Plaintiffs v Firstnamed Defendant Secondnamed Defendant

Plaintiffs v Firstnamed Defendant Secondnamed Defendant - [2011] VSC 184 - VSC 2011 case summary — Zoe

[34]

"Even if the correct interpretation were a matter of doubt (which I do not think it is), two considerations would lead to the resolution of that doubt in favour of the appellants. First, the interpretation contended for by the respondent would cause inconvenience and difficulties in administration. For all municipal valuers would have to ascertain the terms on which each leased parcel of land in the municipality was held and to determine whether or not the lease was more favourable to the landlord than a lease in accordance with the conditions of the market. In saying this, I acknowledge that the interpretation placed on s 42 of the Land Tax Act 1958 by the Full Court in Commissioner of Land Tax v City of Melbourne [1994] VicRp 35; [1994] 1 VR 486 requires the commissioner to make a similar enquiry and the converse determination. But that interpretation was clear and unavoidable. Secondly, the appellants are, in my view, entitled to invoke the principles of statutory construction applicable to an Act which imposes a tax or duty and, relevantly, the principle that the imposition of a tax must be in plain terms: Anderson v Commissioner of Taxes (Vic) [1937] HCA 24; (1937) 57 CLR 233 at 243; Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492 at 510-11. I say that because, although the definition containing the putatively ambiguous words now appears in valuation legislation rather than in rating legislation, it is clear from provisions which I have discussed earlier that the definition of CIV and the provisions of the Valuation of Land Act 1960 which incorporate it are intended to govern the making of valuations on one basis (CIV) for use in the declaration of rates under the Local Government Act 1989. For the purposes of the principles of construction that I have referred to the latter Act relevantly imposes a tax or a duty. The remarks of Dixon J in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of SA Ltd. [1947] HCA 10; (1947) 74 CLR 358 at 373-4 (agreed in by Gibbs J in Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547 at 565), in which a distinction is drawn between revenue cases and compensation cases, although expressed in the context of valuation as opposed to interpretation of valuation legislation, point in the same direction."

[68]

"There are some cases in which the theory or principle on which the compensation is to be assessed prevents regard being had to subsequent events. Thus, where the compensation which is to be given is measured by the ordinary market price of the property taken, the principle on which that market price is to be determined prevents (or at least restricts) reference to subsequent events. That market price is the price acceptable to a willing but not anxious vendor and purchaser on the relevant date. Such persons are to be taken to know what an appropriately informed person would know on that date. That being the principle, it follows that such persons (and the court, as determining what they would have done) cannot be seen as knowing more. The price which such persons would accept at that date will be affected by the uncertainties as at that date, as to, for example, the future demand for land at the relevant time, future decisions of zoning authorities, and the like. Those uncertainties and the effect of them on the postulated vendor and purchaser help to determine what price will be found acceptable. In that regard, therefore, evidence of what subsequently has occurred in relation to such matters may not ordinarily be referred to. This does not operate so as necessarily to exclude evidence of subsequent sales: Melwood Units Pty Ltd v Commissioner of Main Roads (1978) 52 ALJR 593, at pp 597, 598; [1978] 3 WLR 520, at pp 527, 529, 530; [1979] 1 All ER 161, at pp 166, 167, 168; McCathie v Federal Commissioner of Taxation [1944] HCA 9; (1944) 69 CLR 1, at p 16. Such sales are evidence, not of the subsequent outcome of matters which, at the relevant date, were inherently uncertain, but of the price a relevant vendor and purchaser found acceptable at that date for comparable land. The assumption of the law is that from that evidence it is possible to infer what the relevant vendor and purchaser would have found acceptable for the subject land: see generally Harris v Minister for Public Works (NSW) (1912) 12 SR (NSW) 149, at pp 161-4; 29 WN 33; reversed [1912] HCA 56; 14 CLR 721; McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231, at p 239."

[70]

"It would, however, be a mistake to regard the reasons, read as a whole, of Isaacs J in Spencer's case as completely excluding reference to matters arising after the date to which the valuation relates. The hypothetical vendor and purchaser are not treated as being impervious to the influence of potential future events or developments. According to Mahoney JA in Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547, 576, in a passage which is set out in full in the reasons of Cullinane J on this appeal, such persons are to be taken as knowing 'what an appropriately informed person would know on that date', although as Mahoney JA added, 'they cannot be seen as knowing more'. As at that date, his Honour said, the price will be affected by uncertainties, and these uncertainties and their impact on the postulated vendor and purchaser help to determine what price would be found acceptable. The principle, his Honour continued, does not operate necessarily to exclude evidence of subsequent sales; but such sales are evidence, not of the subsequent outcome of matters which at the relevant date were inherently uncertain, but of the price a relevant vendor and purchaser found acceptable at that date for comparable land. The assumption is that what they would have found acceptable can be inferred from evidence of such sales.

It would follow from applying here what was said by Mahoney JA in Housing Commission v Falconer that the evidence in this case of the subsequent rezoning of the land and completion of the sale at $5 million would be admissible to support an inference as to the price which a hypothetical vendor and purchaser might have agreed on as the sale price of the land after the rezoning to Rural on 17 December 1993. The possibility that a further rezoning would occur, and the strong likelihood, approaching near certainty, that the Council would ensure that it did, are factors that would be taken into account by such hypothetical persons in arriving at a price that affords evidence of the value of the land at that date. In In Re Bwllfa & Merthyr Dare Steam and Collieries (1891) Ltd and Pontypridd Waterworks Co [1902] 2 KB 135, 141, the principle applied in valuation cases was likened by Vaughan Williams LJ to the ordinary rule for measuring damages for breach of contract, which, his Lordship said, is that the value at the date when the contract ought to have been performed is to be taken into consideration, but not any matters so remote or so uncertain that they are incapable of being measured. Read in the light of the later decision of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, 539, the comparison is reminiscent of the distinction between foresight based on knowledge of 'the ordinary course of things', which is imputed to all contracting parties as reasonable persons, and foresight based on actual knowledge of special circumstances outside the ordinary course of things.

It may have been knowledge of a kind in the first of those two categories that Mahoney JA had in mind in Housing Commission v Falconer when in his reasons in that case he spoke of persons being 'taken to know what an appropriately informed person would know on that date'."

[92]

"47. Section 5A(3) of the Valuation of Land Act 1960 requires a valuer to take into account, where it is relevant, the highest and best use of the land and any potential use. In ISPT Pty Ltd v Melbourne City Council,[76] the Court of Appeal (following the Tribunal decision at first instance) indicated that the role and weight to be given to this factor will turn logically upon other relevant factors disclosed by the evidence. It will not always be necessary to identify a precise highest and best use before considering comparative sales, and the highest and best use may extend to a range of potential uses.

48. Indeed, in business and activity centre zones, there may be mixed use opportunities where different categories of buyers compete for different opportunities, and where the highest and best use is a moveable feast that is effectively the use to which the highest bidder wishes to put the land. It will thus be sufficient in most cases to describe a highest and best use in general terms - for example, intensive retail and mixed use. That sentiment applies here. It is not necessary to go the level of specificity that Mr Jackson articulated - for example, valuation as a sub-regional shopping centre (which was not clearly substantiated here), or valuation consistent with the actual designated use under the approved development plan.

49. In a business and activity centre context, there is also some danger in being too prescriptive as to what the highest and best use might be. To argue that the actual Mirvac development represents the single highest and best use of the land is flawed. The valuation exercise by Mr Milne perhaps demonstrates this. He uses a prescriptive highest and best use of 10,000m2 retail, and 5,500 m2 non-retail (i.e. not dissimilar to the subject site) to derive a site value for the land of $15.3 million - well in excess of the Council valuation. However, Mr Milne bases his valuation on comparative sales for other infill retail/residential development sites at Camberwell and Highett and his opinion of a more optimal development and tenancy mix for the Moonee Ponds land. A very prescriptive highest and best use becomes very sensitive to, and reliant upon, the other assumptions made.

50. The planning framework for the Moonee Ponds land in this case included the possibility of retail, office, hotel and residential development. The land was initially in several parcels, and consolidated into two lots with different attributes. Multiple opportunities existed for development and use. We think in these circumstances, the Council valuer was not obliged to identify a single or precise highest and best use before ascertaining and considering relevant sales of comparable development land." [Emphasis added]

[95]

"61. Counsel for the applicant argued that it was necessary to identify a precise highest and best use for the land being valued before embarking on the process of ascertaining and considering comparable sales.

...

65. In a mixed zone, such as that applicable in central Melbourne, different categories of buyers of land compete for opportunities. Some buyers might seek to maintain land in its present condition and seek a rental return. Other buyers might buy to 'land bank' with a view to selling or developing the land at some future time. Other buyers may seek to develop the land for commercial uses. Yet other buyers may seek to develop the land for residential purposes. The highest and best use in this situation is the use to which the highest bidder wishes to put the land.

...

67. The applicant's submission does not recognise the reality of the marketplace. In my opinion, at least, in the circumstances of this case, it is not necessary to identify a precise highest and best use of the land in order to assess site value. I would add that, if the highest and best use must be ascertained, it might be identified in general terms: such as an intense use for office, residential, hotel, club or retail purposes (or some combination of these); without specifying a single, precise use.

68. I accept that in identifying comparable sales it will be relevant to consider what uses are likely to be most profitable for the subject land and to look for sales of land with similar characteristics in that respect. And if a sale was in respect of land with a different use profile, then it might be disregarded or be accorded less weight. But where realistic options for the development of land might be a residential tower or an office tower, the sale of such land is likely to be relevant even if the actual purchaser had one or other type of development in mind when the land was purchased. (footnotes omitted)

...

93. Assuming that the improvements on the subject land had not been made, I find that the highest and best use of the land was for intensive development with a tower building (of a similar volume to the existing building) and underground car-parking, to be used for either office purposes or residential purposes or institutional purposes or some combination of these.

..."

[112]

"I take the word 'unencumbered'' to qualify the word 'estate'. But for the words 'by any lease, mortgage or other charge' that follow the word 'unencumbered', it would be clear beyond argument that the estate in fee simple spoken of is a 'pure' fee simple: Stephen v Federal Commissioner of Land Tax [1930] HCA 46; (1930) 45 CLR 122 at 144-145 per Dixon, J (with whom Rich, J agreed); Royal Sydney Golf Club v FCT [1955] HCA 13; (1955) 91 CLR 610 at 621-624, Sydney City Council v Valuer General (1956) 1 LGRA 229 at 230 and 234-235; Gollan v Randwick Municipal Council [1961] AC 82, especially at 101; Broken Hill Pty Co Ltd v Valuer General [1970] AC 627; Harry v Valuer General and State of South Australia (1975) 12 SASR 446 especially at 450 (in which the definition used the word 'unencumbered' without qualification); and CSR Ltd v Valuer General (1977) 17 SASR 446 at 450. However, it seems to me that the words 'by any lease, mortgage or other charge' might be said to be restrictive of the type of encumbrances excluded and, in view of the exclusion of the word 'lease' (ie a non-security word), to admit of the possibility that interests or rights such as easements, profits a prendre, restrictive covenants and the like are encumbrances within the contemplation of the definition but are not directed to be disregarded. The second part of that involves the application of the maxim expressio unius, which always requires care. I have earlier noticed an argument based on the words 'other charge' suggested by the appellants in answer to the respondent's reliance upon the presence of the words 'by any lease, mortgage or other charge'. The point is a difficult one and I do not find it necessary to reach a concluded view on it.

...

In support of its second proposition the respondent relied upon definitions in The Oxford English Dictionary and The Macquarie Dictionary showing the principal meaning of 'encumber' to be to hamper or burden, and upon certain authorities. The principal decision was Wallace v Love [1922] HCA 42; (1922) 31 CLR 156, a case concerning the construction of the words 'when and so soon as my estate shall be from all encumbrances ...' in a will. At 164 the majority (Knox, CJ and Starke, J) said:

[114]

In my view, however, a lease, even if favourable to the lessor, does burden the lessor, because it prevents the lessor from having possession or giving vacant possession of the demised land. Here, I consider that the appellants are correct in saying that the word 'unencumbered' has nothing to do with valuation and everything to do with the estate. Because a lease is by the legislation treated similarly to a mortgage and a charge this is, I think, an instance of the especial use in law (of the cognate word 'encumber') referred to by Knox, CJ and Starke, J. As that case shows, the meaning of the word 'unencumbered' depends upon its context. Here, I consider the reference is to the subjection of an estate in fee simple to any of the three listed interests in the land. In saying this I am conscious that Wells J in Harry [v Valuer General and State of South Australia (1975) 12 SASR 446] at 450 expressed the view that the word 'encumber' had not yet acquired a technical meaning and was not yet a true term of art. However, his Honour acknowledged that it was a protean word that took its precise meaning from the particular context. Here the context, textual and historical, warrants, I consider, the meaning I have attributed to the word.

The appellant relied also on District Bank Ltd v Webb [1958] 1 WLR 148, where at 149-150 Danckwerts J expressed the view that a lease was not an encumbrance to the parties within the meaning of a recital in a certain conveyance.[93] But the case is of no real assistance, for, if anything, it proves too much in that the legislation in question presupposes that a lease may (at the least) sometimes be an encumbrance, if not always. His Lordship's view that an encumbrance normally is something in the nature of a mortgage may, as a general proposition, be accepted: this the especial use in law spoken of by Knox CJ and Starke J. I should add that Danckwerts J acknowledged that in certain contexts a lease might be an encumbrance. In Baggett v Meux (1844) 1 Coll 138; 63 ER 355 (affirmed without discussion at this point 1 Ph 627; 41 ER 771) a lease was held to be an encumbrance within the meaning of a document, but, despite my reference to the case, the respondent did not rely upon the case. It turned, I acknowledge, on somewhat special facts. In Commonwealth Bank of Australia v Baranyay [1993] VicRp 43; [1993] 1 VR 589 a lease was treated as an encumbrance, but the legislation in question expressly contemplated this."

[176]

"[111] This means that the valuer will not necessarily take existing rents at their face value. He or she will examine them to ensure that they represent reasonable market rents for the premises concerned in the same way as allegedly comparable sales will be examined to identify any unusual conditions which might affect price. Rents may have been negotiated at a time of buoyant market conditions which do not then and are not likely in the foreseeable future to be maintained. Rents may have been fixed at a time when residential development on which, for example, a shopping centre relies was sparse and where the prospect of substantial increase in rents on lease renewals is high. This is not to value operational aspects of the landlord's business as suggested by counsel for the appellants. It is merely to apply the expertise and judgment of the valuer in assessing what, at the time, a willing purchaser would pay to a vendor willing to sell for a fair price but not desirous to sell the land.

[112] While operational aspects of the landlord's business are not relevant, it does not follow that land such as this will have a static value regardless of its state of development. In the case of a shopping centre, for example, vacant land may be zoned as appropriate for development as a shopping centre. It will be valued according to that potential taking into account the nature and extent of any likely development, the costs of development, the period of development and likely demand for tenancies. Once fully developed or, to use the language of the Act, improved, the market value of the estate of fee simple will change. It will change again once the premises are fully leased. It may change again according to population growth in the area and the construction of a competing shopping centre. These and other factors are matters on which the valuer will bring his expertise to bear in assessing the market value at any given time. While the actual rental income may properly form the basis of the calculation of market value, the valuer will not be bound by that. He or she will need to be satisfied that the actual rental income to be capitalised accurately reflects current market rentals and that it is not artificially generous or unduly burdensome to the landlord under current market conditions. In that sense the valuer is not determining the capital value according to what the particular owner of the estate of fee simple might be able to obtain in the market for the land in that condition at that time and subject to any generous or burdensome rental conditions. As the valuer is essentially, in cases like the present, valuing the right to future income according to market rates, the actual rentals may require discounting or enhancing according to those perceived future trends.

[113] However, there is nothing in the Act which requires that the valuer undertake the entirely artificial exercise of assuming, for the purposes of the valuation, that the premises are vacant when in fact they are not, and that a letting up period must necessarily be assumed and rent concessions offered in order to induce tenants to take up space in the premises. Nor is it necessary to adopt any of the other alternative assumptions discussed earlier in these reasons other than the first, namely that the hypothetical purchaser purchases the land subject to all existing leases and tenancy agreements.

[114] To decide otherwise is to require the Valuer General to value some land, for example, a group of owner-occupied residential premises, at market value and to value the same group, if commonly owned and let out to tenants, at something other than market value. It also requires that the valuation process be divorced from reality and proceed in a manner which is quite artificial and unrealistic. That should be avoided unless clearly required by the language of the Act. Such is the case in situations like that which arose in Beiler v Valuer General,[131] where the Act clearly required the valuation of an estate of fee simple in land which had only ever been and was only ever likely to be the subject of a crown lease. It is also the case where the Act requires the Valuer General to arrive at a site value or unimproved value of improved land where the land could never be sold in that state. Those are undoubtedly artificial exercises. But they are required by the express words of the Act. There is an artificiality in valuing something which does not exist. That is not the same as applying a non-existent or artificial market value to something which does."

[185]

...

3.54 It has already been pointed out that the definitions of improved value and unimproved value both require the valuation of a hypothetical fee simple and this requirement was claimed to result in inequity in the case of lands which were subject to restrictions on title or which were the subject of leasehold interests only. In both of these instances it was said that because the valuation made no allowance for the restriction on title or the limited title of the person rated there was an inequitable sharing of the rate burden.

3.55 An outstanding example of the first class of case was afforded by the submission of Central Chambers Property Co Pty Limited, the owner of a parcel of land in the City of Tamworth which is entirely subject to rights-of-way and cannot be built upon or obstructed. This land was originally valued at the nominal figure of ₤5 but after the company purchased it at auction in 1962 for ₤400 the Valuer General revalued it at ₤3,939 and this was reduced on appeal to ₤3,000. Since the land was revalued, the company has endeavoured to sell it and has even offered it to the Tamworth City Council at the original purchase price but the Council has declined the offer. Other examples of the same problem were found in the submission of the Greater Wollongong City Council and in the case of lands affected by easements granted to or resumed by the Electricity Commission of New South Wales.

3.56 The Real Estate Institute of New South Wales, the Commonwealth Institute of Valuers (New South Wales Division) and some other witnesses, notably Mr H.J. Manning, a valuer of wide experience, suggested that allowance should be made in valuations for restrictions such as easements, rights-of-way and covenants which would detrimentally affect the market value and Mr J. Bruce Brown, the Valuer General of New Zealand, said in his evidence that this procedure had been followed in New Zealand for many years though he agreed that to some extent the valuer was obliged to undertake a difficult task in determining the nature and extent of the restrictions.

3.57 The attention of the Bridge Committee was drawn to the problem of privately owned lanes, rights-of-way and easements which had to be valued as rateable land and in its Report (paragraph 78) pointed out that under the Trumper Park decision (Sydney City Council v Valuer General (1956) 1 LGRA 229) -

[227]

92 Expert planning evidence was led by Challenger and also by the Valuer General. The planning expert relied upon by Challenger was Mr Marco Negri of Contour Consultants Australia, who provided a Town Planning Report, dated December 2009. The Valuer General relied upon the Town Planning Report prepared by Mr Bernard McNamara dated October 2009. Mr Negri, the planning expert relied upon by Challenger, also provided a written response to Mr McNamara's Report, dated March 2010. Both Mr Negri and Mr McNamara are well qualified town planning experts, though it would be fair to say that Mr McNamara has had more extensive experience in the planning, design and development of retail and mixed use projects as a result of 17 years experience as planning manager and later as development and planning manager with the Gandel Group of Companies. In these positions, he was engaged in the acquisition and development of various shopping centres throughout Australia including, for example, Chadstone and Northland. He was also engaged in the development management of projects at various shopping centres, including Roxborough Park, Frankston, Lake Haven (NSW) and Chatswood Chase (NSW). In this respect, reference should also be made to Mr Peter Fitzgerald, a Certified Practising Valuer and, as such, the person appointed under s 13DA(1) of the Act as the valuer responsible for carrying out the 2008 general revaluation for Stonnington. Put more succinctly, and having regard to Mr Fitzgerald's ongoing role, he is the valuer for Stonnington (and was also valuer for its predecessors), and has been employed in that capacity for many years, since 1988. Mr Fitzgerald was not put forward as a planning expert, but given the nature of his appointment and work with Stonnington over many years, weight must be given to his knowledge and understanding of the content, operation and application of the planning scheme or schemes applicable in Stonnington. This is also clearly the position in relation to the development and application of the "Chapel Vision Structure Plan 2007 - 2031" ("Chapel Vision"), the application or applicability of which figured largely in the course of the trial.

[257]

107 The second revision of the NH Architecture plans was produced in January 2009. In May of that year, GTA provided a revised draft Traffic and Transport Impact Assessment,[173] now described as a "draft town planning submission", for the purpose of accompanying the submission for town planning approval of the redevelopment. It was noted in the executive summary to that draft report that the proposal was to be supported by an Integrated Transport Plan and Travel Plan as conditions of the permit granted for the redevelopment to encourage sustainable modes of transport, including walking, cycling, and public transport. On what might be thought to be more on the economic side of considerations inherent in planning a development of this size, in June 2009, Pitney Bowes Business Insight prepared a Trade Area Analysis for the redevelopment of the Jam Factory. This analysis contained a detailed review of the site location, the centre composition, the trade area population, socio-demographic profile, trade area spending and the competitive context. There was also evidence of inter-agency meetings in relation to the redevelopment proposal between at least 22 December 2008 and 21 May 2009 in the form of minutes of a group, which were printed on the letterhead of the Department of Innovation, Industry and Regional Development. The group described itself in the minutes as the "Inter-agency Facilitation Meeting: Jam Factory Redevelopment". The attendees of that meeting include representatives of that Department, an officer of whom also chaired the meetings, together with representatives of NH Architecture, Urbis, GTA Consultants, Stonnington, Public Transport Policy and Planning in the Department of Transport and also the manager of Commercial Property Development in VicTrack. Further, in the minutes of a meeting on 13 March 2009 between Mr Meelan and Mr Moffat of Case Meelan, Project and Development Managers and representatives of Stonnington, GTA and others, it appears that they "introduced the project and confirmed it was proceeding". Consistently with this position, Urbis, in a letter to Challenger dated 30 June 2009, noted key planning issues with respect to the development proposal, the import of the letter being that there was a very strong likelihood the project would receive town planning approval. Some of the more specific comments are also of particular importance in the present context:[174]

[377]

155 Reference was made to the plans for the Challenger proposal developed by NH Architecture which provide for a development which does accommodate the highest and best "uses" to which reference has been made. For example, the NH Architecture Jam Factory redevelopment plans marked "Layout Review", dated 7 December 2007, show the development as including a supermarket, organic supermarket and liquor store, 13 specialty shops, a discount department store, together with loading bays and sundry service areas. These plans also show three groups of specialty or concept stores along Chapel Street together with four clusters of internal specialty stores leading to the department store. The hotel lobby is adjacent a porté cochere off Garden Street with a pedestrian bridge across the rail line to the Clara development. There is also a commercial lobby. Subsequently, a Powerpoint presentation in March 2008 shows the Chapel Street concept stores in almost identical layout as previously, internal specialty stores similarly laid out, the hotel lobby adjacent the porté cochere, with the department store at the eastern end. An escalator joining level one has been inserted. The bridge across the railway line continues to join the Clara development with an alternative location shown and the office lobby moved east of one of the specialty stores. The upper levels include cinemas, the hotel and apartments. The Powerpoint presentation identifies 40,000m2 of retail space, which is almost the same figure in the quantity surveyor's feasibility estimate as at April 2008.[235] The hotel and residential tower height limit as shown in the quantity surveyor's figures coincide with the depiction in the master plan which forms part of the Powerpoint presentation. The quantity surveyor's estimates refer to a hotel having five levels and apartments built between levels 2 and 11, with a plant room on level 12. I accept that, as submitted by Stonnington, the likelihood is that the quantity surveyor's report was prepared in March 2008 to be current in April 2008. These dates coincide with the Powerpoint presentation. In any event, no further plans to the December 2007 plans were discovered and, consequently, it does appear safe to assume that the quantity surveyor's analysis was with respect to those plans.

[382]

159 Challenger submitted that Mr Jackson, the valuer whose evidence it relied upon, and who gave extensive oral evidence, both in chief and in cross-examination, demonstrated an impressive grasp and recall of matters of fact in detail concerning the subject site, comparable sites, and other properties and matters put to him. It was submitted that he is a valuer of high standing and long experience, with particular expertise in the fields that this matter involves. It was further submitted that, despite heavy attacks that the defendants, Challenger and the Valuer General, sought to mount as to his credit, the manner of his presentation of his oral evidence was balanced and reasonable. It was said that, despite the impression to the contrary which was sought to be conveyed, Mr Jackson displayed a repeated willingness to make concessions and acknowledgments. It was said that he answered questions put to him and did so directly, without undue length and argumentation, whilst incorporating in his answers the details and qualifications necessary for an accurate response. It was said that this was in contrast to the evidence of Mr Cundall and Mr Fitzgerald, the valuers relied upon by the Valuer General and Stonnington, respectively. Further, it was submitted that in spite of the attacks made on Mr Jackson, there was no basis for any conclusion that he did not give truthful and accurate evidence. It was said that the closing submissions of Stonnington and the Valuer General alleging to the effect that Mr Jackson did not seek information from Challenger in relation to the Challenger proposal failed to acknowledge his evidence to the effect that the absence of a record in his file leads him to consider that this task, which did occur, had been carried out by other staff in his office, as he initially suggested might be the case. Aspects of the initial objection to the valuation made by Challenger and the initial correspondence between Mr Jackson and Stonnington in relation to that objection, which the evidence indicate that he had prepared and submitted, were put to him. It was said that he accepted that he had made some errors in the preliminary stages and set out how he had prepared his valuation reports for the Court from a "clean start". Additionally, it was said that the remarks in relation to Mr Jackson in Mirvac Funds Ltd v Moonee Valley City Council[239] and in Perpetual Trustee Co Ltd v Valuer General (No 2)[240] were made in the context of particular cases and the circumstances of those cases and would not assist the Court in the present proceedings.

[392]

165 In spite of the fact that the Notice of Objection was dated 26 September 2008, Mr Jackson's evidence was that the objection was "based upon [his] assessment of site value, having regard to the development potential of the land".[245] When questioned in relation to this statement, Mr Jackson said that it was the sort of statement "you would expect to see"[246] and then later acknowledged that this was at a preliminary stage. The documents subpoenaed from Challenger, commence on 31 July 2008 with a series of emails requesting M3, a reference to "M3 Property Strategists" of which Mr Jackson was Director, to review the Stonnington rates notices. In his letter of 6 August 2008, Mr Jackson reported that he had had a long involvement with the property on behalf of the owner, including a review of the 2006 rates. He recorded the percentage changes of the main site and the two car-parks and suggested in light of the magnitude of the increases, that a more detailed review should be undertaken. Accordingly, he requested four pieces of information, namely (1) a tenancy schedule; (2) an outgoings schedule; (3) a copy of the Title search; and (4) any recently issued planning permits in respect of the property. Additionally, he observed that a recent valuation report may contain various aspects of the information he required. The letter of 6 August is apparently the only document in the file of subpoenaed documents, whether by way of letter, email, file note or memorandum that requests information from Challenger or its agents. There was a follow-up email dated 19 September 2008 from Mr Will Barton to Mr Mark Conson of Knight Frank seeking the recent valuation report. Stonnington, in its submissions, drew attention to the fact that the 6 August 2008 letter was 42 days after The Age article in June 2008 containing the public announcement of the Challenger proposal, which included a quite dramatic artist's impression of the extensive Jam Factory redevelopment which was proposed. The Stonnington submissions continued:[247]

[409]

"164. Mr Cundall relies upon the 4:3:2:1 rule. Mr Cundall explained both the rule and how he had applied it at T988-T991. Mr Cundall said that the rule was 'a rule of thumb that valuers can use and I have used it in this case'. He described the rule as one whereby the subject land is notionally divided into four equal parts, and the parts going down the length from the frontage are ascribed the value of the total land in the ratio of 4:3:2:1: T1305.4 - 11. Mr Cundall's evidence is that the rule is a valid tool or rule of thumb to use in respect of valuing the Jam Factory and that he had gained 'some comfort' from it in his adopted values: T1305.26 - 29; T 1306.8 - 10.

165. Mr Cundall's use of the rule is incorrect. First, the rule is now viewed as outdated and of academic interest only: T1306.25 - T 1307.4. Second, the pre-eminent authority on valuation (T1306.11 - 15), Roost and Collins' 'Land Valuation and Compensation in Australia" states that the [sic] in the authors' opinions the proper statement of the 4:3:2:1: rule is that it only ever applied to the first 100 feet of depth from the frontage, and that for the second 100 feet the 9:8:7:6 rule applied: T1307.8 - 17. The Jam Factory site is 218 metres, or well over 600 feet, deep. Third, Roost and Collins state that the rule as formulated would only be valid if supported by analysis of sales in the particular district to which it was being applied. Mr Cundall agreed that he had not undertaken any analysis to assess the applicability of the rule, whether as he asserted it, or as correctly formulated by the learned authors: T1310.2. Fourth, Roost and Collins state that the 4:3:2:1 rule as they state it only applies to inside sites with single frontages to streets: T1310.14 - 16. The Jam Factory is a corner site. Fifth, Roost and Collins state that depth tables may be adjusted to take account of corner sites: T1310.17 - 20. Mr Cundall accepted that he did not make any adjustments: T1310.21 - 23. Fifth Roost and Collins set out several depth tables of notable complexity, used in certain US cities, for corner sites, including the Somers' System and the Zangerle Method: T1310 - T 1311. Mr Cundall accepted that if any depth table were to be used, it should have been a corner based method: T1311.19 - 21.

166. Further, Mr Cundall's use of the 4:3:2:1 rule suffers from even a superficial implausibility. According to Mr Cundall's evidence, the third quarter of the site back from the Chapel Street frontage would be worth twice the value of the last quarter back from the Chapel Street frontage: T1311.28 - 30. It is remarkable that Mr Cundall, an expert valuer, did not immediately realise that this rule was not producing the proper outcome when it resulted in such markedly values [sic] for two virtually identical sites sitting next to other [sic], in the circumstances of the subject site.

167. It is significant that, having accepted that his statement of the 4:3:2:1 rule was incorrect, and that even if had [sic] applied it correctly, that rule did not apply to a corner site, Mr Cundall continued to assert that 'I do have some comfort in regard to how I've done it ... At the present time I'm happy with what happened' (T1321.16 - 17, 19 - 20; T131.27 - 28). It was only after Mr Cundall had answered numerous questions, the effect of each being that he could not take any comfort from his use of his 4:3:2:1 rule with respect to his figure of $3,500 per square metre for the Jam Factory, in a manner that was not entirely responsive, that he finally accepted this proposition to be correct: T1321.26.

168. As noted above, however, in re-examination Mr Cundall then sought to back-flip. First, he asserted that the third quadrant could be analogised to 7-13 Simmons Street: T1398.2.28. Second, in response to the question, referring to Mr Batt's cross examination on the 4:3:2:1 rule, 'is there anything in all that that, in your view, affects the evidence that you have given about the appropriateness of the methodology you adopted, the 4, 3, 2, 1 methodology as a check method', Mr Cundall said 'No. As a check method, Your Honour - whilst I heard and saw exactly what Rost [sic] & Collins said - it's still something that, as you go away from the frontage the value of the property does decrease; so the answers is, no, it hasn't changed my perception'. (t1418.12 - 23).

169. The plaintiffs submit that this answer does Mr Cundall and his evidence generally a disservice. Mr Cundall's misuse of the 4:3:2:1 rule, and continued assertions that he obtained comfort from it for his valuation of the Jam Factory, goes directly to the credibility of his valuation."

[416]

"15. Section 13DC(6) of the Valuation of Land Act 1960 refers to the land parcels being regarded as together forming rateable land and valued accordingly. The valuation of the land parcels as 'together forming rateable land' does not mean that the combined land holding must be valued as a single homogenous site where all parts of the land are necessarily of equal value, or where a common valuation rate per square metre necessarily applies uniformly across the site. The requirement that the land be 'valued accordingly' simply means that the common ownership or occupancy must be taken into account as part of the valuation exercise. Depending on the circumstances, this may attract an adjustment to the overall value.

16. We agree with the respondents that, notwithstanding the land is to be valued as 'together forming rateable land', the configuration of titles existing at the valuation date is still a relevant factor in assessing value, as are potential attributes of the land including its shape, size, situation, aspect and potential use[2]. The land's potential could conceivably include the separate sale, development or use of individual lots, or in some cases the benefits and potential for further consolidation or subdivision. A valuation based on a single integrated development site may often reflect the highest and best use of the land and provide the best evidence of value. But not always. The relevance and weight of various factors influencing value will vary from case to case.

17. It follows that, in valuing the land 'together' for a single rating assessment, relevant parts of the land may still be considered separately as part of the valuation process if this better reflects the underlying value of the land as a whole, and with these parts then aggregated to provide the overall valuation. Indeed, the valuation of a large site by the aggregation of values of individual lots is not uncommon. The fact that the Council's overall site valuation of $11,725,000 here has been reached through an aggregation of the value of individual lots or parts of the land does not of itself undermine the integrity of the valuation.

18. In this case, the smaller Lot 2 fronts Puckle Street, Moonee Ponds - arguably one of Melbourne's prime shopping strips. In our view, the Council valuer was entitled to separately consider this portion of the land, and apply a higher rate of value per square metre, rather than valuing it at a lesser rate as an amorphous part of a larger site. This reflects the fact that this portion existed on a separate title with a different and much higher potential as prime retail floor space. [Emphasis added]"

[523]

245 Fourthly, Mr Jackson's conclusion that Stonnington would require the provision of additional car parking at the Jam Factory site in the event of its redevelopment, by way of a new s 173 Agreement, is not supported by any evidence. It is not even certain that Stonnington or the responsible authority would require the developer of the site to enter into a fresh s 173 Agreement. Mr Jackson and Mr Cundall did consider that would be the case, but Mr McNamara said that not all large developments required such an agreement. It was submitted by the Valuer General that, given Mr McNamara's experience and credentials in town planning and shopping centre developments, his evidence should be preferred. In my view, the position in this respect can only be regarded as speculative. There is an apparent sufficiency of car parking in the area, quite apart from the car parking facilities provided at the Jam Factory site. Additionally, the fact that Stonnington or the responsible authority may require the developer of the Jam Factory site to enter into a fresh s 173 Agreement does not necessarily indicate a situation which would adversely affect the value of the site. First, in the event of significant redevelopment, it would be reasonable to assume that the developer would be as concerned as anyone else to provide adequate car parking facilities for the uses to which the redeveloped site was directed. In the preceding discussion, reference has been made to the car parking requirements for retail, residential and other uses, all of which one would expect to be adequately accommodated. Also, a reading of the present s 173 Agreement reveals that it deals with a number of other matters apart from car parking; such as traffic management measures and closure of Garden Street, paving and lighting at Garden Street, and more machinery or standard matters. For all these reasons, I am of the view that even if it is reasonable to suppose that a fresh s 173 Agreement would be required on redevelopment of the site, there is not, in my opinion, any basis for supposing that it would impose obligations which would materially affect the site. The evidence to date does not suggest this.

[524]

246 My views in relation to the possibility of the requirement of a fresh s 173 Agreement are, in any event, supported by the evidence of both Mr McNamara and Mr Negri, who accepted that the number of car parking spaces required to be provided at the Jam Factory site in any redevelopment would be determined by reference to the type and intensity of uses to be developed at the site. Neither took any purported "wider community" need into account which, in my opinion, is reasonable and appropriate having regard to the evidence considered in the preceding discussion; particularly having regard to the fact that the present s 173 Agreement is not, in my view, properly construed as presently catering or providing for "wider community" need. There is perhaps one reservation in this respect, in that it might be said that the monitoring provisions in sub-clause 7.4 and the corresponding additional car parking provision obligations have been included to avoid creating a "wider community" need for off-street car parking in the event that it was found that the car parking capacity of the Jam Factory as presently developed was insufficient to meet the car parking requirements for its existing retail and entertainment uses. Nevertheless, this is somewhat speculative and, in any event, is not the sort of "wider community" need upon which Mr Jackson is relying as a basis for his opinion. Further, both Mr McNamara and Mr Negri expressed the opinion that Stonnington or the responsible authority would be likely to permit the developer of the site to provide fewer car parking spaces than the site would notionally be required to provide under clause 52.06 of the Planning Scheme, though they did not agree on the precise reduction that would be permitted. It was submitted by the Valuer General that this opinion is consistent with the conclusions of the GTA reports. It was also submitted that Mr McNamara and Mr Negri were right to proceed in this manner, and that Mr Jackson's position on this point misconceives the effect of the relevant provisions of the Planning Scheme. The purpose of clause 52.06 of the Planning Scheme was said to be to require an owner to meet the demand for car parking generated by use or development on site, but not to require an owner to provide car parking so as to enhance other uses. In my opinion, this evidence is to be preferred to Mr Jackson's view which, as indicated, is not supported by evidence nor any analysis in this respect.

[553]

271 Mr Cundall and Mr Fitzgerald were of the opinion that Mr Jackson's 10 per cent adjustment for location was too low because 670 Chapel Street is essentially in a non-retail area of Chapel Street, in marked contrast to the position of the Jam Factory site, which it was said is significantly superior as a retail site. Mr Cundall and Mr Fitzgerald were of the opinion that the Jam Factory has a significant retail presence in a prime part of Chapel Street as compared to 670 Chapel Street, which is at the northern fringe, north of Toorak Road, and does not have as much passing pedestrian traffic. Mr Fitzgerald commented that this northern part of Chapel Street is a "retail location that has to generate its own traffic". This is in marked contrast to the position in the area of Chapel Street in which the Jam Factory site finds itself. Mr Jackson agreed in cross-examination that 670 Chapel Street is at the northern fringe of the Chapel Street shopping district, and experiences significantly less pedestrian traffic than that in the vicinity of the Jam Factory. Further, he was asked whether he was familiar with the shops in the Como building, which is on the corner of Chapel Street and Toorak Road, just south of 670 Chapel Street. He said that he had acted on the Como development for a number of years and accepted that there had been "challenges" in letting out the Como shops, having been asked if there had been significant difficulty in this respect. Mr Jackson said: "One of the challenges is that it is not properly anchored by a major drawcard tenant. The noble idea that in an affluent area you can put a collection of shops together and people will come and shop there without a major attractor is just that, a noble idea".[315] Mr Cundall also saw Toorak Road as a divide and said that: "The site of 670 Chapel Street is in what I would term to be a secondary retail location ... whereas around the subject property it's actually almost the prime retail area. So it is a significant difference between the two sites".[316] Similarly, Mr McNamara gave evidence that until 670 Chapel Street was constructed, the area of Chapel Street north of Toorak Road was "not an attractive retail location".[317]

[587]

It was submitted that when asked about the age of the fit-out of the Village cinemas at Chadstone for the purposes of comparison with the Jam Factory, Mr Cundall admitted he was unaware of the date of the fit-out at Chadstone. Challenger submitted that, relying upon Mr Cundall's emphasis on "the quality of the actual Village cinemas at the Jam Factory", both the locations and quality of the cinemas at Doncaster and Victoria Gardens make those cinemas as relevant for comparable purposes as those at Chadstone and the Rivoli. In terms of comparables, it was also submitted that it was not clear why the Rivoli should be more relevant to the assessment than Victoria Gardens, or why Chadstone should be more relevant than Doncaster, which is a super regional centre, having noted that Mr Cundall, in re-examination, said that he did not consider Victoria Gardens to be comparable to the Jam Factory, commenting: "[p]urely it gets back to location".[329] Finally, Challenger submitted that Mr Cundall, in adopting his market rental of $28 per seat per week for the Jam Factory, did not have regard to whether the resulting occupancy cost of 24.75 per cent was too high. It was submitted that this was significant because Mr Cundall did not express an opinion as to the appropriate occupancy cost for a cinema but, rather, answered by reference to the opinion expressed in the Savills Report. It was submitted by Challenger that, even accepting the figures in the Savills Report, that occupancy cost for cinema complexes should lie within the range of 15 per cent to 25 per cent, Mr Cundall's figure was at the top of that range. Finally, it was submitted that Mr Cundall had made incorrect assumptions about the Village cinemas lease at the Jam Factory in that, as a result of a variation of the lease, there had not been any market review in 2009 but, rather, a CPI review with a ratchet. Mr Cundall was not aware of these terms and did not know that the 2003 market rent review option had not taken place.

Parties

Applicant/Plaintiff:

# Challenger Property Asset Management Pty Ltd & Anor

Respondent/Defendant:

Stonnington City Council & Anor \[2011\] VSC 184

Legislation Cited (88)

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Land Act 1960

Civil and Administrative Tribunal Act 1998

Tax Act 1958

Government Act 1989

Minister Administering National Parks and Wildlife Act 1974

Land Act 1971

Parochial Assessments Act 1836

Practices Act 1974

Environment Act 1987

Minister Administering Parks and Wildlife Act 1974

Land Act 1916

Cases Cited (49)

(2008) 101 SASR 110

(2008) 20 VR 447

(2007) 99 SASR 251

(2006) 95 SASR 338

(1973) 6 SASR 541

(1967) 97 CLR 379

(1991) 24 NSWLR 156

At a glance

Court

Decision date

Before

Source

Judgment (1132 paragraphs)

Parties

Legislation Cited (88)

Cases Cited (49)