancies formed a part for the purposes of the Act because the highest and best use of the land was as a port. Both Mr Bowman and Mr Torr accepted that the highest and best use of the port of Melbourne land was as a port, and that the port of Melbourne land would be sold in the market place as one property and operated as a port. As Mr Bowman said:[83]

The land appropriately zoned for such use [port and port-related purposes] contributes positive financial returns to the operators and is supported by a state-wide planning framework that serves to facilitate, protect and expand for future operations of port activities in the present location.

179 To value the port as a series of disaggregated parcels of land would be to lose sight of one of the most important determinants of the value of the port occupancies at the relevant date, which is that they formed part of the port.

180 Evidence given by Mr Torr about how he valued the occupancies at Webb Dock East shows the difference between the two approaches. The former Patrick tenancies at Webb Dock East are presently vacant because the land is being redeveloped as a container terminal as part of the Port Capacity Project. When asked about the redevelopment of Webb Dock East as a container terminal, Mr Torr agreed that he had not approached the valuation of that site in a way that accorded with its highest and best use, because his valuation did not include any premium for the fact that the site could be reconfigured for a different use. In treating each occupancy at Webb Dock East as if it were a separate property, he did not treat the site as having the capacity to become a container terminal.

181 This, in my view, illustrates the short-coming of not recognising the port of Melbourne land as a 'larger property' for the purposes of the Act.

182 A further shortcoming is evident in Mr Torr's treatment of a number of narrow strips of land at the water's edge or on the edges of parkland that served as environmental buffers. Mr Torr valued these strips or slivers of land as separate occupancies, whilst describing them as 'vacant land, water edge, undeveloped', 'strip of riverbank undeveloped parkland' and, more fulsomely, as 'an unused remnant of land beside the road, between the road and the river'. Treating these buffers as part of the larger property that is the port of Melbourne land would implicitly recognise their role as part of the planning context in accordance with s 5A(3)(b) of the Act.

183 I am reinforced in my conclusion that the port of Melbourne land is a 'larger property' by the evidence given by Mr Brown on the points of commonality between the port and the Chadstone shopping centre. I accept that the role of PoMC was not dissimilar to the role of the owner/manager of Chadstone. As Mr Brown pointed out, while there was a variety of different tenants at the port, PoMC controlled the nature of the tenancies and dictated where at the port certain activities could and could not occur. The port was divided into precincts or sectors based on the activities undertaken in different areas and PoMC had the power to reconfigure the port in order to achieve its medium and long term strategic objectives for the port. In addition, PoMC provided services and common user facilities, and the means to circulate and move cargo around the port via the provision and maintenance of roads and railways and the maintenance of waterways.

184 Mr Torr generally agreed with the points of commonality between the port and the shopping centres identified by Mr Brown. When it was put to him that there were no material differences between the 'larger property' of Chadstone and the 'larger property' that is the port of Melbourne, other than that one involved a retail use and the other a port, Mr Torr agreed, but on the basis that the term 'larger property' referred to the property's 'actual commercial existence as a larger integrated property' and not to a 'larger property' in the sense in which the term is used in the Act. He drew a distinction between the way the properties would sell in the open market and the way that they were to be treated under the Act because, according to Mr Torr, the Act was based on the 'fundamental foundation stone of occupancy'.

185 I have already explained why that approach is not correct. In my view, the port's 'actual existence as a larger integrated property' is significant for whether it should be valued in accordance with s 2(3) of the Act.

186 In the evidence of the valuers, there was shown to be no relevant difference between the port of Melbourne land and a shopping centre like Chadstone, which the defendants accepted should be valued as a larger property. Parts of Chadstone, such as the Myer and David Jones tenancies, were not highly integrated in the shared buildings in the shopping centre and had an individual footprint like the port tenancies. As a result, the defendants made much of the fact that Chadstone had pooled car parks, while the port tenants provided their own car parks on the land leased by them. I do not regard the car parking arrangements as a sufficiently important point of distinction to prevent the port from being characterised as a larger property like Chadstone. The port tenants may not have had shared car parks but they shared a plethora of other things such as access to common user berths, roads and rail facilities.

187 In my view, at the relevant date the port of Melbourne land was a 'larger property' of which the tenancies formed a part.

188 Section 2(3) is to be construed according to its ordinary and grammatical meaning. It calls for a factual inquiry into whether the port is a larger property of which the occupancies at the port form a part. There is no warrant to impose the necessity test to limit the circumstances in which s 2(3) will apply.

189 For the reasons I have outlined, at the relevant date, the port of Melbourne land was a 'larger property' of which the occupancies formed a part for the purposes of s 2(3) of the Act. I am persuaded that the occupancies on the subject land should be valued for site value purposes using the methodology in s 2(3), as this provides the fairest and most accurate method of valuation of occupancies in the particular circumstances of the port.

190 In light of my conclusion that the port of Melbourne land is a 'larger property' for the purposes of s 2(3) of the Act, it is unnecessary to consider whether, and if so how, s 13DC(9) affects the valuation exercise.

191 The definition of 'site value' in s 2(1) of the Act refers to the value of the unencumbered estate in fee simple 'assuming that the improvements (if any) had not been made'. The second question to be decided is which works were to be disregarded as improvements when determining site value at the relevant date.

192 A generally applicable definition of 'improvements', also found in s 2(1) of the Act, includes 'all work actually done or material used on and for the benefit of the land' except, relevantly:

(a) work done or material used for the benefit of the land by the Crown or by any statutory public body; and

(b) improvements in the nature of draining or filling land unless made by the owner or occupier in the previous 15 years (known as the '15 year rule').

193 PoMC and its predecessors undertook the civil engineering works that transformed the swamp land around the lower reaches of the Yarra River into its current form as a port. These works included significant filling and reclamation[84] of land. Such works are not improvements for the purposes of s 2(1) by reason of the exclusion of work done or material used for the benefit of the land by the Crown or by any statutory public body.

194 Section 2(2AA) provides that '[w]orks relating to a port, being buildings, breakwaters, berths, wharfs, aprons, canals or associated works', are improvements within the meaning of the Act. It supplements the definition of 'improvements' in s 2(1) of the Act to include as improvements specified works 'relating to a port', even when undertaken by the Crown or a statutory public body.

195 Because the leases at the port are ground leases, the tenants have made most, if not all, of the visible improvements on the leased areas. The tenants' improvements are principally buildings and extensive areas of hardstand (or pavement). These improvements fall within the definition of improvements in s 2(1) and are to be disregarded when assessing site value. Thus, before considering the application of s 2(2AA), Messrs Torr and Bowman considered what fell within the definition of 'improvements' in s 2(1) and disregarded all of the tenants' improvements when determining site value, including all buildings and hardstand on the occupancies. What remained to be considered under s 2(2AA) were works undertaken by PoMC or its predecessors ('Crown works'), as these could not be disregarded at the initial stage as falling within the general definition of 'improvements' in s 2(1).

196 As to the Crown works, the parties agreed that the berths and wharfs on the subject land were to be disregarded in the site valuation, along with underlying piling works. The principal Crown works that remain to be considered are therefore the reclamation works carried out over many years to develop the port and support the port infrastructure.

197 In order to enable the Court to consider the impact of the reclamation works on site value, the joint questions required the valuers to make five different assumptions with respect to the treatment of fill on the subject land. The five scenarios were as follows:

(a) s 2(2AA) results in the land being in the condition of and at levels commensurate with its existence as a swamp or tidal marsh area, as existed prior to the placement of any fill as part of the historic re-definition and development of the port over time (PoMC's primary position);

(b) s 2(2AA) results in the land being in the condition of and at levels commensurate with its existence as a swamp or tidal marsh area, as existed prior to the placement of any fill as part of the historic re-definition and development of the port over time, excluding the land indicated in the cross-hatched section of the plan in Annexure A (PoMC's alternative position);

(The cross-hatched (excluded) section covers hardstand areas at Swanson Dock to the north of Coode Road and an adjacent area south of Coode Road covering a number of leases, including those of Murray Goulburn, POAL and Semi-Skel.)

(c) s 2(2AA) applies only to licenced areas (not including licenced berths) and buildings and building structures (wherever located), including building foundations created for the design and support of those buildings and structures (MCC's position);

(d) s 2(2AA) has the operation given to it in the reply report of Mr Torr dated 20 November 2014 as set out in the plans in Annexure B (VGV's position); and

(Annexure B has marked in red as s 2(2AA) improvements the strips comprising the wharfs at Webb Dock, South Wharf and Swanson, Appleton and Victoria Docks.)

(e) s 2(2AA) results in the land being in the condition of and at levels commensurate with its existence as a swamp or tidal marsh area, as existed prior to the placement of any fill as part of the historic re-definition and development of the port over time, excluding the land indicated in the cross-hatched section of the plan in Annexure C.

(The cross-hatched (excluded) section again covers hardstand areas at Swanson Dock to the north of Coode Road but with a larger area south of Coode Road that includes the Appleton Depot and Appleton Rail areas, along with Coode Island, parts of South Wharf and what appear to be the undeveloped parts of Webb Dock.)

198 Annexures A, B and C to the joint questions are reproduced in Appendix B to this judgment.

199 PoMC adduced evidence of the reclamation works at the port through a number of witnesses. Stephen Drummond, Senior Project Officer for PoMC, made a lengthy affidavit setting out the history of works at the port. These works included the construction of the Coode Canal and the development of Swanson and Webb Docks through large-scale reclamation works. He produced a series of 'mosaic' maps using historical photographs and other material to show the changing shape of the port over time.

200 The extent and impact of the reclamation works on the port of Melbourne land is evident from the following map overlay, which shows the original shape of the port land using the 1877 map overlaid with the outline of the current shape of the land:

201 Mr Neil Diepstraten, a Senior Project Manager for PoMC, also made an affidavit about the development of the port and the use of fill. He deposed generally in relation to fill as follows:[85]

Historically, Port land has been filled, and there continues to be filling of Port land.

In general terms, Port land is filled in order to reclaim, heighten and/or stabilise it and thereby enable it to be used and/or developed for PoMC's purposes including leasing.

The Port land east of the Yarra River and east of the Maribyrnong River was originally low level swamp land and has been filled. The Port land known as 'Webb Dock East' and 'Webb Dock West' was formerly part of Port Phillip Bay and has been filled. The Port land west of the Yarra River and of the Maribyrnong River has also been filled to varying extents along the river banks. The Port land at Williamstown has been filled to varying extents along the coastline. Port land between Williamstown Road, Todd Road, the West Gate Bridge and the Yarra River has also recently been filled.

202 Mr Diepstraten deposed that the methods by which port land was filled fell into three categories:

(c) the use of mixed fill, referred to as 'historical fill' because that method has not been used since approximately 1990.

203 The majority of the fill on the port of Melbourne land is historical fill, as this method was used from the earliest days of the port until discontinued 25 years ago. The historical fill was composed of rubbish dumped at the port from various gas waste sites and municipal authorities, as well as dredge spoil and land fill from city construction sites. Much of it was contaminated.

204 Mr Diepstraten also deposed that because the port is built on 'Coode Island silt', everything not built on piles continuously settles, requiring areas to be constantly filled or 'topped up' to maintain levels.

205 Mr Drummond exhibited to his affidavit a map of the port showing where the three different types of fill have been used. This is the map showing the areas of fill:

206 PoMC contends that, on its proper construction, s 2(2AA) requires the port of Melbourne land to be valued for site value in its condition as at 1876, that is, less all the works involved in land reclamation over time. This is because, due to land-use controls, all works undertaken on the port of Melbourne land were necessarily 'works relating to a port' and all the reclamation works were 'associated works' for the purpose of s 2(2AA), being works associated with the works specified in s 2(2AA).

207 MCC contends that the expression 'works relating to a port' is not apt to refer to works being undertaken at a geographical location or an area determined by a statute or planning scheme but refers to works undertaken in relation to a function or activity, being the docking, loading and unloading of ships. The s 2(2AA) analysis therefore involves determining whether the works in question were used in a way that was sufficiently connected to the docking, loading and unloading of ships.

208 MCC's primary position is that the reclamation of land at the port can never be 'associated works' for the purpose of s 2(2AA); its secondary position is that the reclamation of land will only be associated works if the reclamation works can properly be described as 'accompanying', or being 'allied to', relevantly, a building, berth, wharf, apron or canal.

209 In relation to its primary position, MCC says that the reclamation of land at the port was work associated with land, not work associated with the port-related structures built on that land. Land reclamation works fell to be considered by reference to the definition of improvements in s 2(1) of the Act and could only be treated as though they never existed if they were carried out by an owner or occupier within 15 years of the relevant date.

210 Alternatively, MCC says that reclamation works will only be 'associated works' if they are works in fact associated with, in the sense of being allied to or accompanying a building, breakwater, berth, wharf, apron or canal ('primary works'), and this will only be so if there is a degree of contemporaneity between the design or construction of the primary works and the reclamation works. This cannot be the case for land that was filled using the historical fill method, because it took from five to 10 years from completion of the filling process for the land to be developed. According to MCC, s 2(2AA) could only apply to the filling works underlying the strip adjacent to where vessels sit to load and unload cargo and to any buildings and building foundations (wherever located) on port of Melbourne land.

211 VGV, through Mr Torr, advanced an even narrower view of what is captured by s 2(2AA). In order for works to be 'port-related' (whether primary works or associated works) they must be proximate to, constitute, or define the boundary between land and water. Such works are confined to the geographical area necessary for ships to load and unload, being the strip adjacent to where vessels sit to load and unload cargo. It is then a question of fact whether works on or to those lands are buildings, breakwaters, berths, wharfs, aprons, canals or works associated with any of these works. It follows, on VGV's analysis, that for any building, apron or works associated with a building or apron to fall within s 2(2AA), they must be proximate to the water. VGV advanced a very restricted meaning of 'apron' consistent with this analysis.

212 On this basis, the only works at the port falling within s 2(2AA) where the wharfs (including foundational or piling works for the wharfs) and the areas on top of the wharfs (which were recognised as 'aprons' by Mr Torr).

213 Thus, when valuing the occupancies at the relevant date, Mr Torr viewed them as being filled to sub-base level, and compacted to standards suitable for their (then) current use, but excluding surface paving. He adopted this approach having regard to the Tetzner principle, according to which all surrounding property and occupancies are deemed to be in their actual improved condition. This meant that each occupancy was deemed to have fully constructed road access, reticulated services to its boundary and the land around it to have been completely filled, reclaimed, compacted and improved to its (then) current state and use.

214 Unsurprisingly, PoMC submits that s 2(2AA) does not have the limited application contended for by the defendants. It contends that all reclamation works undertaken on the port of Melbourne land have the requisite degree of connection to the port to qualify as 'works relating to a port' for the following reasons:

(a) The port of Melbourne land is a designated area for use as a port under the Port of Melbourne Planning Scheme. The reclamation works are situated on such land, and used for port purposes;

(b) By operation of the definition of 'port of Melbourne' in s 3 of the PM Act and ss 141D and 141E of the TI Act, the port of Melbourne land is to be operated and developed as a port. The reclamation works are situated on such land, and used for port purposes;

(c) The port of Melbourne land was at the relevant date, and continues to be, operated and developed as a port. The reclamation works are situated on such land, and used for port purposes; and

(d) All works on the port of Melbourne land have been undertaken by the Crown, PoMC or its predecessors for port purposes. The reclamation works were undertaken as part of the creation of the port, and they have been, are, or are to be, used for port purposes.

215 PoMC further submits that the words 'associated works' are to be read within their legislative context, namely in conjunction with the rest of s 2(2AA) to cure the mischief to which that section is directed. They are therefore not to be read narrowly. To be associated works, works must simply be connected to the primary works. That includes fill and reclamation, as well as any works needed to make the primary works operational.

216 By this means, PoMC contends that at the relevant date all reclamation works on the port of Melbourne land were 'associated works' and therefore 'improvements' pursuant to s 2(2AA).

217 The Court must determine whether, and if so which, reclamation works carried out on the port of Melbourne land since 1877 by PoMC and its predecessors are to be disregarded as 'improvements' under s 2(2AA) when assessing the site value of the subject land at the relevant date. In order to qualify as improvements, the reclamation works must 'relate to a port' and be 'associated works', for they are not recognised as primary works.

218 Again, this raises questions of statutory construction, as there is a fundamental disagreement between the parties as to what are 'works relating to a port' and 'associated works' in s 2(2AA). The parties also disagree on the meaning of 'apron' in the context of a port.

219 Section 2(2AA) is a difficult provision to construe despite having been purpose built to deal with improvements at ports. It was inserted into the Act by s 27 of the State Taxation (Omnibus Amendment) Act 1996 in the context of the proposed sale of the ports of Portland and Geelong. The Minister's Second Reading Speech for the State Taxation (Omnibus Amendment) Bill reads, relevantly, as follows:[86]

The amendments to section 2 of the V L Act 1960 provide for the consistent application of land tax to Victoria's ports. The amendment clarifies the definition of 'improvements' to ensure that in the case of a port, the construction, reinforcement and extension of breakwaters, berths, wharfs, aprons, canals and associated works are treated as improvements for the purposes of ascertaining site value.

Previously, if these port-related structures were developed by the Crown, they would not have been considered improvements. However, if the structures were developed by an owner or occupier in a port they were considered improvements to a site. This amendment removes the anomaly to ensure consistent treatment when calculating site value in a port and when determining a potential land tax liability.

220 The stated purpose of the amendment to insert s 2(2AA) in the Act was therefore to provide for the consistent application of land tax to Victoria's ports. This involved removing the anomaly produced by the exclusion of Crown works in the definition of 'improvements' in s 2(1) of the Act. The amendment broadened the definition of 'improvements' in the Act, thereby reducing the incidence of land tax otherwise payable by prospective purchasers of port land.

221 PoMC submits that the mischief to which s 2(2AA) was directed could only be remedied if s 2(2AA) covered all works undertaken by the Crown at a port. However, this does not sit comfortably with the word 'being', which limits the improvements recognised by s 2(2AA) to the works that are specified, namely, the primary works and 'associated works'.

222 The defendants' position is that neither the text of s 2(2AA) nor its purpose reveal any legislative intention to recognise reclamation works as improvements. Section 2(2AA) makes no mention of reclamation works, even though it would have been easy to have expressly referred to them. Furthermore, so the defendants say, if the purpose of s 2(2AA) was to remove an anomaly, the treatment of reclamation works was not anomalous when s 2(2AA) was enacted in 1996, because all reclamation works up to that point in time were Crown works. It was not the case that, absent s 2(2AA), some reclamation works at Victorian ports would be treated as improvements while others would not.

223 In my view, the absence of any reference to 'reclamation works' in s 2(2AA) does not resolve whether reclamation works are capable of falling within the meaning of 'associated works' in s 2(2AA).

224 Furthermore, although the assertion that all land reclamation at Victorian ports up until 1996 had been carried out by the Crown (or statutory public bodies) seems likely to reflect the reality, there was no evidence to that effect. Moreover, the provision is clearly intended to capture future works as well as those existing in 1996, and would prevent the anomalous treatment of post-1996 reclamation works carried out by PoMC or PMA (assuming, of course, that it captured reclamation works at all).

225 Identifying the purpose of s 2(2AA) as curing the mischief of the anomalous treatment of Crown works at Victorian ports can take the process of statutory construction only so far, having regard not only to the duty to give primacy to the statutory text, but also to the particular form of the 'mischief' and the practical effect of the 'cure' as they pertain to reclamation works.

226 Prior to the enactment of s 2(2AA), a wharf, apron or building in a port constructed by a port owner or occupier (not being the Crown or a public statutory body) would be disregarded for site value purposes, and therefore not subject to land tax. The same improvement, if constructed by the Crown or a public statutory body, would not be disregarded, and would therefore be subject to land tax. Section 2(2AA) put Crown works of that kind in the same position as non-Crown works of that kind under s 2(1). However, because of the definition of 'improvements' in s 2(1), land reclamation works at a port, if carried out by a port owner or occupier (not being the Crown or a public statutory body), would be disregarded for only 15 years. If s 2(2AA) made all reclamation works at a port (no matter when carried out) improvements to be disregarded in assessing site value, s 2(2AA) would go beyond putting Crown reclamation works in the position of any non-Crown reclamation works carried out prior to the enactment of s 2(2AA). Reclamation works in a port would be removed from the operation of the 15 year rule altogether, while reclamation works outside a port would remain subject to the rule.

227 Furthermore, the consequence that reclamation works, no matter how old, are improvements to be identified and disregarded when determining site value involves a departure from an established legislative position and has the potential to revive the difficulties that led to the retirement of the concept of 'unimproved capital value' many years ago. Unimproved capital value was replaced by 'site value' in a gradual process commencing in 1968 with the enactment of the Local Government (Amendment) Act 1968. The Minister's Second Reading Speech noted 'overwhelming evidence' of the difficulties arising from the fact that in assessing unimproved capital value, the subject land had to be imagined in its entirely unimproved state, requiring the valuer notionally to restore to the land any timber, stone and so on, that might once have been on it. In this context, it was said that the introduction of site value involved the elimination of the 'unrealistic requirement' that the land be notionally restored to its original condition:

Instead, [site value] requires that improvements which are to be imagined as not existing are those which can be seen, namely, buildings, fencing, sown pastures, and so on, and including works undertaken on the land such as the removal of timber or stones, draining or filling of the land, erosion works, and so on, which have been made within the fifteen years last preceding the valuation.[87]

228 The 15 year period was said to give the owner an allowance for his industry in improving the land.

229 This rationale for the transition to site value (with its more limited raft of improvements) was also recognised by Croft J in Challenger Property Asset Management Pty Ltd v Stonnington City Council.[88] The definition of 'unimproved value' required the valuer to attempt the (in many cases) impossible task of ascertaining the original state and condition of the land, at a point of time when there was no longer any evidence about that state and condition. This requirement was seen to introduce unnecessary uncertainty and complexity into the valuation process.[89]

230 It is clear, then, that as long ago as 1968, and with good reason, the legislature decided to move away from recognising as 'improvements' historic works involving the draining and filling of land, the removal of timber, rocks, stone and earth and the changing and improving of waterways.

231 In effect, PoMC now asks the Court to discern a legislative intention that all reclamation works at Victorian ports since 1876 be identified and disregarded as improvements when determining site value, in circumstances where s 2(2AA) makes no specific mention of such works, s 2(1) makes a special rule for them that does not accord with such a procedure, and where to identify and disregard such works would involve reverting to a methodology that was discarded as unworkable nearly 60 years ago.

232 There is therefore a good argument to be made that it is unlikely that in enacting s 2(2AA), the legislature intended reclamation works going as far back as 1877 be identified and excluded in the assessment of site values of port land.

233 However, there are also factors that support the existence of a legislative intention to create a special rule for improvements at ports. Section 2(2AA) was parachuted into the Act in 1996 in response to a specific circumstance (the proposed sales of the ports of Geelong and Portland and land tax issues affecting those sales). It is poorly integrated into s 2 of the Act, standing as a relatively self-contained provision dealing with a special circumstance. Importantly, in dealing specifically with improvements at ports, s 2(2AA) was enacted against the background that the commercial trading ports to which the provision is addressed were made up of heavy engineering works of precisely the kind that are excluded[90] in the general definition of 'improvements' in s 2(1) of the Act, namely, works involving the removal of rocks, stone or earth, the draining and filling of land, the construction of retaining walls and the changing or improvement of waterways on or through land. There are many examples of Crown works of this kind at a commercial trading port: the construction of a berth or canal will involve the removal of rocks, stone and earth, the construction of retaining walls and, possibly, the modification of waterways on or through land; the construction of a wharf will often involve the filling of land to create a stable area land-side, as will the creation of the extensive paved areas required for the handling of containers at container terminals. In my view, the fact that s 2(1) makes provision for such works generally does not prevent works of this kind at a port from being improvements under s 2(2AA).

234 Both PoMC and the defendants relied on the Minister's Second Reading Speech to support their preferred construction of s 2(2AA). It provides a useful indicator of the purpose of s 2(2AA). However, as the High Court said in Northern Territory v Collins,[91] secondary material seeking to explain the words of a statute cannot displace the clear meaning of the text of a provision, not least because such material may confuse what was 'intended ... with the effect of the language which in fact has been employed'.[92] Furthermore, it is important to bear in mind the warning given by Dawson J in Mills v Meeking[93] that the intention of Parliament is 'somewhat of a fiction' and that the collective will of the legislature must be taken to have been expressed in the language of the enactment itself.[94] Most recently, in DPP v Walters,[95] the Court of Appeal re-iterated that nothing said in a Minister's Second Reading Speech can displace the meaning and effect of the statutory text or be used to fill a gap in the text.[96] The language of s 2(2AA) is the surest guide to its meaning.

Does s 2(2AA) apply to reclamation works at the port?

235 By its terms, s 2(2AA) provides for specific types of works relating to a port to be improvements. The word 'being' limits the port-related improvements to the primary works ('buildings, breakwaters, berths, wharfs, aprons, canals') and works associated with the primary works. To fall within s 2(2AA), the works in issue - reclamation works - must therefore be 'works relating to a port' and works 'associated with' buildings, breakwaters, berths, wharfs, aprons and canals.

236 It is uncontentious that the expression 'works relating to a port' requires there to be some connection between the 'works' and 'a port'. It also appeared to be accepted by MCC that works falling within the expression 'being buildings, breakwaters, berths, wharfs, aprons, canals or associated works' that were on port of Melbourne land would fall within the meaning of 'works relating to a port'.

237 However, VGV took the narrower view that works 'relating to a port' were only those works on the port of Melbourne land that were adjacent to the water in the area where cargo was loaded or unloaded.

239 The legislature must be taken to have enacted s 2(2AA) in the knowledge of what constitutes a modern commercial trading port. The containerisation of cargo, in particular, has generated a pattern of port development extending well away from the water's edge. It requires the provision of large areas of hardstand for container handling. This development was explained by the Chairman of the Harbor Trust, Mr V G Swanson, in its 1969 Annual Report:

For some years port planning has indicated a significant change in the traditional pattern of port facilities, and the activities in 1969 crystallised what unquestionably will be the pattern of the future. During the year the introduction of new container and unit load shipping services, and the extension of others resulted in the increasing concentration of cargo handling in five specialized areas, with a dwindling utilisation of traditional facilities. With the new cargo handling concepts both ashore and afloat, it is evident that the almost traditional LINEAR port facilities are giving way to AREA development, necessary to meet the new cargo handling requirements.

240 The Annual Report for 1969 also described the works that were being carried out as a result of the traditional linear port facilities giving way to 'area' development:

The year 1969 saw a record capital expenditure of $8,309,136, which was $224,383 more than in the previous year, as work was continued on a series of development projects planned over the past five years.

The major concentration of the money expended was on the continuing construction work, as well as new work, associated with the provision of improved and new facilities for the container and unit load ships and cargo handling operations.

Of the total capital expenditure of $8.3 million more than $5 million, or 61 per cent was on construction for these types of operations, and the work included the provision of wharves and sheds, approaches, reclamation, railways and a considerable dredging programme. The concentration of capital expenditure on these types of facilities highlights the changing face of the port, and the year 1969 saw the emergence of a clearer definition of the port of the future. The old pattern of LINEAR wharf development in the traditional style - with comparatively narrow wharf aprons adjoining cargo transit sheds backed by comparatively narrow roadways - was breaking up into five emerging terminal AREAS comprising only a small number of actual berths, but backed by considerable land area with highly sophisticated cargo handling equipment and methods.

241 The Harbor Trust Annual Report for 1970 provided an update on these works:

The five major port areas located at North Wharf, Victoria Dock, Appleton Dock, Swanson Dock and Webb Dock were utilised to near full capacity during the year. The transformation of the land area on the east side of Swanson Dock and Appleton Dock is now complete and the 300 acres of reclaimed land behind and adjacent to the container complex have either been leased to or are the subject of options by private cargo handling organisations specialising in container and unit type ships.

242 The Harbor Trust Annual Report for 1971 once more referred to the new shape of the port and the works to be undertaken. After recording that the capital works program had been stepped up considerably with the entry of overseas container, unit and roll-on/roll-off vessels, the Chairman stated:

The new breed of ships called for radical changes to be introduced and where the port of Melbourne was concerned, it entailed a massive and costly programme of extensive reclamation coupled with specialized new berth construction, widening and deepening of the River Yarra and other ancillary projects, which to date has cost the Trust more than $50 million.

243 These extracts describing port planning and development make it plain that works for 'area' development were port-related works, and that particular port-related works, namely those designed to cater for 'the new breed of ships' and the containerisation of cargo, involved the reclamation and development of large areas of land for port purposes. It was no longer sufficient to provide port infrastructure in the form of berths, wharfs, aprons and sheds at the water's edge and ports and port-related activities ceased to be so confined.

244 Furthermore, the growth in container trade resulted in significant changes in the transportation of goods more generally. The integration of the port into transport networks (recognised by the TI Act), its consequent development as an 'intermodal' facility and the growth of logistics operations as a component of the businesses of port users have also significantly influenced the physical shape and structure of the port. Road and rail links, as well as on-site facilities for the management of containers and roll-on/roll-off cargo, have become an integral part of the port.

245 Mr Bennett gave evidence that the capacity of a shipping terminal is, among other things, dependent upon cargo dwell times. Current terminal capacities are based on the proposition that cargoes are removed from terminals quickly and placed into off-terminal storage areas and warehouses either adjoining or nearby, such as along Coode Road. The bulk of traffic in the port is container-based and it is important to have large cargo space for storage so that cargoes can be turned over and received from several ships at the wharf. Consistently with this evidence, the Port Development Strategy recognised that:

Freight terminals and empty container parks provide essential links between importers, exporters and international container terminals. Critical functions include storage and servicing of empty containers, providing a time buffer for delivery and receipt of full containers and assisting terminals to cope with peak load periods.

246 As a result, it is difficult to draw any clear distinction between works supporting 'pure' stevedoring functions and works supporting related functions such as servicing and storage, and logistics functions more generally. Works at the port that supported operations such as those described by Mr Bennett and logistics operations such as those performed by Patrick, Qube and Toll, were, in my view, port-related works.

247 In so finding, I have taken into account the evidence of David Nash of Patrick Terminal Logistics,[97] who explained that there were different divisions within Patrick for 'ports and stevedoring' and 'terminals and logistics', and that these divisions operated from different areas at the port.[98] Stevedoring services were provided at the East Swanson Dock area, while logistics services were provided at the Appleton Depot. However, Mr Nash rejected the proposition that there was a 'very clear demarcation' between Patrick's logistics business and Patrick's terminal business. He gave evidence that Appleton Depot was used as a holding area for various purposes, including for containers that arrived at the docks and were transported into the Appleton Depot to await collection, either for transfer into the East Swanston Dock area for export or by customers. Appleton Depot had a direct interface with the East Swanston Dock terminal enabling containers to be moved in and out without using the road network (although, in practice, 99% of containers were trucked into the terminal). Hence, the area designated for logistics functions was also used for functions directly related to the loading and unloading of ships. Generally, having regard to the 'intermodal' character of the port and its integration in transport networks, a bright line between stevedoring and logistics functions is difficult to draw.

248 In my opinion, to limit 'works relating to a port' to works at the water's edge is to ignore the reality of modern port operations.

249 Furthermore, while it may not always be possible or appropriate to identify 'works relating to a port' simply by reference to a geographic location, in this case the Port of Melbourne Planning Scheme limited the use of the port of Melbourne land to uses that were directly associated with and reliant upon the port. The uses permitted on the port of Melbourne land at the relevant date were required by land use controls to be port-related uses. It is therefore appropriate, in my view, to recognise works on the port of Melbourne land, including reclamation works, as works satisfying the description 'works relating to a port'.

250 The reclamation works on the port of Melbourne land at the relevant date were '[w]orks relating to a port' for the purposes of s 2(2AA).

'being buildings, breakwaters, berths, wharfs, aprons, canals'

251 The meaning of 'buildings', 'breakwaters', 'berths', 'wharfs' and 'canals' was uncontroversial. However, the meaning of the word 'aprons' was hotly contested.

252 It was PoMC's case that much of the hardstand was an 'apron' for the purposes of s 2(2AA) and that the reclamation works underlying the hardstand were works associated with an apron. By contrast, the defendants submitted that 'apron' referred to only a very narrow strip of land immediately above or beside the wharf and any reclamation works associated with aprons (assuming that reclamation works could qualify as associated works at all) would therefore be minimal.

253 In Oxford English Dictionary,[99] the most relevant definition of 'apron' is this:

m. A flat, usually paved, surface in front of a building, hangar, etc., esp. an area on an aerodrome prepared for the easy handling, (un)loading, etc, of aircraft on the ground.

254 In the context of a port, an area meeting this definition would be a flat, paved surface in front of a shed or building that was an area for the handling, loading and unloading of cargo. It is uncontroversial that the paved areas between the berth lines and the sheds at Appleton and Victoria Docks, and along South Wharf were 'aprons'. However, the flat, paved surface or surfaces used for handling cargo at the container terminals do not meet this definition because there are few buildings and none used for cargo storage as is the case in the older style port configurations.

255 In addition to dictionary definitions, the parties referred the Court to a number of technical meanings of 'apron':

(a) The 'Dictionary of Shipping Terms'[100] defines 'apron' as the '[h]ard-surfaced area of the quay on which shipping containers are assembled before loading to the ocean vessel or after their discharge';

(b) Eric Sullivan's 'Marine Encyclopaedic Dictionary'[101] defines 'apron' as '[a]n American term referring to that area of the loading/unloading quay between the cargo sheds and the ship which is used in most cases for stacking outward and inward bound cargoes'; and

(c) C. Thorensen's 'Port Designer's Handbook'[102] defines 'apron' as 'the area between the berth line and the transit shed or the storage area for loading and unloading of cargo'.

256 Two of the three definitions define the physical area of an apron by reference to transit or cargo 'sheds'; two refer to an apron as an area for 'stacking' or 'assembling' containers or cargo; two refer to an apron as part of the 'quay', which in some definitions is synonymous with a 'wharf'. These technical meanings therefore have some elements which suit and other elements which do not suit the respective arguments of the parties. None of them seems to me to be particularly well adapted to describing the part of a container terminal or roll on/roll off facility that is used for handling, loading and unloading cargo.

257 Mr Torr, for VGV, endeavoured to provide further insight into the meaning of the word 'apron':[103]

My research indicates that the term, in common use, refers to the strip of land between buildings and the shipping berth. It can also refer to the loading/unloading area upon the wharf structure where goods are transferred between ship and land. 'The Long And Perilous Journey - A history Of The Port Of Melbourne' by J.R. Buckridge defines an apron as:

'That portion of a wharf or pier lying between the water edge and the transit shed. Also called Apron Wharf and Wharf Apron.'

Further, The American Association of Port Authorities (May 2011) defines 'apron' as:

'The area immediately in front of or behind a wharf shed on which cargo is lifted. On the 'front apron', cargo is unloaded from or loaded onto a ship. Behind the shed, cargo moves over the 'rear apron' into an out of railroad cars.'

As an example of apron definition, the Port of Portland defines aprons at its various Berths as 17.5 metres wide, 18.7 metres wide, 21 metres wide etc.

258 In cross-examination, Mr Torr explained his understanding of how those definitions would apply to different port arrangements:[104]

We have down on the right-hand side the way that ports originally worked [referring to Appleton Dock]. So you have a berth and then you have the transit building, and between the two is the apron. You can see that along Appleton Dock. Then when you look to Swanson Dock you can see the new configuration of how container ports work. The thing that's different is the cranes of course that are running up and down the apron, but also the absence of the transit buildings. So the way I reconcile the distinction is on a functional basis. So in the old configuration where they talked about the apron, that was the area where the goods were picked up and put down in their transition between land and ship. I have applied that same functional definition to the way that I define an apron now.

259 In opening, Senior Counsel for the defendants also acknowledged that the meaning of 'aprons' in s 2(2AA) must recognise the difference between older style ports and the modern container port. Referring to the technical definitions of 'apron' set out above, he submitted:[105]

In this case there are no cargo sheds, because that really is a definition relating to old-style ports where you didn't have the containerised shipping. We say it's not too much of a stretch to read 'cargo sheds' to include a container park that you would use in a containerised shipping context. That might be as the third definition defines it, as the storage area.

The third definition is the one that does draw the distinction between old-style shipping and new-style shipping. It defines 'apron' as 'the area between the berth line and the transit shed or the storage area for loading and unloading of cargo.' We say again that can't include the actual storage area, but it's the area between the berth line and the storage area.

260 The defendants' position is therefore that the hardstand areas used for stacking containers before they are loaded onto or after they are unloaded from ships are 'storage' areas (the equivalent of cargo sheds) and aprons are the areas between the berth line and these storage areas.

261 This submission draws attention to what constitutes the storage of cargo (as opposed to its handling for loading and unloading) and which operations at the port form part of the loading and unloading process.

262 PoMC submitted that in considering what constitutes an apron, it is necessary to appreciate the difference between the 'linear unloading system' and the 'area unloading system' for cargo. The linear unloading system involves a ship berthing next to the wharf, unloading the cargo onto the adjacent hardstand, then moving the cargo into the transit or storage shed behind the hardstand, and finally either moving the cargo out of the port or transhipping. In contrast, the area unloading system used for containerised cargo involves a ship berthing next to the wharf, a crane placing the container on a cradle on the hardstand on the wharf, straddle carriers immediately picking up the container and assembling it in the adjacent hardstand area and, within as short a time as practicable, the container being moved by truck either directly out of the port, to the railway service, or to a logistics business to unpack and move the de-containerised cargo out of the port.

263 PoMC submitted that in parts of the port such as the DP World and the Patrick terminals at Swanson Dock, the whole of the hardstand area was used to assemble containers as an integral part of the loading/unloading process. Within those areas there are no storage areas for containers.

264 The Court carried out a view of the unloading and loading of a large container ship at the Patrick terminal at East Swanson Dock. To load, a straddle carrier brought a container from the adjacent hardstand area to the wharf and deposited the container on a cradle positioned immediately beneath the crane. The crane then lifted the container from the cradle onto the ship. This process was repeated for each container that was loaded during the course of the view. Unloading was taking place at the same time. To unload, the crane lifted a container from the ship and deposited it onto the cradle. A straddle carrier collected the container from the cradle and carried it to the adjacent hardstand area. Again, this process was repeated for each container that was unloaded from the ship. At no point were containers assembled on the wharf.

265 The Court also heard evidence from port operators about the use at the relevant date of the hardstand areas at the container and roll on/roll off cargo terminals.

266 At the Patrick terminal at East Swanson Dock, export containers were brought into the terminal by truck. Mr Nash described what happened next:[106]

The straddle carrier drives to the truck and collects the container off the truck and takes the container to the areas within the East Swanson Dock area where the container will be stored on the hardstand awaiting shipment ... The containers will sit on the hardstand until such time as the ship berths in the berthing area. When a ship is in the berthing area, a straddle carrier will pick up the container and deliver it to the cranes which are installed along the edge of the berth. The cranes then pick up the container and transfer the container onto the ship. ... Containers are stacked on the hardstand area awaiting shipment up to three containers high. Containers are generally stacked in a way that makes it efficient for them to be loaded onto the ship. Particular containers require refrigeration - these containers are stored in particular areas known as 'reefer' areas. Otherwise containers are stored in rows on the hardstand area.

267 The process was reversed for import containers.

268 Mr Nash gave evidence that an export container could be delivered to the hardstand area by truck up to five days before loading, and an import container could remain in that area after unloading for up to three days free of charge, but the average time that an import container spent on the hardstand area was only 1.5 days. Mr Nash said that the Appleton Depot area was used for the same purpose as the East Swanson Dock terminal and that the Appleton Rail area was also used as a staging area for cargo moving in and out of the port.

269 At the DP World container terminal on West Swanson Dock, the same loading and unloading process was used. After delivery, the containers were assembled on the hardstand next to the wharf up to five days prior to loading, then moved individually by straddle carrier to the wharf, placed on the cradle and lifted onto the ship. That process was reversed for unloading, save that containers were left in the adjacent hardstand area for on average two days after unloading.

270 Vladimir Jotic of DP World described the hardstand area as a 'container yard' which was used for containers 'in transit'. He said that the area was used as a transit point because it would be logistically difficult to move the container straight from the ship to a waiting truck. Mr Jotic was cross-examined about the period for which a container might remain on the hardstand area. He said that customers were vigilant in retrieving containers but agreed that there was an incentive to maximise the free time on the DP World hardstand. When asked whether it was a form of 'free warehousing', he replied that the container yard wasn't a warehouse - it was more of a transit point. He stressed that it helped operational efficiency to have the container yard as close to the berth as possible.

271 Mr Jotic gave evidence that the DP World hardstand area north of Coode Road was used in the same way as the container yard to the south, and primarily for full containers. When asked whether DP World could use a site in Footscray located several minutes away instead, Mr Jotic said that such an arrangement, while possible, would be a 'nightmare' operationally for all involved.

272 As for the operations of Qube Logistics, Sean Harris gave evidence about the 'staging' or storage of containers for a period of time. The Qube site was used for importing and exporting containers through Appleton, Victoria and Swanson Docks, and for the export and import of bulk cargo such as grain, rice, cotton, paper and timber. The site was used for staging containers before and after shipping, including packing, unpacking and repacking. At the relevant date, the large area of hardstand that now exists and is used for container assembling was still under development.

273 Paul Treloar gave evidence in relation to the operations at the relevant date of Toll Shipping and Toll Tasmania, which were located on adjacent parts of Webb Dock East and serviced the Bass Strait trade. Toll Shipping shipped cargo to and from Tasmania. The Court observed the use of its hardstand to assemble and to roll containers on and off the ship using specialised machinery (described as 'roll trailers'). Mr Treloar said that, as a general rule, outward bound cargo for Toll Shipping did not stay on its hardstand for more than 24 hours and that eighty to ninety per cent of incoming cargo was collected within 48 hours.

274 Toll Tasmania was not directly involved in shipping cargo, but operated a specialist freight forwarding service which made up and unpacked container loads shipped by Toll Shipping to and from Tasmania.

275 Steven Ponton of AAT gave evidence about the use of the hardstand at Webb Dock West, which was designed as a roll on/roll off facility for 6,000 cars. He said that the hardstand was used to manage the delivery of cars for export over a period of about seven days before the arrival of the ship. Cars were assembled on the hardstand to be loaded directly onto the ship. The loading involved stevedores driving the cars individually onto the ship. In reverse, imported cars were driven off the ship by stevedores and parked on the hardstand for collection by car carriers.

276 Paul Cudmore gave similar evidence about the operation at the relevant date of the Patrick terminal at Webb Dock East, which had the capacity to hold approximately 7,000 cars and was primarily used for imports. As at the AAT facility at Webb Dock West, stevedores drove the cars off the ships to pre-determined areas on the adjacent hardstand, where they would be released for pre-delivery inspection by one of Patrick Autocare, Car Compounds Australia or PrixCar. Both Patrick Autocare and Car Compounds Australia subleased areas within the Webb Dock East terminal. Once serviced, the cars left the terminal on car carriers.

277 The Webb Dock East Terminal also received other goods known as 'general cargo or break bulk' (i.e. timber, steel and other materials of that kind) for import and export. On the Webb Dock East Terminal berth area, there was a crane which was used to load and unload goods from ships that berth alongside. The goods unloaded from the ship were placed on the hardstand next to the ship, and were then moved either into a shed or a storage area where break-bulk goods were loaded onto third party trucks and driven out. Where goods were exported from the Webb Dock East Terminal, goods (generally in containers) were brought in by trucks into the Webb Dock East Terminal and stacked into an area to await loading onto a vessel.

278 This evidence, while describing a range of port operations, supports the characterisation of what occurred on the areas of hardstand at the container terminals and roll on/roll off facilities at Swanson and Webb Docks as the 'handling', 'assembling' or 'staging' of cargo as part of the loading and unloading process. The relevant hardstand areas were transit areas that were required as a part of the loading and unloading processes for containers or cars.

279 Mr Torr was cross-examined about why he did not recognise the hardstand areas at the Patrick terminal at East Swanson Dock as aprons. It was put to him that there was, in essence, one movement of the container from the ship to its location in the computer-allocated bay within the container park area. Mr Torr responded:[107]

No, there is not one movement. There are two separate movements. The first one is from ship to shore, which is on the wharf cranes. Then there is a transition either to the reach stackers or the straddle cranes, which is then moving away from what I consider to be the pure stevedoring activity, which is loading and unloading of the ship, to then container handling and storage.

280 I disagree that the operation of the straddle carrier (or reach stacker) after the crane has deposited the container on the cradle involves a separate movement of the container that is not part of the unloading process. In my view, the operation of the straddle carrier (or reach stacker) is an extension of the operation performed by the crane. It forms part of the movement of the container from the ship to the designated area in the terminal where the container is assembled with other containers for collection. In reverse, the operation of the straddle carrier forms part of the movement of the container from the assembly area to the ship. Containers are not assembled on the wharf during the loading and unloading process; rather, the assembling of containers for loading takes place on designated parts of the hardstand in the container yard, as does their assembling for collection. The container yard is, as Mr Jotic described it, a transitional facility, which is needed because it is impractical to bring trucks directly onto the wharf to feed the cranes or to take delivery of containers from the cranes.[108] Likewise, the areas at Webb Dock on which cars are assembled for loading and following unloading function as transitional areas because the car carriers cannot access the ships directly.

281 At the relevant date the container yards adjacent to the wharfs at the DP World and Patrick terminals at Swanson Dock, the Toll Shipping and SeaRoad Shipping hardstand at Webb Dock East, and the motor vehicle assembly areas at Webb Dock East and Webb Dock West were areas that were flat paved surfaces used for the handling, loading and unloading of cargo. I consider that all of these areas were 'aprons' for the purposes of s 2(2AA). The area at the Qube terminal that is now used to assemble containers was, at the relevant date, an area being prepared to function as an apron. The works in progress were works associated with the construction of an apron.

282 The traditional apron areas adjacent to the wharfs at Appleton and Victoria Docks and along South Wharf were, uncontroversially, also 'aprons'.

283 It therefore remains to consider the status of the Patrick and DP World hardstand areas to the north of Coode Road, the Appleton Depot and Appleton Rail hardstand areas, the bulk liquid facilities at Coode Island and the Toll Tasmania hardstand area at Webb Dock East.

284 Although there was evidence that the DP World container park north of Coode Road and parts of the Appleton Depot were used as transit facilities in the same way as the hardstand areas adjacent to the wharfs at the DP World and Patrick terminals, in my view, these areas were not 'aprons' for the purposes of s 2(2AA). The use of the DP World container park north of Coode Road required the containers to be put onto trucks to be moved to and from the main transit area, which in turn involved crossing a public road and leaving the secure area of the port. The same applied to Patrick's Coode Park, which was not a facility for containers in transit but was used for a variety of purposes including the storage, cleaning and maintenance of containers. Appleton Depot and Appleton Rail, while also used as staging areas for cargo moving in and out of the Patrick terminal at East Swanson Dock, were well removed from the waterside areas, and used for a variety of purposes that did not involve the assembling of cargo as part of the loading and unloading process.

285 As for the concrete pads supporting the bulk liquid tanks at Coode Island, I am not persuaded that bulk liquid cargo was 'assembled' on these pads as part of the loading and unloading process. The concrete pads merely supported the tanks and were not themselves used for assembling cargo. They did not qualify as 'aprons'.

286 Finally, I find that the Toll Tasmania hardstand area was not an apron, because it was used in the process of making up container loads and unpacking containers for shipping rather than the loading and unloading of ships.

287 Given the uncertainty about how the traditional meanings of 'apron' could apply to areas at a container terminal or roll on/roll off facility, MCC developed a fall-back position. That position is represented in Annexure C of the joint questions. Mr Bowman explained the alternative position in the following way:[109]

It is intended to provide my opinion of the most liberal interpretation of where the loading and unloading of vessels occurs within the port of Melbourne, and it follows the path of a maritime security fence that I thought was useful in considering where cargo or containers were being unloaded and brought into the port and then being exchanged outside of that boundary for then shipment or movement off to the final destination.

288 The areas identified by Mr Bowman in Annexure C as aprons are those areas that I have identified as aprons as a result of the foregoing analysis. I find that the areas that are not cross-hatched in Annexure C to the joint questions were 'aprons' at the relevant date.

289 The parties agree that s 2(2AA) must be read to include as 'improvements' the following -

(b) breakwaters or works associated with breakwaters;

290 However, PoMC proposes a further category, 'or any combination(s) of the above'. It submits that the structure of s 2(2AA) makes it clear that the words 'or associated works' attach collectively to 'buildings, breakwaters, berths, wharfs, aprons, canals' and that s 2(2AA) is intended to cover the whole of a port because those words describe the basic infrastructure to facilitate the movement of cargo by large vessels in and out of a modern port. According to PoMC, to be 'associated works', works must simply be connected to the primary works. That would include fill and reclamation, as well as any works needed to make the primary works operational, such as roads, railways, loading bays, and other areas of hardstand providing access to the primary works or used to make the primary works operational or functional.

291 Taking the Murray Goulburn building as an example, PoMC argued that both the areas surrounding the building and the fill beneath the site were works associated with the building because it would be artificial (and illogical) for a building and the fill immediately below it to be disregarded as improvements, but not the works surrounding the building that enable it to function as a building. Likewise, so PoMC contended, the works associated with the wharf and apron areas at the port were those works needed to make the wharfs or aprons operable or functional for the loading and unloading of cargo. This would include, for example, Patrick's Coode Park, which housed an empty container storage area and other service areas integral to the operation of the wharfs and aprons at the Patrick terminal. It would also include the reclamation of land for Coode Park, as without the reclamation works there would be no Coode Park. PoMC applied the same logic to other areas at the port, including the Customs Service facility and the Coode Island bulk liquid area. It contended that the wharfs and aprons would not be operable for the loading and unloading of cargo without these facilities and the reclamation of land permitting their construction.

292 For their part, the defendants submitted that the relationship between an instance of the primary works (a particular building, breakwater, berth, wharf, apron or canal) and any 'associated works' must be a direct or one-to-one relationship. According to the defendants, s 2(2AA) does not contemplate combinations of primary and associated works so as to extend the ambit of 'associated works' beyond the boundaries of the building, breakwater, berth, wharf, apron or canal in question. In effect, the defendants contended that to be 'associated works', reclamation or filling works must be foundational works for a particular instance of the primary works.

293 Thus, Mr Bowman carried out his valuation on the basis that works associated with, say, a wharf or a building were only those works designed for the construction of the wharf or building. He included in his valuation report a cross-section of a building showing the surrounding pavement and fill below.[110] Apart from the building itself, he recognised the hardstand as an improvement and 'anything that is a foundation for that hardstand designed specifically for the purpose of that hardstand or that building.' He did not treat fill below the pavement or the building as an improvement. In a related figure showing a cross-section of a wharf with an apron directly on top of it and adjacent (non-apron) hardstand, the fill below the wharf/apron is distinguished from the fill beneath the hardstand, which is not treated as 'associated works'.[111]

294 However, in relation to scenario (e) in the joint questions (referred to as the 'Bowman 2AA scenario') the valuers agreed to deduct an amount from the assessment of site value to reflect the cost of fill immediately beneath the buildings. This produced a site value for the subject land that was $15 million less than the site value for VGV's preferred position (scenario (d)) which did not include fill as an improvement. Mr Bowman explained that the cost of fill was based on an average depth of two metres of fill but said that this did not reflect the way in which he approached the treatment of buildings as improvements in his report. He said he would not have included the two metre deep fill in his valuation approach if liberated from his instructions.

295 Whatever Mr Bowman's preferred position, the defendants submitted that, as a matter of statutory construction, in order for reclamation works to be 'associated' with the primary works, they had to accompany or be allied to them, which required contemporaneity in their design and construction. This, they say, disqualified the historic reclamation works from being associated works at all.

296 The authority upon which the defendants rely for the temporal requirement is Winslow Constructors Pty Ltd v Mt Holden Estates Pty Ltd,[112] in which the Court of Appeal considered whether earthworks, road works, drainage, sewer and water reticulation construction (described by the Court as 'infrastructural works') for a proposed residential subdivision were works associated with the erection or construction of a home[113] for the purposes of s 5(1) of the Domestic Building Contracts Act 1995 ('DBC Act'). The infrastructural works were carried out before approval of the plan of subdivision or the creation of any titles. No homes had been built, none were being constructed and there were no contracts for the construction of any homes.

297 The Court held that the word 'associated' in the relevant provisions of the DBC Act required a relationship beyond a mere nexus. The dictionary definition of 'associated' was 'allied to' or 'accompany', both of which required a degree of contemporaneity between the items said to be associated.[114] The Court found that this requirement had not been met because individual lots in the subdivision might remain unsold or vacant for several years before any domestic building work occurred.[115]

298 I consider it to be unlikely that the legislature intended to impose a temporal requirement of this kind when it enacted s 2(2AA), having regard to the nature and scale of works at a port. Section 2(2AA) is a provision dealing with specific types of works in a particular physical context. That context, being the commercial trading ports to which s 2(2AA) is directed, is one that is characterised by major engineering works undertaken over lengthy periods to modify lands and waters to permit ships to dock safely and to be safely and efficiently loaded and unloaded, as well as to facilitate the delivery and onward transportation of cargo. Winslow is to be distinguished on the basis that it was concerned with different legislative arrangements and quite different forms of primary works.

299 To construe s 2(2AA) so as to require reclamation works on the port of Melbourne land to be linked to the design and construction of a particular instance of the primary works in order to qualify as 'associated works' is to give the words 'or associated works' little work to do. This is best illustrated by reference to buildings. The defendants contended that reclamation works were to be distinguished from foundational works and that only the foundational works for a building would be 'associated works'. In my view, foundational works for a building (or other port-related structure) will be 'improvements' because they form part of the building (or other structure) itself, not because they are 'associated works.'

300 Depending of course on the particular statutory context, works 'associated' with a building will be works that do not form part of the building itself. Works associated with a house will commonly include such things as its driveway and garage; works associated with a building housing a McDonalds restaurant will include the parking and drive-through areas; works associated with a 'big box' retail outlet will include car parks and paved areas giving access to loading bays. In each of those examples, the works to support the driveway, car park, drive-through, and loading bays will also be works associated with the building.

301 The meaning of 'associated works' in s 2(2AA) is to be discerned from the context in which those words appear in the provision. That context includes the requirement that works 'relate to a port' and the nature of the works that have been specified as primary works. As PoMC submitted, the words 'buildings, breakwaters, berths, wharfs, aprons, canals' describe generally the works to be found at a port. They are generic terms intended to capture all of the major types of works at a port. The inclusion of 'buildings' as primary works highlights the generic nature of the works in question: the provision captures buildings of all shapes, sizes and functions, as long as they are port-related.

302 In my opinion, this evinces an intention that the words describing the primary works be read expansively and that 'associated works' be treated in the same way. The limiting factor in s 2(2AA) is not so much the word 'being' as the requirement that the primary works and the associated works be port-related.

303 Such a construction accords with the purpose of s 2(2AA), which was to ensure that port-related works undertaken by the Crown or statutory public bodies at Victorian ports could qualify as 'improvements' under the Act, thus removing an existing anomaly in the taxation treatment of works at ports. The legislature recognised that the construction, reinforcement and extension of the fundamental port infrastructure at Victorian ports was largely undertaken by the Crown and determined that such works should be treated as improvements.

304 The evidence shows that reclamation works were closely linked to the development of the port and the construction of the fundamental port-related structures such as berths, wharfs and aprons. As Mr Bennett said in his evidence, from the earliest days of the port, the Harbor Trust Commissioners and their successors made and implemented long term plans and programs for reclamation, wharf construction and dredging. Once plans were adopted, work was done on port land to reclaim and develop land for port purposes in accordance with the plans in force from time to time.

305 Thus, in the 1968 Annual Report, the Chairman of the Harbor Trust referred to the 'good fortune' that the legislators throughout the 92 year history of the Melbourne Port Authority had allowed the 250 acre area surrounding Swanson Dock to remain unalienated for future port use, permitting what was at one time considered to be 'useless swamp' to be turned into 'a most valuable development area for the most sophisticated of modern cargo ships and cargo handling methods'. The passages extracted above from the 1969 to 1971 Annual Reports record that the reclamation works at Swanson Dock were carried out in order to create the container terminals, which required large areas of flat, paved land for the delivery, loading, unloading and collection of containers and for related operations such as container maintenance and storage. The port planners identified the need for the port to expand laterally and to evolve from a 'linear' to an 'area' format. The fill in the areas that became Swanson Dock was deposited and managed over a number of years in anticipation of the reclaimed land being developed as wharfs and hardstand to support what the Chairman described as 'highly sophisticated cargo handling equipment and methods'.

306 Likewise, much of Webb Dock is reclaimed land, reclamation works having been carried out in a carefully planned fashion since the early 1950s to extend the port and create new port facilities. The 1973 Melbourne Harbor Trust Development Plan, for example, identified a lack of available port land to meet future requirements and proposed the reclamation of two areas in Hobson's Bay. It contained an existing conditions plan, followed by plans for 1985 and 2000 showing the progressive development of Webb Dock into Hobson's Bay through land reclamation. Although Webb Dock East has not been developed to the extent envisaged in the 2000 plan, a series of aerial photographs exhibited by Mr Drummond of Webb Dock in 1931, 1946, 1951, 1968, 1989 and 2002 clearly shows from 1951 onwards the extensive development of Webb Dock through the reclamation of land. That reclamation was undertaken for no other purpose than for the construction of wharfs, aprons and other port-related structures and facilities.

307 I reject the proposition that the historic reclamation works were incapable of being associated with the primary works because of the time taken by historic fill to settle. I also reject the proposition that the reclamation works were works to land rather than works associated with port-related structures. The reclamation works were not carried out to permit the development of the land generally; they formed part of the development of the land as a port and, in the case of Swanson and Webb Docks, were carried out to create the conditions for specific forms of cargo handling and management that required large land areas.

308 The evidence therefore establishes a direct connection between the reclamation works carried out to create Swanson and Webb Docks and the construction of the berths, wharfs and aprons at those locations. I find that reclamation works carried out at Swanson and Webb Docks were directly linked to the construction of berths, wharfs and aprons and were therefore works that were 'associated' with one or more of the primary works in those locations. That nexus is most clearly illustrated by the development of Webb Dock East, most of which was not solid land of any kind prior to the reclamation works and which was planned and constructed through reclamation in order to extend the port. Even Mr Torr accepted that the filling of Webb Dock to permit its use as a wharf was, at least on one view, 'associated works'.

309 What of the reclamation works on the remaining parts of the subject land?

310 As I understand the defendants' position, it is not disputed that the fill beneath the wharfs, including those at Victoria and Appleton Docks, and at South Wharf, were associated works. However, the defendants dispute that the fill beneath the aprons adjoining those wharfs amounted to associated works.

311 I have no difficulty in finding that the reclamation works at the conventional or 'older style' docks at Victoria and Appleton Docks, and at South Wharf were works associated with the wharfs, aprons and buildings at those locations. I include the reclamation works under the aprons that were road-side of the sheds or buildings at South Wharf. I also include the areas along South Wharf used by PoMC for various management purposes.

312 Many other works at the port that were not wharfs or aprons were constructed on filled land. At the relevant date, the filled areas on the subject land included the Patrick leases at Coode Park, Appleton Depot and Appleton Rail, the areas occupied by the Murray-Goulburn, CMC, POAL, Semi-Skel and Customs Service tenancies, the DP World container park area north of Coode Road, the tank farm at Coode Island, the MTO grain facility adjoining the Appleton Dock and the Toll Tasmania lease at Webb Dock. These areas contained buildings, hardstand and other visible works that were recognised by the valuers as tenants' improvements. There were also many other filled areas owned and managed by PoMC and used for roads, railways, electricity substations, environmental buffers and the like.

313 Of the works on the remaining land, 'buildings' would immediately qualify as improvements under s 2(2AA) if not already disregarded as improvements under s 2(1).

314 PoMC argued that not only the fill supporting the buildings, but fill supporting works associated with the buildings amounted to associated works and therefore 'improvements' for the purposes of s 2(2AA). The defendants' position was that only filling works that were foundational works for buildings were 'associated' with buildings.

315 I have already explained why I do not consider works associated with a building to be limited to foundational works. On the ordinary and grammatical meaning of the words 'works associated with a building', such works would include works surrounding the building or allied to it that help to make it functional or operational. That would include fill to support such works.

316 Recognising as 'associated works' only the fill underlying individual buildings, wharfs or aprons is largely unworkable, in my view, and fails to recognise the integrated nature of the port infrastructure. It also fails to recognise that a port, as a major piece of transport infrastructure, must be expected to grow and evolve over time and that reclamation works carried out as part of the long-term planning for the port will support different types of port-related works at different times depending on such things as changes in trade composition and ship size.

317 I am satisfied from the evidence concerning the planning and development of the port that the reclamation works were carried out in anticipation of the reclaimed land being used for the construction or extension of berths, wharfs, aprons and buildings. Reclamation works were also carried out in anticipation of the construction of works that were not primary works but were, as PoMC submitted, works that would permit or assist in the functioning or operation of the primary works. These were, in substance, works that made the wharfs operable, including the areas of paving that I have found not to be aprons (the container yards to the north of Coode Road operated by DP World and Patrick, the Appleton Depot and Rail areas and the Toll Tasmania hardstand), loading docks and other areas around buildings, wharfs and aprons required for access or for the staging trucks and trailers, as well as roads, railways and other service areas.

318 These areas and works were required, as the evidence shows, to facilitate the movement of cargo to and from the wharfs, even though some of them were not directly used for the movement of cargo. There was evidence that ancillary areas and services - involving such things as container storage, cleaning and repair, container packing, unpacking and repacking, logistic and transport services - were required to at the port to facilitate the movement of cargo to and from the wharfs and in order to manage the short dwell times for vessels imposed by terminal capacities. Logistics and storage facilities had to be within the port precinct to enable the container terminals to operate within dwell times. As such, the areas and structures in question were works associated with the primary works, that is, they were works associated with the operation of the berths, wharfs and aprons at the port.

319 As to the areas containing the tank farm at Coode Island and the MTO grain tanks adjacent to Appleton Dock, these were also works that were associated with the operation of the wharfs at those locations. At Coode Island, bulk liquid materials were taken off the ships through pipelines and assembled in the tanks for collection. The wharf could not operate without the tanks. At the MTO grain facility, grain was delivered by rail and collected in tanks awaiting shipment. Again, the physical constraints involved in moving the grain from rail to wharf required it to be first assembled in the tanks.

320 It follows from this analysis, the reclamation works on most if not all of the subject land were works associated with either primary works or other associated works. They were, in my view, 'associated works' for the purposes of s 2(2AA) of the Act. This is consistent with the reclamation works having been carried out in anticipation of the construction and development of port-related structures comprising the primary works or works associated with the primary works in the sense described.

321 There is a particular area on the subject land that received little or no attention in submissions and which raises issues of its own. The area at Webb Dock to the north of Williamstown Road below the West Gate freeway (which I shall refer to as 'Webb north') was undeveloped at the relevant date. However, the map of filled areas on the port of Melbourne land produced by Mr Drummond shows Webb north to contain fill, principally 'contract to complete' fill. Plainly, at the relevant date (as now) the reclamation works at Webb north did not support any existing primary works or any existing works associated with primary works.

322 As part of its closing submissions, PoMC provided to the Court aerial photographs of the subject land marked in colour with the areas that PoMC contends were buildings, wharfs, aprons, canals and associated works at the relevant date. Most of the areas are marked either as primary or associated works. However, Webb north is not marked at all on PoMC's photographs. It is not claimed to be 'associated works'. This is not consistent with PoMC's contention in its written submission that s 2(2AA) requires all works undertaken on the port of Melbourne land since 1877 to be disregarded for site value purposes as all works undertaken on that land since that time are either primary works or associated works.

323 There is evidence that PoMC has plans for Webb north. The PDS short to mid term vision concept plan shows its uses to be 'cars', 'port-related' and 'interim use'; the long term plan shows its use for 'coastal (including Bass Strait)' and 'international containers'. The text records that there will be extensive development of Webb Dock, which could be connected to the rail network, substantially increasing the port's capacity, and that 'highly productive and efficient container terminals' will be located there and at Swanson Dock. It is clear that the reclamation works at Webb north have been carried out with these kinds of port-related purposes in mind.

324 Based on the logic of the foregoing analysis, the reclamation works at Webb north are also 'associated works' in that they have been carried out in contemplation and for the purpose of the development and use of primary works and works associated with primary works (most likely the latter). This is consistent with my earlier conclusion that s 2(2AA) does not include a temporal requirement for works to be 'associated' as was held in Winslow.

325 I therefore find that the reclamation works carried out on the subject land between 1877 and the relevant date were improvements for the purposes of s 2(2AA). I have limited this finding to the works on the subject land (rather than applying it to the whole of the port of Melbourne land) because there are parts of the port of Melbourne land outside the subject land about which no evidence of works was led.

326 The defendants submitted that a construction that brought all (or nearly all) of the works at the port under s 2(2AA) strained the language of the section and that there were some areas of the subject land that could not on any view be recognised as 'associated works'. They pointed, by way of example, to an unsealed truck parking area on the north-west corner of Swanson Dock, also described as a 'paddock' for DP World's future expansion.

327 Apart from Webb north, there may well be small pockets of the subject land that at the relevant date were bereft of any port-related function or purpose. However, the reclamation works were carried out on the port of Melbourne land in order to provide for its use for port-related functions. The specific use and development of the land, within the framework described, was flexible, having regard to the need for the port to grow and evolve. To exclude specific areas from the finding that I have made is to invite a piecemeal and, I consider, largely unworkable approach to the valuation of the subject land.

328 One of the difficulties with the narrow construction advanced by the defendants is that s 2(2AA) is given virtually no work to do. So much is plain from Annexure B, which shows only the thin strips that represent the wharfs marked in red as improvements under s 2(2AA). So far as the defendants are concerned, only the wharfs and the fill immediately beneath them, and possibly the fill immediately beneath individual buildings, could qualify as improvements under s 2(2AA), leaving all but a tiny fraction of the Crown works at the port to fall outside the special definition of port-related improvements in the Act.

329 The defendants respond that ports come in many different shapes and sizes and that there is little work for the provision to do in relation to the port of Melbourne because of its particular configuration. The difficulty with this argument is that s 2(2AA) will have little work to do in any port where the bulk of the works involve modern cargo handling facilities requiring large aprons and other areas of hardstand for the management of containers. I consider it unlikely that the legislature intended to limit the operation of s 2(2AA) to what were described in the course of the trial as 'older style ports'. Having regard to the aerial photographs tendered in evidence, neither of the port of Portland nor the port of Geelong could be so described.

330 The reclamation works carried out by PoMC and its predecessors on the subject land were works relating to the port and works associated with the construction and operation of the buildings, berths, wharfs, aprons and canals on the subject land. They were 'associated works' that fell within the definition of 'improvements' in s 2(2AA) of the Act and were to be disregarded when the assessing site value of the subject land at the relevant date.

331 The appeal brought by PoMC pursuant to s 23(3) of the Act challenging the assessment of site value of the subject land as at the relevant date must be allowed.

332 The site values of the occupancies on subject land must be assessed on the basis that the port of Melbourne land is a 'larger property' of which the occupancies form a part and that the reclamation works on the subject land were improvements under s 2(2AA) of the Act.

333 The capital improved value and estimated annual value of the subject land as at the relevant date was agreed to be $706,269,000 and $65,101,900 respectively. The valuers must now confer to seek to reach agreement as to the apportionment of site value to the various occupancies on the subject land at the relevant date in accordance with s 2(3) of the Act.

334 If agreement is reached, the Court will be in a position to make final orders in each of the six related proceedings, being SCI 2013 - 3164, 3169, 3171, 3172, 3166 and 3167.

335 If no agreement can be reached, those values will have to be determined by the Court.

1 The parties filed extensive valuation evidence in the proceeding. In each case the expert valuation reports were supplemented by oral evidence.

(b) reply report by Les Brown dated 31 October 2014.

(b) reply report by Richard Bowman dated 7 November 2014; and

(c) further valuation report - questions for joint conference by Richard Bowman dated 25 February 2015.

(a) two letters from the Department of Transport, Planning and Local Infrastructure, dated 7 & 8 August 2014;

(c) reply report by Chris Torr dated 20 November 2014; and

(d) supplementary report by Chris Torr dated 26 February 2015.

5 PoMC filed lay evidence about the operation of the PoMC and the use of the port of Melbourne land at the relevant date.

6 The following affidavits were made by PoMC employees about its operations:

(c) Neil Marinus Diepstraten, sworn on 6 June 2014;

(g) Matthew John O'Meara (confidential), sworn 16 July 2014.

7 Of the foregoing, the defendants cross-examined Bennett and Schafter.

8 The following affidavits were filed concerning, principally, geotechnical and fill evidence:

10 The following affidavits were made on behalf of PoMC's tenants concerning their use of the leased land and other port of Melbourne land:

11 The Court undertook two views of the port of Melbourne land.

12 On day 2 of the trial, the Court undertook a day long view of the port of Melbourne land, and visited:

13 The Court was provided with a series of maps (Exhibit P-4), and the parties agreed a summary of what was seen.

14 On the afternoon of day 7 of the trial, the Court undertook a further view of a ship loading and unloading containers at the Patrick site at East Swanson Dock, and the record of what the Court saw during that view was read into the transcript.[116] The Parties also prepared a joint report on the site inspection.

[1] Melbourne City Council - 431 hectares; Maribyrnong City Council - 31 hectares; Hobson's Bay City Council - 29 hectares; and Port Phillip City Council - 11 hectares.

[2] All land at the relevant date was held in fee simple except one parcel at Anne Street, Williamstown and one parcel at Station Pier, Port Melbourne.

[3] Between 1877 and 1978, the lands and waters within the port were defined in schedules to the various port enactments. From 1978 to 1995, the port land was vested in the Port of Melbourne Authority ('PMA') pursuant to s 45 of the Port of Melbourne Authority Act 1958, and the Surveyor General identified the vested land on a map produced annually pursuant to s 106A of that Act. In general terms, as the needs of the port increased, the swampland that had been reserved for port use was vested in the port and developed for port uses. Following the enactment of the Port Services Act 1995, as part of the land transfer processes, there was a rationalisation of land that had previously been vested in or managed by the PMA. Land surplus to the requirements of the Melbourne Port Corporation ('MPC') was not transferred to it from the PMA. Surplus land was retained by the Crown and management rights to such land were transferred to authorities such as Parks Victoria. Although riverbed and seabed had been vested in the PMA, such land was not vested in the MPC under the Port Services Act. The Port Services Act made provision for MPC to hold freehold title. From its establishment MPC held small land holdings as freehold owner. On or about 28 April 1998 most of the land then managed by MPC was converted to freehold title by a series of Crown Grants. Land under water on the south bank of the Yarra River (Vol 10372 Fol 660) was transferred on or about 20 July 1998. Land at Victoria Dock (Vol 10407 Fol 939) was transferred on or about 3 May 1999. Thereafter MPC purchased additional freehold land from time to time.

[4] As at the relevant date, the remaining port of Melbourne land was used as follows: 3.2 hectares were common user areas; 1.2 hectares were navigational channels; 40 hectares were non navigational channels; 25 hectares were open space; 1.7 hectares were piers and jetties; 1.2 hectares were for miscellaneous PoMC use; 10.4 hectares were for railway services; 20.6 hectares were for road services; 5 hectares were for miscellaneous services; 65.6 hectares were undeveloped; 26.9 hectares were vacant (untenanted land); and 17.8 hectares were wharves.

[5] Mr Bowman also prepared a report dated 25 February 2015 for the purposes of the joint conference of valuers.

[6] Mr Torr prepared a supplementary report dated 26 February 2015 to provide values for a number of occupancies that were 'pending'.

[8] Dated 13 March 2015. A correction was made on 24 March 2015.

[9] The figure of $150 million arrived at jointly by the valuers represents the site value of land owned by PoMC within the City of Melbourne and within the Port of Melbourne Planning Scheme. There are two sites that fall outside the latter but are within the first two: Todd Road and Wharf Road. The valuers agreed that these sites had a combined value of $5 million.

[10] The capital improved value and the estimated annual value of the subject land, as at the relevant date, were agreed by the valuers to be $706,269,000 and $65,101,900 respectively.

[11] A listing of the affidavit evidence that was filed and a brief outline of what was observed during the views is contained in Appendix A.

[12] This is the Act as at the relevant date. The Act has since been amended by Act No. 58 of 2012, which had a commencement date of 17 October 2012.

[13] By s 10(1) of the Act, the council may nominate the VGV to be the valuation authority in relation to a municipal district.

[14] Although councils may base rates on any one of site value, net annual value or capital improved value (Local Government Act 1989, s 157(1)), the Court was told that councils most commonly base their rates upon either net annual value or capital improved value.

[15] Via the definition of 'rateable land' in s 3(1) of the Local Government Act 1989.

[16] Port Management Act 1995, s 91K.

[17] Transport Integration Act 2010, s 6.

[18] Transport Integration Act 2010 s 141E(2).

[19] Port of Melbourne Corporation, 'Port Development Strategy - 2035 Vision', August 2009, p 4.

[20] A dedicated planning scheme providing for the specialised use and development of land across several municipal areas is unusual. Only the port and the Alpine Resorts are treated in this manner.

[21] This description is derived from case law that is discussed below.

[22] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 429-20 - 430-17.

[23] Valuer-General Victoria and Municipal Group of Valuers, 'General Provisions for Specialist Guidelines' (August 2011) (Exhibit D9).

1. [24] The estates to centres to which Mr Brown referred where: (a) Caribbean Gardens, a high quality industrial estate owned by one family in Melbourne's eastern suburbs of around 150 hectares on 3 titles with a privately owned road; (b) Francis St, Brooklyn, an industrial park on around 23.5 hectares under common ownership, with multiple occupancies and internal roads within the title; (c) Chadstone, a shopping centre on a number of titles zoned Commercial 1, which has internal private roads, and different occupancies and tenancies; (d) Point Cook Town Centre, a shopping centre with mixed uses on 6 titles, including land for future development, divided by public roads; (e) Craigieburn Shopping Centre, a shopping centre divided by a road; (f) Highpoint Shopping Centre, a shopping centre on one title which has a public library within the title; (g) Southland Shopping Centre, a shopping centre divided by a road.

In cross-examination, Mr Brown also said that Malvern Central shopping centre would be valued as a larger property.

[25] So far as Mr Torr was aware, the land north of Coode Road was used for empty container storage and repair, whereas the land south of Coode Road was used for more direct stevedoring and container storage and handling. However, the evidence at trial was that the land to the north and south of Coode Road was used for the same purpose.

[26] In his report, Mr Bowman treated the Terminals tenancies and the Pacific Terminals tenancies as each being one (aggregated) occupancy under s 13DC(6), and each of the remaining 9 tenancies as being a 'larger property' under s 2(3). By the time of the trial, Mr Bowman regarded each of the 11 tenancies as being a separate (aggregated) occupancy under s 13DC(1) or (6).

[27] To the DP World leases, the Qube Shipping and Logistics leases, the Continental Freight Services on South Wharf, Australian Cement Limited and Independent Cement and Lime at South Wharf, the Toll Shipping and Toll Transport leases and the Patrick leasehold interests at Webb Dock.

[28] Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 ('Thiess').

[30] [2014] VSCA 143.

[31] Ibid [2]; see also Tuite v R [2015] VSCA 148, [71]; Di Paolo v Salta Constructions Pty Ltd [2015] VSCA 230, [26]-[39].

[32] Also described by Senior Counsel for the defendants as a 'notion that has its roots in valuation law'.

[33] Section 1(a) of the 1991 amending Act states that one of the purposes of the 1991 Act is to 'require rating valuations to be based on occupancy rather than ownership'. To the same effect, the Explanatory Memorandum stated that s 13DC(1) had been replaced in order to require valuations to be returned on an occupancy basis. Furthermore, the second reading speech for the 1991 bill referred to the fact that a working party considering potential problems with the administration of owner liability and owner assessment for ratings had endorsed the concept of owner liability but recommended the retention of rate assessments structured on the basis of occupancy (Victoria, Parliamentary Debates, Legislative Assembly, 19 September 1991, p 754, Mr Steve Crabb, Minister for Conservation and Environment).

[34] Local Government Act 1958 ss 254(1) (definition of 'unit'), s 254(3A) (dealing with 'home units') and 254(3B) (dealing with 'cluster' lots). Section 254(3A) was inserted by the Land Tax Act 1973; s 254(3B) was inserted by the Local Government Act 1975. The definition of 'unit' was introduced into the Local Government Act by s 11(1)(a)(iv) of the Local Government Act 1972.

[35] See Victoria, Parliamentary Debates, Legislative Assembly, 25 March 1975, 4427.

[36] [1900] VicLawRp 2; (1899) 25 VLR 5 ('Tramway case').

[38] (1872) LR 7 QB 643 ('Mersey Docks case').

[40] Ibid 649. Justice Blackburn said that the parochial principle must be followed 'whenever it is possible' (651); Justice Lush said that the acreage principle is only to be applied 'when the parochial principle is impracticable' (653).

[41] R v Hull Dock Co [1852] EngR 476; (1852) 18 QB 325.

[42] [1895] AC 136 ('Sculcoates').

[45] Ibid 143-4. For his part, Lord Davey recognised that, in some cases, the profits or earnings of the rateable property may be so mixed up with the profits derived from the beneficial use of the other properties that it was impossible to separate the rateable property. In those circumstances, it might be proper to take the profits of the whole undertaking and then apportion them according to the respective areas or according to some other principle: Ibid 152.

[46] Esso [1986] VicRp 29; [1986] VR 289, 294.

[47] Local Government Act 1958 s 255(8).

[51] Victoria, Parliamentary Debates, Legislative Assembly, 29 October 1957, 2570, (Sir Thomas Maltby, Minister of Public Works).

[52] Victoria, Parliamentary Debates, Legislative Council, 3 December 1957, 3291, (Gilbert Chandler, Minister for Agriculture).

[53] See discussion of the definition of 'estimated annual value' and 'net annual value' in Shell Co of Australia Limited v City of Melbourne [1997] 2 VR 615, 633.

[54] In Re Horwitz (1900) 26 VLR 500, 509.

[55] Disney v Mayor of Williamstown [1889] VicLawRp 18; (1889) 15 VLR 59.

[56] Local Government Act 1890 s 248.

[57] Local Government Act 1903 s 265(b).

[58] Land Tax Act 1910 s 7.

[59] Land Tax Act 1910 s 3, definition of 'unimproved value'.

[60] Land Tax Act 1910 s 15.

[61] Or the deemed net annual value of five per cent of fair capital value.

[62] Rating on Unimproved Values Act 1914 s 3(d).

[63] Rating on Unimproved Values Act 1914 s 265(b).

[64] This is the amendment to which the defendants referred when identifying the block of flats as the model 'larger property'. As discussed, the 1957 amending Act sought to deal with 'own your own flats' by applying to them the same basis of valuation as applied to flats in one ownership.

[65] Local Government Act 1969.

[66] Local Government Act 1969 Part XI Division 1.

[67] Local Government Act 1969 s 254(15).

[68] Section 254(3) provided (emphasis added):

Where it is necessary to determine the capital improved value, the site value or the unimproved capital value of any rateable property, in respect of which any person is liable to be rated but which forms portion of a larger property, the capital improved value[,] the site value and the unimproved capital value of each such portion shall be as nearly as practicable to the sum which bears the same proportion to the capital improved value, the site value and the unimproved capital value respectively of the whole property as the net annual value of the portion bears to the net annual value of the whole property.

[69] Local Government Act 1969 ss 255(5), (6) and (7). Section 255(5) was equivalent to s 13DC(6) but used the expression 'one rateable property' rather than 'rateable land'; s 255(6) was equivalent to s 13DC(7A) and also used the expression 'separate rateable property'; s 255(7) was equivalent to s 13DC(8) but also used the expression 'one rateable property' rather than 'rateable land'.

[70] Local Government (Rates) Amendment Act 1976 s 255(5A). Section 255(5A) also used the expression 'one rateable property' rather than 'rateable land'.

[71] Local Government Act 1989 s 156.

[72] Victoria, Parliamentary Debates, Legislative Council, 19 April 1989, 456, (Maureen Lyster, Minister for Local Government). Both Acts came into force on 10 October 1992, but the 1991 amending Act made considerable changes prior to their commencement.

[73] Valuation of Land (Amendment) Act 1989 ss 5, 8.

[74] Local Government (Rating) Act 1991 s 1(a).

[75] Local Government (Rating) Act 1991 s 16.

[76] Valuation of Land Act 1960 s 5A(3)(a).

[77] In other evidence, Mr Torr agreed that in valuing for any purpose, s 5A(3) of the VLA requires the valuer to take into account both the use to which the land is being put and its highest and best use and that it is necessary to value on the highest and best use of land when valuing for rating purposes.

[78] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 556-7-11.

[79] Affidavit of John Ashwin Bennett sworn 27 June 2014 (Exhibit P20); 3408.

[81] Mr Bennett gave evidence that leases on port land were typically of 25 years' duration. However, the leases for the two container terminals were in the order of 40 years' duration. The longer leases typically imposed additional obligations on the tenant to implement large scale works and dealt with the concept design, construction standards and cost burden for such works.

[82] Affidavit of John Ashwin Bennett sworn 27 June 2014 (Exhibit P20); 3406.

[83] Valuation Report prepared by Richard Bowman of Ernst & Young Global Limited, 8 August 2014, (Exhibit P20); 8731.

[84] Although the Court heard no evidence on this point, I understand reclamation in this case to involve the use of fill, and I use the term 'reclamation works' to mean filling works or works involving the use of fill.

[85] Affidavit of Neil Marinus Diepstraten sworn 27 June 2014 (Exhibit P20); 2279.

[86] Victoria, Parliamentary Debates, Legislative Assembly, Hansard, 16 May 1996, 183 (Alan Stockdale).

[87] Victoria, Parliamentary Debates, Legislative Assembly, 30 April 1968, 4522.

[88] [2011] VSC 184; (2011) 34 VR 445, [76] - [77].

[90] To the extent of the 15 year rule.

[91] [2008] HCA 49; (2008) 235 CLR 619.

[92] Ibid 642, [99] Crennan J. See also Gummow ACJ and Kirby J at 623 [16].

[93] [1990] HCA 6; (1990) 169 CLR 214.

[97] Part of the Asciano Group of companies.

[98] The Patrick leases covered a number of areas: East Swanson Dock terminal, Appleton Depot, Appleton Rail terminal and Coode Park.

[99] 2nd edition, 1989, vol I, page 591.

[103] Affidavit of Christopher Edward Torr sworn 8 August 2014 exhibiting Valuation Report (Exhibit P20); 8911.

[104] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 571-11-24.

[105] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 263-17-30.

[106] Affidavit of David Nash sworn 14 July 2014 (Exhibit P20); 8367.

[107] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 571-30 - 572-6.

[108] Mr Jotic agreed that it would be ideal for the straddle carrier to take the container directly from truck to ship, but the planning involved meant that it could not be done that quickly.

[109] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 600-26 - 601-2.

[110] Figure 20 - Building and Associated Works.

[112] [2004] VSCA 159; (2004) 10 VR 435 ('Winslow').

[113] Or a building on residential land.

[115] Ibid. In fact, the infrastructural works were found not to fall within the DBC Act having regard to the provisions of that Act read as a whole and the interrelated nature of the controls in the DBC Act and the Subdivision Act 1988. The Subdivision Act and the DBC Act were complementary and governed distinct areas of works, the former being concerned with 'public works' such as the provision of sewerage, drainage, water supply in order to connect the subdivision to the existing systems. By contrast, the focus of each paragraph in s 5(1) of the DBC Act was a home or a residential building, and the specified work in each paragraph was directly connected to, or had a nexus with, the home or building.

[116] Transcript of Proceedings, Port of Melbourne Corporation v Melbourne City Council & Anor (Supreme Court of Victoria, S CI 2013 03164, Emerton J, 8-10, 13-17 and 22-24 April 2015) 472-5 - 473-12.