Additional Submissions
30 I turn now to the additional submissions made orally today. Mr M Craig QC, who appeared in this Court for the RTA, submitted that it was an error of principle to use land capable of being used for residential purposes, as being in any way comparable, for the purpose of valuation of open space land. He also submitted that there was no rational basis for the rate of discount of 50 per cent, propounded by Mr Wood, which his Honour somewhat reluctantly adopted and applied.
31 This submission was significantly different from the written submissions. In the normal case, the choice of comparable sales and of a discount rate, gives rise to a question of fact. There may, however, be a legal error involved in the process, and the Appellant relied on this Court's reasoning in Roads & Traffic Authority of NSW v Mosca [2006] 146 LGERA 335 at [60].
32 Mr Craig submitted that residential land cannot be logically used, on any basis, for computation of the market value of the acquired land. Such sales were simply not comparable because the acquired land could not be used for residential purposes. In making this submission, Mr Craig acknowledged that the expert called below by the RTA, Mr Dempsey, had, in accordance with prior practice, also had resort to land capable of residential use as comparable sales.
33 Mr Dempsey said in his written report :
"[45] The most reliable valuation evidence is to apply comparable sales of other land used and zoned open space or lands with a similar use potential essentially having a highest and best use of public recreation.
[46] A less reliable valuation approach is to derive the Market Value of the acquired lands from the sale of lands with a zoning permitting a higher and better use compared to that of the acquired land.
[47] These sales are less reliable because they involve land of a different character particularly in relation to zoning and use potential. Such land is likely to attract a different class of buyer.
[48] If sales of other open space land are unreliable or irrelevant, then one may then use those less reliable sales."
34 He went on to identify what kind of adjustments were appropriate where such "less reliable" sales are used, including the adjustments made for both open space zoning and, as was accepted at the time, for the community land classification.
35 By reason of the fact that much open space land is categorised as community land, there are few and often no relevant transactions of a comparable character. Necessarily resort must be made to the use of comparable sales, which Mr Dempsey identified as "less reliable."
36 The submission made on behalf of the RTA is that Mr Dempsey, along with all the other expert valuation evidence in this and similar cases, was wrong. So that basically not only were such sales, "less reliable", but they were entirely impermissible, indeed, illogical and irrational.
37 In the present case, there was one transaction of the character which Mr Dempsey identified as most reliable, being the sale of a very small parcel of open space land. However, his Honour, after detailed consideration of the nature of that transaction, rejected it. The RTA accepts in this Court that his Honour was entitled to do that.
38 The end result was, the RTA now contends, that the approach adopted, albeit as a second best approach by its own valuer, was impermissible. Accordingly, there was here no evidence before his Honour which could logically, or even rationally, be used for purposes of comparison.
39 The result may be that the Respondent did not discharge its onus in the proceedings below, because no other valuation methodology was propounded. Accordingly, the judicial valuer would have had to conclude that the Respondent had not discharged its onus under s 66 of the Just Terms Act.
40 As the expert evidence of both parties in this case affirms, and numerous other decisions of the Land and Environment Court also indicate, valuation of open space land under the Just Terms Act has often involved comparable sales of properties acquired by councils for open space purposes, which properties had residential zonings or residential uses.
41 These authorities, and the expert evidence in this case, indicate that such evidence has often been given, and that expert valuers, including the expert valuers in this case, have frequently accepted it as appropriate. I am not prepared to overturn such a practice on the basis of submissions from the bar table which are made without any reference to expert evidence.
42 This is a matter with a considerable amount of background in expert valuations decisions in the Land and Environment Court. To seek to thus undermine the whole of this expert evidence, including expert evidence of the valuer called for the RTA in the present case, is, to say the least, a bold course.
43 The submission that sales of residential land cannot logically be regarded as comparable does not in my opinion, actually arise on any of the grounds of appeal, which are quite specifically pleaded. At the outset of the oral hearing in this case, the Appellant was given an opportunity to amend its grounds of appeal, and did not do so. That is sufficient to dispose of this matter. However I think it is, in any event, a submission that should be rejected.
44 The long accepted practice reflected in the expert evidence in this case, identifies, appropriately, that a person who wishes to acquire land for the purpose of open space, is in fact prepared to pay residential values to make such an acquisition. This is an example of the "willing but not anxious purchaser" element of the market valuation test, the traditional test now found in s56(1) of the Just Terms Act.
45 It is the case that the "willing but not anxious seller", element of the hypothetical transaction, requires compensation for the additional value of residential use. However in my opinion, it is at least relevant to look at transactions in which residential land has been acquired for open space purposes, and it is logical to focus on land of that character, for purposes of the relevant analysis, rather than on the full range of residential land transactions, where both the purchaser and vendor have a residential use in mind.
46 I find this to be a relevant source of information but, of course, by reason of the ability of the vendor in the hypothetical sale, to get compensation for the use as a residence, it is not determinative. I see nothing wrong with an approach which accepts the relevance of such transactions, and then proceeds to apply a discount.
47 As the expert evidence in this case manifests, valuers accept the validity of this general approach. In my opinion no basis has been set forth which could establish the proposition that the approach is either illogical or irrational. In valuations, as in computation of damages, a court, relevantly a judicial valuer, must often do the best he or she can with the materials before the Court. That may involve a broad brush.
48 A significant element involved in this process is the element of judgment. Where, as is the case with the valuation of open space land, actual comparable sales are few, an indirect approach is, in my opinion, appropriate. The formulation of a judgment, whether by a valuer giving expert evidence or by the judicial valuer, often calls for a broad judgment to be made, just as the determination of damages requires a broad judgment to be made. This is not a process that can be parsed and analysed with precision.
49 I refer to Mr Craig's submission that the 50 per cent discount adopted in this case, was itself not shown to have any rational basis. The submission was that, in order for a computation of this character to be made, some sort of "analytical valuation methodology" had to appear. There may be occasions on which such a methodology can be identified.
50 Perhaps there may be cases, and there was one suggested to exist on the evidence in the present case, where one could derive something from sales of two blocks of land, which themselves are very similar, but which have some particular difference in their use. For example, one could be used for residential purposes and one not, which may indicate something in the nature of an appropriate discount that could be applied more generally. There may be such evidence of a specific character that is useful. It is not in my opinion necessary to have evidence of that character.
51 Expert valuers acquire the ability to make estimates of this character, on the basis of the whole of their experience. They can make such estimates without needing to rely on specific transactions. That is what both valuers did here. His Honour, as a judge sitting frequently in matters, was entitled to bring the expertise of a judge of the Land and Environment Court to the making of a similar judgment, and to adopt the same approach. I can see no error which raises a question of law in the procedure adopted by his Honour in this respect in the present case.
52 Mr Craig QC drew attention to the fact that Mr Wood approached some of the comparable sales on the basis that they were residential land which was not serviced. In this respect Mr Wood noted in the summary of his approach, given by his Honour, that the sales would require some "upward adjustment on account of the subject land being fully serviced land". Mr Wood did not quantify any such adjustment but it would clearly, as Mr Craig submitted, have informed his overall judgment as to the rate per square metre which he found to be reflected in the comparable sales. Again, I do not see how this arises on any ground of appeal.
53 This particular element in Mr Wood's approach adopted by his Honour may not appear entirely appropriate. However, I find it difficult to characterise it as an issue of principle that would give rise to a question of law. More significantly, I do not interpret Bignold J's judgment to have adopted each of the stepping stones in Mr Wood's analysis. He adopted his general approach. He preferred that approach and eventually accepted it, albeit with reservations. He adopted the final computation, although indicating that he may have been inclined to adopt an even higher valuation. His Honour was entitled to approach the matter of judicial valuation in this matter without adopting each of the specific steps in Mr Wood's analysis.
54 The Appellant also directed attention to a reference in Mr Wood's analysis in which he computed an average rate per square metre with respect to three of a number of sales which happened to be in the same area. Mr Craig referred to authority which suggests that a process of averaging is not consistent with valuation principle. He referred particular to Commonwealth v Milledge (1953) 90 CLR 157 esp at 161.
55 It is by no means clear to me that this reasoning is applicable to the particular use made by Mr Wood of the three specific sales which he averaged in the process of his reasoning. However, I am satisfied that this matter, even if it does raise a question of law, does not arise on any ground of appeal.
56 Accordingly in my opinion the appeal should be dismissed with costs.
57 BEAZLEY JA: I agree.
58 HODGSON JA: I agree.
59 SPIGELMAN CJ: The order is as I have indicated.
**********