Pyntoe Pty Ltd v Valuer-General of NSW

Land and Environment Court (NSW)|2012-10-09|Before: Craig J

Judgment 1Pyntoe Pty Limited and Joseph Gilles (collectively referred to as "Pyntoe") were dissatisfied with the Valuer-General's determination of their objection to the land value of land owned by them at 506 Bunnerong Road, Matraville. They appealed to the Court from that determination pursuant to s 37 of the Valuation of Land Act 1916. On 27 July 2012, their appeal was upheld by Acting Commissioner Cowell (Pyntoe Pty Ltd v Valuer General of NSW [2012] NSWLEC 1201). 2The land value originally determined by the Valuer-General for base date 1 July 2010 was $868,000. By its objection, Pyntoe contended that the correct land value was $641,715. The Acting Commissioner determined the land value at the base date to be $748,250. 3Pyntoe now applies by notice of motion for an order that the costs of the proceedings be paid by the Valuer-General. That order is opposed by the Valuer-General.

The costs discretion 4The making of an order for costs in any proceedings is in the discretion of the Court, subject to the rules: s 98 Civil Procedure Act 2005. While the provisions of Pt 42, r 42.1 of the Uniform Civil Procedure Rules 2005 (the UCPR) would ordinarily require that costs follow the event "unless it appears to the Court that some other order should be made", that rule is overridden by the provisions of the Land and Environment Court Rules 2007 (the LECR) in so far as those rules make specific provision for costs in matters of the present kind: Pt 1, r 1.7 and Sch 2 of the UCPR. 5Part 3, r 3.7 of the LECR applies to an appeal brought pursuant to s 37 of the Valuation of Land Act. Subrule (2) of that rule provides: "(2)The Court is not to make an order for the payment of costs unless the Court considers the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances." 6Subrule (3) identifies circumstances "in which the Court might consider the making of an order for costs to be fair and reasonable". Those circumstances are expressed to be "without limitation", indicating that the particular circumstances identified are not exhaustive of those that may be considered when determining whether the making of an order is fair and reasonable. One circumstance identified in the subrule is that the proceedings involve a question of law or fact or mixed question of fact or law, the determination of which is potentially determinative of the proceedings: subrule (3)(a).

Pyntoe's contentions 7Pyntoe identifies four matters that, it submits, when considered collectively justify the making of the order that it seeks. Those matters are: (i) that it was successful in the appeal; (ii) that it has successfully appealed to the Court on two prior occasions against the Valuer-General's determination of land value for the subject land, being the land values determined for base dates 1 July 2006 and 1 July 2009; (iii) that the proceedings involved the determination of a preliminary question of fact; and (iv) Pyntoe made two offers to resolve the proceedings prior to the hearing, each of which was higher than the land value determined by the Court. 8These issues necessitate some recitation of the material evidence upon which Pyntoe relies.

Earlier proceedings 9An appeal to this Court for the base date of 1 July 2006 was determined by an Acting Commissioner of the Court on 30 December 2008 (Gilles v Valuer General [2008] NSWLEC 1508). The value determined by the Valuer-General for that base date was $740,000; the value for which the applicants contended was $312,975 while the land value determined by the Acting Commissioner was $731,500. As the judgment in that matter makes clear, the only expert evidence led in the proceeding was from two valuers, with the Acting Commissioner left to determine the development potential of the land based upon the planning documents with which he was provided. 10The latter determination was necessary in order to deduce land value for the subject land from comparable sales relied upon by each valuer which were sales of improved land. A reading of the judgment discloses that the approach to analysis of sales adopted by the valuer retained on behalf of Pyntoe was favoured over that adopted by the valuer retained by the Valuer-General. 11The land value determined on appeal for the base date of 1 July 2009 was the sum of $760,000 (Pyntoe Pty Ltd & Gilles v Valuer-General of NSW; Gilles v Valuer-General of NSW [2011] NSWLEC 1207). The land value that had been determined by the Valuer-General was $777,000 while that for which the applicants contended was $700,000. In reaching the conclusion that he did in those proceedings, the Senior Commissioner accepted the town planning evidence led on behalf of the Valuer-General as to the development potential of the land while preferring the valuation analysis by Pyntoe's valuer when applying the development potential identified by the Valuer-General's witness.

Pyntoe's case in the present proceedings 12At the time at which the present appeal was commenced by Pyntoe the land value for which it contended was, as I have earlier indicated, the sum of $641,715. As I have also recorded, the land value assessed by the Valuer-General was $868,000. However, the evidence prepared for the purpose of the hearing showed variation on both sides. The valuer retained by Pyntoe contended that the land value should be determined in the sum of $557,500 while the valuer retained by the Valuer-General indicated in his evidence that the value was $925,000, apparently increased during the course of the hearing to the sum of $1,030,000. However, it was always submitted on behalf of the Valuer-General that the land value determined by the Court should be $868,000. 13In addition to the valuers retained by each party for the purpose of the hearing, a consultant planner was retained by the Valuer-General while an architect was retained by Pyntoe. The purpose of their evidence was to identify the development potential of the land which, in turn, was to be used when deducing a land value derived from sales of comparable properties. 14The judgment of the Acting Commissioner reveals that he preferred the evidence of the consultant planner retained by the Valuer-General when considering the development potential of the site over the evidence given in that regard by Pyntoe's expert (at [24]). Further, it is pertinent to observe that in arriving at his determination of land value, the Acting Commissioner took aspects of the evidence given by each valuer for the purpose of arriving at his conclusion. The process of reasoning of neither valuer, including the manner in which each of them addressed deductions or allowances, was accepted by the Acting Commissioner in its entirety. Aspects of each were either rejected, modified or applied. 15In arriving at the conclusion in the present appeal, the Acting Commissioner identified the land value, before adjustment, as being $925,000 (at [37]). This figure accorded with the evidence initially led on behalf of the Valuer-General. However, adjustments were made to this figure in the sum of $176,750, resulting in the determination of a land value of $748,250. The valuer retained by the Valuer-General had calculated an adjustment of only $83,250 which, if accepted, would have resulted in a figure that was some $26,000 less than the land value of $868,000 originally determined by the Valuer-General. 16It is also to be noticed that the adjustments and allowances made by the Acting Commissioner in the present appeal had not been addressed, in similar terms, in the previous appeals.

Offers of compromise 17By letter dated 11 April 2012, Pyntoe's solicitors wrote to the Crown Solicitor offering to settle the proceedings on the basis that the land value was agreed in the sum of $755,000. The offer was made without prejudice, save as to costs, and was expressed to be made "in accordance with the provisions of Calderbank v Calderbank" a reference to the well known decision in Calderbank v Calderbank [1975] 3 WLR 586. The offer was said to be open for a period of 28 days. 18The letter containing the offer identified the basis upon which the figure of $755,000 was determined. It showed that a gross figure of $905,000 was derived by assuming the development potential of the land to be that indicated in the evidence of the consultant planner retained by the Valuer-General. From that gross figure an "allowance for contingencies" in the sum of $150,000 was deducted, yielding the land value offered of $755,000. 19The offer was not accepted by the Valuer-General. On 30 April 2012, Pyntoe served an Offer of Compromise, indicating that the land value ascribed to the property be the sum of $755,000. The Offer of Compromise was said to be made in accordance with Pt 20, r 20.26 of the UCPR. 20In making this Offer of Compromise, it was apparently overlooked that UCPR r 20.26 was not applicable to proceedings by way of appeal under s 37 of the Valuation of Land Act. The operation of that rule is excluded by r 1.5 and Sch 1 of the UCPR. Nonetheless, it manifested a continuing preparedness on the part of Pyntoe to resolve the proceedings by accepting the nominated sum as the land value.

Consideration 21Pyntoe accepts that Pt 3, r 3.7 of the LECR has the effect that "there would usually be no order as to costs." That is clearly a correct position from which to commence consideration of its application. 22Addressing the general rule under UCPR r 42.1, Young JA (McColl JA concurring) said in Hastings Point Progress Association Inc v Tweed Shire Council (No 3) [2010] NSWCA 39; (2010) 172 LGERA 157 at [18]: "The Rule speaks for itself. However, judicial exposition has noted that it means that a person seeking to displace its prima facie effect must show that there is something out of the ordinary in the case in order to justify the departure; see eg New South Wales v Gebethner [2009] NSWCA 237." 23By parity of reasoning, LECR r 3.7 must be applied according to its terms. It has been described as a presumptive rule. As Spigelman CJ said in Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125, when addressing the similar but not identical rule (at [48]): "The starting point must be the presumptive rule that there will be no order as to costs." When one applies to that observation the reasoning of Young JA in Hastings Point, there must be something "out of the ordinary" in order to justify a finding that it is fair and reasonable to depart from the presumptive rule (New South Wales Golf Club v Valuer-General New South Wales (No 2) [2012] NSWLEC 186 at [14]). 24It is against this approach to the application of r 3.7 that Pyntoe's four grounds, claiming an entitlement to costs, must be considered. In identifying the four grounds, I acknowledge Pyntoe's submission that it is the cumulative effect of matters identified by each ground that is said to justify the making of the order that is sought.

Pyntoe was successful in the proceedings 25As I have earlier recorded, the Acting Commissioner upheld Pyntoe's appeal. However, as Pyntoe recognises, success in the proceedings would not, of itself, take this case out of the ordinary so as to justify the making of an order. It would be most unusual for an unsuccessful applicant to establish an entitlement to an order for costs in the face of the presumptive rule. 26This said, there is a related aspect of Pyntoe's submission as to its success that should be addressed and which is encapsulated by its third contention. It sought to rely upon the provisions of LECR r 3.7(3)(a) to which I have earlier referred. The submission made was that the subrule was relevant to be considered in Pyntoe's favour because the Acting Commissioner had been required to determine a "preliminary matter" in order to determine the land value, namely the hypothetical development that could be undertaken upon the subject land and the adjustments to be made for development costs of comparable properties. 27I do not accept that the subrule to which reference is made is material to the determination of Pyntoe's claim. There is both a contextual reason as well as a factual reason for rejecting Pyntoe's submission. 28First, the subrule is clearly intended to be a reference to the determination of a question, whether of fact, law or mixed fact and law which, when separately determined, is potentially determinative of the proceedings. Further, to engage the subrule, the question must be one that has not involved, when determined, an evaluation of "the merits" of the application. In the sense intended by the rule, there was no "preliminary" matter to the ultimate determination made by the Acting Commissioner. 29As his judgment recognises, the determination of the ultimate question, namely the appropriate land value, involved a reasoning process in two steps (at [10]). Determination of the development potential of the land was integral to and necessary to the assessment of the valuation evidence in order to arrive at a land value. It was part and parcel of the merit assessment and involved a conventional approach to the determination of the value of land zoned for urban purposes. In no way could it be regarded as a preliminary issue in the context of the subrule. 30Secondly, the submission made by Pyntoe implies that the "preliminary" issue was determined in its favour. I am unable to accept that this reflects a fair reading of the Acting Commissioner's decision. As [19] of the judgment makes tolerably clear, the Acting Commissioner accepted the development potential of the land in accordance with the evidence of the consultant retained by the Valuer-General. That finding is made abundantly clear at [24] of the judgment. Moreover, when percentage adjustments were required to be made to values deduced from comparable sales, factors adopted by the Acting Commissioner generally reflected those advanced by the Valuer-General's valuer as opposed to those advanced by Pyntoe's valuer (see [29], [32], [35] and [37]). 31In summary, Pyntoe gains no purchase in advancing its application by reference to r 3.7(3)(a) of the LECR.

Prior appeals have been successful 32As my summary of the decision in the appeals relating to base dates in 2006 and 2009 reveals, Pyntoe has been successful in having the land value determined by the Valuer-General lowered from that for which he contended. That success has been repeated in the present appeal. These appeals have involved successful challenges in three out of five successive years with the consequence, so Pyntoe submits, that it is oppressive for Pyntoe, as a property owner, regularly to bear "the costs of repeated successful challenges". This, so it is further submitted, is a circumstance "out of the ordinary", such that it is fair and reasonable to order the payment of costs. 33In his written submissions, the Valuer-General contends that the determination of land value made in the earlier proceedings to which reference has been made are irrelevant to the exercise of the costs discretion. However, I was left with the impression from the oral submissions of Mr Leggatt SC, who appeared for the Valuer-General, that the essence of the submission was that little weight should attach to the earlier decisions rather than an absolute denial of their relevance. There are a number of bases upon which it is submitted by the Valuer-General that the earlier decisions should receive little or no weight for present purposes. 34The determination of land value is required to be made annually: s 14A of the Valuation of Land Act. That determination is to be made having regard to all facts and circumstances relevant to be considered as at the base date for which the valuation is being made. The land value assessed for one year will not necessarily be the benchmark by which the value is to be determined in a succeeding year or years. The determination for each year is to be approached anew. 35That same position pertains to an appeal made under s 37 of the Valuation of Land Act. Each appeal involves a hearing based upon the evidence led before the Court, that evidence not being confined to the evidence available to and considered by the Valuer-General when making his determination of land value. 36At a level of generality, so much can be accepted. However, both the approach to valuation and the circumstances pertaining at each base date in respect of which appeals were brought before the Court are relevant to be considered. Pyntoe points to the circumstance that in each of the years for which appeals were brought, there had been no significant change to planning controls that would impact differently upon the development potential of the land from year to year. Furthermore, the sales evidence adopted by the Court in each case did not reflect any significant change in the market. The relatively static position that pertained in each year is reflected in the determinations made by the Court demonstrating values within a relatively narrow range: $731,500 for base date 2006; $759,000 for base date 2009 and $748,250 for base date 2010. Of some significance, so Pyntoe submits, is the circumstance that the Valuer-General's assessment for 2010 was $868,000 when the two prior determinations by the Court, particularly that for 2009, had determined the value to be nearly $120,000 less than that figure. 37In submitting that little or no weight should be given to the prior determinations of the Court, the Valuer-General relied upon the decision of Pain J in Meriton Apartments Pty Ltd v Council of the City of Sydney (No 2) [2010] NSWLEC 63; (2010) 174 LGERA 178. Her Honour there dismissed a motion for costs by a successful applicant in Class 1 proceedings, being proceedings to which LECR r 3.7 applied. In seeking an order for costs, the applicant in that case had relied upon the circumstance that the issue raised in the proceedings had been determined favourably to the position that it advocated in two prior judgments of the Court. In giving judgment, her Honour said at [16]: "As submitted by the Council provided that issues of merit that are arguable are raised the Court will be unlikely to award costs against an unsuccessful party. Ultimately each case must depend on its own facts. I consider that this is such a case in relation to the Council's approach, which was supported by evidence and was clearly arguable." 38I do not understand her Honour to be expressing a principle that prior determinations by the Court could not be relevant to the exercise of discretion under LECR r 3.7. That no such principle was intended is apparent from her Honour's observation that "each case must depend on its own facts". The rigid adoption of matters that are said to be excluded from consideration when exercising the costs discretion would be contrary to the observations of Spigelman CJ (Mason P, Beazley, Giles, Ipp JJA agreeing) in Port Stephens Council v Sansom where his Honour said at [75]: "This issue now falls to be determined in the context of the broadly based judgment to be made as to what is 'fair and reasonable' in the particular circumstances. It is wrong, and in my view inconsistent with principle, to impose upon that judgment any kind of presumption or to identify a matter, however expressed, which is determinative of what is 'fair and reasonable' or which, in every circumstance, is entitled to presumptive weight." 39The Valuer-General also submits that when exercising the costs discretion, it is relevant to consider the degree of success relative to the parties' competing contentions as to land value. Reliance is placed upon observations made to this effect by Biscoe J in Maurici v Chief Commissioner of State Revenue (No 8) [2007] NSWLEC 37; (2007) 155 LGERA 115 at [72]. 40The submission so made is supported in the present case by the very fact that for each of the 2006 and 2009 base dates, the determination made by the Court was closer to the value contended for by the Valuer-General than that for which Pyntoe contended. Repeating figures that I have earlier given, for 2006, the Pyntoe contention was for the sum of $312,975; that for which the Valuer-General contended was $740,000 and the value determined by the Court was $731,500. In 2009, the value for which the applicants contended was $700,000; that for which the Valuer-General contended was $777,000 while the Court determined the value to be $759,000. In the present case the value determined by the Court of $748,250 was closer to Pyntoe's value of $641,715 than it was to the Valuer-General's figure which was $868,000. (In identifying the values contended for by the respective parties, I refer to the value for which Pyntoe contended when it lodged its objection with the Valuer-General and the value to which the Valuer-General adhered when determining that objection). 41While the comparative exercise just identified is relevant to the consideration of costs, the fact that Pyntoe was successful in each appeal cannot be ignored. Notwithstanding the values for which Pyntoe contended by way of objection, in each case it successfully discharged the onus imposed upon it by s 40(2) of the Valuation of Land Act to establish that the value determined by the Valuer-General was too high. 42In opposing an order for costs against him, the Valuer-General rightly points to the circumstance that in the present appeal, there were a number of aspects of the determination made by Acting Commissioner Cowell which reflected favourably on the evidence adduced by the Valuer-General. These are matters to which I adverted in [14] and [15]. They are matters that cannot be ignored when considering whether an order for costs in favour of Pyntoe is fair and reasonable. 43So much is acknowledged on behalf of Pyntoe. However, it identifies two points which weigh not only against the significance of the submission put against it in this regard but rather weigh in its favour. First, it submits that notwithstanding elements of evidence found to favour the Valuer-General, considered in its totality, the case made by it was sufficient to discharge the onus to which I have earlier referred, such that it successfully established the Valuer-General's determined value to be too high. The result of the proceedings rather than an adjudication upon an intermediate issue leading to that result is, so it is submitted, the more weighty consideration. 44Secondly, Pyntoe submits that while there may have been some elements of detail within the evidence addressed to the two-step process undertaken by the Acting Commissioner which differed from that considered in the previous decision of the Senior Commissioner when determining the 2009 base date land value, that two-step approach did not alter as between the two cases. There was no material change in the approach to determination of value among all three cases. In particular, there was close correspondence between the approach to the 2009 determination and the approach taken in the present case. Once again, the absence of any material change in circumstance that could logically have a significant effect upon land value as between 2009 and 2010 was relied upon by Pyntoe. There is merit in these submissions. 45In summary, the debate between the parties as to the significance of the earlier decisions and comparison of the results in them with the determination made in the present proceedings is one that I consider to be finely balanced in the context of Pyntoe's application for costs. It is therefore necessary to consider whether that balance is altered when considering the other element of Pyntoe's basis for claiming costs, namely its offer of settlement.

The settlement offer 46As I have earlier recorded, the offer of settlement made by Pyntoe was sent to the Crown Solicitor, acting for the Valuer-General, on 11 April 2012, nearly five weeks before the hearing of the present appeal was fixed to commence. As I have also recorded, the manner in which the sum offered was calculated was also disclosed in the letter of 11 April. There was ample time to reflect upon the terms of the offer and its implications before the hearing commenced. In the result, the sum offered by Pyntoe as the land value of the subject land exceeded that determined by the Court. 47The Valuer-General accepts that where a Calderbank offer is made but not accepted and the offeree achieves a less favourable result from the Court's determination than would have been the case had the offer been accepted, the offer is relevant to the exercise of the costs discretion. However, the fact of the offer does not "automatically bring a different order for costs" (SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 per Giles JA at [37]). His Honour continued: "All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs." 48Pyntoe does not contest this principle as it applies to the circumstances of this case. It accepts that in light of the presumption arising from the provisions of LECR r 3.7(2), an offer of compromise that was "bettered" at the hearing would not lead to a costs order in the usual course of events. However, an offer made well in advance of the hearing which is reasonable but has been rejected is an important circumstance to be considered when determining costs. 49The Valuer-General also relies upon the nature of the proceedings as an administrative appeal involving a merit determination based upon the evidence led before it. No binding precedent is created by that determination so that the decision made for one base date does not compel or even determine the result should an appeal be lodged in the succeeding year or years. 50I accept that submission as reflecting the correct jurisprudential character of decisions made in proceedings of the present kind. However, where, as here, the Court is called upon to determine the land value of the same land for three years out of five successive years, involving no change of significance to matters relevant to the determination of value and employing the same methodology in arriving at that value, an offer to settle falling within the range of prior determinations made by the Court is a matter relevantly bearing upon the exercise of the costs discretion. 51Related to this consideration are the legislative provisions pertaining to mediation and conciliation. The Court is empowered by s 26 of the Civil Procedure Act to order mediation of an appeal brought under s 37 of the Valuation of Land Act, just at it is in respect of other proceedings falling within the Court's jurisdiction. Further, by s 34 of the Land and Environment Court Act 1979, the Court may "arrange" a conciliation conference between parties, presided over by a Commissioner of the Court. That is a procedure almost always required to be undertaken in appeals under s 37 of the Valuation of Land Act. 52Each of the processes of mediation and conciliation impose upon the parties an obligation to participate in good faith in an endeavour to resolve issues, if not the proceedings as a whole. These processes, when employed, are consistent with an expectation that both parties to an appeal under s 37 are prepared to compromise their respective positions as to land value when circumstances justify compromise being made. There is no reason, founded in the legislation or the rules of Court, to consider that the encouragement to resolve proceedings before the Court is any less important or significant in proceedings of the present kind than it is in any other proceedings before the Court. 53Having regard to the terms of the letter of 11 April 2012, I accept that it was a genuine attempt by Pyntoe to resolve the proceedings. This attempt to resolve the proceedings was reinforced by its Offer of Compromise given on 30 April. The circumstance that the offer had no effect under the UCPR did not detract from the fact that its earlier offer was maintained nor did it diminish the opportunity it afforded the Valuer-General to reach a compromise.

Conclusion 54Having weighed the matters I have identified, I have come to the conclusion that the combined effect of the decisions of the Court for the 2006 and 2009 base dates, success in the present appeal and the offer of settlement made by Pyntoe are circumstances rendering it fair and reasonable that the Valuer-General pay Pyntoe's costs of the proceedings. The need for Pyntoe to bear the costs of successfully challenging the determination of the Valuer-General for the third time in five years in the face of an offer that at the time at which it was made and having regard to the subsequent determination made by the Court was eminently reasonable, are factors that in summary inform my decision. None of these factors, considered in isolation, would have been sufficient to reach this conclusion. Cumulatively, they reflect "something out of the ordinary" that justifies departure from the presumptive rule.

Orders 55The orders I make are therefore in the following terms:

The respondent must pay the applicants' costs of the proceedings, including the applicants' costs of their Notice of Motion seeking this order.
Exhibits may be returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 October 2012

(2010) 172 LGERA 157

(2007) 155 LGERA 115

(2010) 174 LGERA 178

(2007) 156 LGERA 125

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