Robert Croft Holdings Pty Ltd v Valuer General

The rationale for applying s 6A(2) to the circumstances in this case

1. In the context of the statutory scheme explained in Olefines LEC and confirmed in Olefines CA, it is necessary for the Court to set out its assessment of the parameters of potential hypothetical development of the Land. The Court has determined that the hypothetical development of the Land, pursuant to the s 6A(1) pathway to identify the highest and best use of the Land, is not feasible. The Court therefore confirms that the s 6A(2) pathway applies to the valuation exercise in this case.
2. It is in the context of the Respondent's contention that there is a theoretical development potential of the Land, based on the evidence of Mr Haskew, the Court reviewed the conflicting evidence on the development prospects of the Land. The Court accepts that, pursuant to s 6A(1) of the Valuation of Land Act, the starting point that is to be assumed is that there are no improvements (in this matter being, essentially, the building) on the Land. However, the land improvement of the level building pads - the excavated base on which the building sits - are present. Those were Mr Haskew's starting assumptions. It was from that point that the Court considered the range of difficulties confronting any hypothetical redevelopment of the Land.
3. In short, the Court determined that the Applicant's town planner Mr Le Bas' evidence is more persuasive than Mr Haskew's evidence. As a consequence, the hypothetical development of the Land which Mr Haskew envisaged as possible is, in the Court's view, highly improbable. Being highly improbable, it cannot be accepted as a feasible "highest and best" use of the Land. On the basis that the Respondent's valuer Mr Hill relied upon Mr Haskew's assessment over that of Mr Le Bas, the Court must consider Mr Hill's valuation evidence in that context, being a more "optimistic" approach to the potential hypothetical development of the Land - an approach which the Court rejects.
4. The Court has determined that the Respondent has failed to rebut the Applicant's case, in the exercise of determining whether the appropriate valuation pathway is s 6A(1) alone or with s 6A(2) applied and that a potential hypothetical new development on the Land would not meet the "highest and best" use status as Mr Haskew envisaged it. Once the Court reached the conclusion that there are a sufficient number of NSLEP and NSDCP control "hurdles", together with other relevant considerations, to make potential new development (to the extent envisaged by Mr Haskew) improbable, then the current improvements on the Land - the existing use development of the extant apartment building - come into focus. Those improvements come into focus, not on the basis that they are actually there in a "bricks and mortar" sense and actually valued as such, but rather in the sense that they could hypothetically be there, with all consent requirements in place, thereby confirming what the potential highest and best use of the Land is for valuation purposes.
5. The Court has concluded that the Land is highly constrained by reason of its physical location, sitting as it is on a coastal rock platform with no effective setback from the Neutral Bay harbour. Pursuant to cl 6.9(4) of the NSLEP the Land is partially (noting that the evidence of Mr Le Bas, at Ex 1 p 47, implied it was wholly within that area) within the "foreshore area" which is defined to mean the land between the foreshore building line and the mean high water mark of the nearest natural waterbody (Neutral Bay) shown on the "Foreshore Building Line Map". Pursuant to cl 6.9(2), consent must not be granted for development on land in the foreshore area except for the following purposes: "(a) the extension, alteration or rebuilding of an existing building wholly or partly in the foreshore area; (b) the erection of a building in the foreshore area, if the levels, depth or other exceptional features of the site make it appropriate to do so; (c) boat sheds, sea retaining walls, wharves, slipways, jetties, waterway access stairs, swimming pools, fences, cycleways, walking trails, picnic facilities or other recreation facilities (outdoors). In addition, by virtue of clause 6.9(3) of NSLEP, consent must not be granted under clause 6.9(2) unless the consent authority is satisfied, among other things, that the development will contribute to achieving the objectives for the zone in which the land is located, that the appearance of any proposed structure, from both the waterway and adjacent foreshore areas, will be compatible with the surrounding area, and that the development will not cause environmental harm of any of the kinds specified in the clause."
6. In short, by reason of the Land's difficult location, contextually defined by its physical natural setting, the planning constraints which consequently apply to the Land are accepted by the Court as severely limiting the highest and best use of the Land. In this regard, the Court accepts the evidence of Mr Le Bas as being far more realistic than that of Mr Haskew.
7. Drawing from the evidence placed before the Court and from its own observations during the Court's view of the Land and its locale, factors which have influenced the Court's assessment that the Land is severely limited in its development potential include the following: 1. Accepting that better access to and parking space for the Land is required, the Court considers it highly improbable that a land swap, to secure better access and parking spaces, between the Applicant and the Council would be achieved. In this regard, the experience of the Applicant, as demonstrated by the paper trail in Ex A, is likely to be indicative of a future response if another attempt was to be made. Many, potentially all, of the negative assessments set out in the Council email of 23 December 2010 to Mr Le Bas, would remain potential issues likely to be raised again. The Court considers that many of these expressed concerns (albeit informal and not formally tested) have considerable strength. 2. The Court considers it highly improbable that access from the neighbouring property's elevated driveway, to create an intersecting new driveway to the Land via an engineered mid-air bridge, would be achievable. The owners and occupiers of the neighbouring property would seek to oppose any compromise of their own access or potential degrading of their current amenity. 3. Despite there being a statutory pathway available (s 88K of the Conveyancing Act) to a person to secure an easement-of-way over neighbouring property, the discretionary factors that are considered with such an application would, in this case, weigh against the grant, with no guarantee of success. In the Court's opinion, a refusal would be a more likely outcome. The "necessity" for access which would have to be proved would be rebutted by the fact that the extant apartment building has been there for decades and could continue. A proposal to replace the current apartments, giving rise to the easement application, would be seen as a commercial choice. 4. Visual amenity considerations, both from the Neutral Bay harbour and from the neighbouring property, would strongly weigh against a rooftop parking facility being approved pursuant to a range of planning policies. 5. Safety considerations would be relevant considerations at both the intersection of elevated mid-air driveways and on top of the hypothetical new building. Such safety concerns could well deny development approval. 6. Mr Haskew's assessment of alternatives to on-site parking, including alleged ease of access to public transport and car sharing options, were, in the Court's opinion, optimistically over-stated. Assessing the distances, topography and general accessibility, the location of the Land is not such that it could be presumed that waiver of all parking provision would be readily accepted by a consent authority. 7. Current access via a steeply sloping, potentially slippery and potentially poor visibility pedestrian pathway gives rise to serious safety issues for normal ingress and egress to the Land. 8. Such access problems would be exacerbated for any delivery of materials beyond lightweight easily transportable objects. The disadvantages for furnishing, let alone redevelopment, would, by any measure, be problematical and a serious disadvantage of the Land. 9. The safety issues highlighted in (7) and (8) above are highly likely to be even more significant in times of emergency, such as fire in any building constructed on the Land, or if a coastal scrub fire were to occur. Given the Land abuts a public reserve, coastal scrub fires would conceivably not be an unreal possibility. 10. By reason of the locational issues, the range of potential occupants of both the current apartments and any potential redevelopment would be severely limited, excluding the elderly, the infirm, the disabled and those with very young children. This would limit the market of the current apartments and potentially any hypothetical redevelopment. 11. The nearest access point to a road, reached only via the steep pedestrian pathway across the public reserve, is at a road bend or corner of Ben Boyd Road, a corner currently kept clear of parking presumably due to traffic management reasons directed at safety. 12. Given the narrowness and steepness of access to the Land via the pedestrian pathway across the Council reserve, the Court considers the construction of a new building would most probably be dependent upon awkward and, most likely, expensive modes of construction. Conceivably, construction might be reliant upon barges to bring building materials to the site and perhaps a floating pontoon from which the construction works would be conducted, however the abutting rocky platform may be a serious obstacle. Whether such coastal access would be allowed, on a prolonged basis, might be questionable. 13. Given that Ben Boyd Road itself is not wide, that it curves and slopes, and that the very point at which access via the reserve might conceivably be gained to the Land is at the main bend in the road, an alternative thought of an overhead crane, (to assist in the delivery of building materials to the site), being located on, and partially blocking, the road at that location with the requisite approval is improbable. 14. Approval for construction vehicles and areas to deposit and store building materials could be difficult given the narrowness of Ben Boyd Road, and the nearest point to the access path being on a bend, currently free of kerbside parking. Given the inaccessibility of the Land from the road, the construction of a new development would necessarily be significantly more difficult and most likely be significantly prolonged compared to a more accessible site. Conceivably, approval sought pursuant to an application (Ex 2, referred to in [14] above) might be refused. 15. Finally, although the Land abuts the coast, it lacks direct access to the water, with no pier or mooring, being separated from the water by a rocky platform, subject to tidal variations.
8. In reaching its conclusion that a hypothetical redevelopment of the Land would not constitute the highest and best use of the Land, the Court found Mr Le Bas' conclusion in his individual planning report (Ex 1, p 69) to be persuasive. In particular, I refer to the following paragraphs: "A present use may well be, and often is, the highest and best use. That is, in my view, more than likely to be the case here, in light of the fact that there are formidable constraints on future development of the Ben Boyd Road site. The author of the Haskew report assumes that a development with an increased yield (vis-à-vis the yield of the existing development) would be likely to be acceptable to the consent authority, despite the exceedance of the controls and inconsistency with objectives contained in NSLEP and the NSDCP, In our view, such an assumption or expectation is quite unrealistic in light of the practical and legal effect of the numerable constraints imposed both by the site itself, and NSLEP, NSDCP and the relevant State Policies. In addition, I simply cannot accept the assertion of the author of the Haskew report that it would seem to be the case that an even larger floor plate and a larger yield than existing is realistically achievable, based on the various controls in NSDCP, including parking, additional excavation, dwelling mix, building envelope, desirable roof form, potential loss of affordable housing, amenity impacts and view impacts to and from the site. My opinion is reinforced by way of considerations relating to the heritage provisions in the NSLEP."
9. It follows that the Court prefers the evidence of Mr Le Bas, when assessing the potential of an elevated bridge being built from nearby private apartments up on Ben Boyd Road, or across the public Council reserve. In both instances, the potential obtaining of consent is implausible. The Court observed, during the site view, the current elevated access ramp to basement parking at the neighbouring apartments. It foresees great resistance to any thought of an intersecting sky bridge being approved from that neighbouring ramp, bridging the adjoining Council reserve, to reach the rooftop of a hypothetical new development on the Land. Apart from the conflict with a number of relevant current planning principles identified by Mr Le Bas, the Court considers that it can be anticipated that such a proposal would be strenuously opposed by persons in nearby properties, especially from the occupants of the very apartments that Mr Haskew suggested might grant access. The potential of visual intrusion of rooftop parking in an area where the views to Neutral Bay would be cherished, means that strong opposition is realistically to be anticipated. Accordingly, the Court rejects Mr Haskew's evidence in this regard as being unrealistic, and so thereby accepts in preference Mr Le Bas' evidence.
10. The Court does not agree with one element of Mr Le Bas' analysis: the Court does not believe that the "potential loss of affordable housing" is a relevant factor in the valuation exercise in this case. The current provision of affordable housing might be a consequence of the physical disadvantages of the Land, perhaps by way of a default occupancy, but it is not in the Court's view an attribute that contributes to the current apartment building being the highest and best use of the Land. It may be a fact that as a consequence of difficult accessibility the market appeal of the extant apartments may be limited (as excluding the elderly, the very young, the disabled and those with a car dependency), affordable housing is consequently provided by default, but the hypothetical reinstatement of the apartments is to assume that it is the highest and best use of the Land, irrespective of the status of its current occupancy.
11. Whilst acknowledging the more limited market as a consequence of the access issues, s 6A(2)(b) contemplates that improvements may be made "to enable the land to continue to be so used". So, given the high aesthetic amenity of being located on Neutral Bay, the Court should assume the Applicant will over time avail himself of the opportunity to upgrade the existing apartments. Rather than allowing the apartments to fall into disrepair and potentially become unusable, it is expected that a process of internal renewal will occur. Such improvements may lead to gentrification of the accommodation available, leading to a more "upmarket" occupant willing to pay more. These improvements would add value to what would, alternatively, be a deteriorating asset. As will be seen later at [115]-[116], this aspect of likely upgrade of the apartments should be accepted as a valuation "uplift" factor.
12. Accordingly, for the reasons summarised in [87] above, and generally on the evidence of Mr Le Bas, the Court has dismissed the Respondent's contention that the s 6A(1) pathway is available as the appropriate means of valuing the Land. Contrary to the opinion expressed by Mr Haskew, pursuing the s 6A(1) course would arrive at an inferior hypothetical use and potential development of the Land than that capable of being identified pursuant to the s 6A(2) pathway, being the hypothetical reinstatement of the current apartment building with its present yield of six two-bedroom flats.
13. In short, if the Court were to proceed on the hypothetical basis that all improvements to the Land had not been made, and then consider what the NSLEP and other relevant planning controls and policies would allow to be hypothetically developed on the Land, the potential outcome, in the Court's opinion, would be significantly less than that which currently exists on the Land. Therefore this is a case where in determining the land value of the Land it shall be assumed that "the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates". That is the appropriate course allowed by s 6A(2) and it is notwithstanding anything in s 6A(1).
14. Although the current improvements on the Land merely comprise an older style three-storey brick residential flat building providing "affordable housing" (as described by Mr Le Bas), nestled on to a mere current 130 m2 footprint, landlocked by the water on one side and a steep Council reserve on the only abuttal providing access, that development evidently enjoys historical development consent and remains in place by virtue of its extant entitlements. Although the full range of potential non-compliances of the current building with the current planning controls were not explored (being unnecessary to explore due to the "protection" available for the hypothetical reinstatement per s 6A(2)), it was clear that any alternative hypothetical development would be severely restrained, being required to comply with all present-day standards and controls.
15. The concerns expressed by Mr Haskew summarised at [38]-[39] above do not arise, as the hypothetical alternatives of the potential development envisaged by Mr Haskew or a "hole in the ground" are not the options left available by a proper application of s 6A. Section 6A(2) negates Mr Haskew's "hole in the ground" proposition. If Mr Haskew's assessment was accepted by the Court, then the highest and best use of the Land would be its potential redevelopment; however with that having been dismissed as not being feasibly achievable, as the Court has found, then the highest and best use is that offered by s 6A(2) - the hypothetical continuation of the current use - the old apartment block. The whole exercise being undertaken is one dealing with hypothetical alternatives - a hypothetical new development which can be shown to be the highest and best potential use of the Land, or failing that being feasible, the hypothetical reinstatement of the current use of the Land, if the Court so judges it to be the highest and best potential use of the Land. For valuation purposes, an unusable void is never one of the hypothetical options.
16. In such circumstances, the Court presumes, based on Mr Le Bas' analysis of the various relevant planning provisions, that if the current apartment building had to hypothetically gain current day approval, it too would similarly run the gauntlet of planning provisions which would either deny it approval or alternatively, see it hypothetically reinstated as a more constrained and lesser development. Accordingly, it is appropriate to treat the existing building as having existing use rights to have had it developed to its current form. It therefore constitutes the highest and best use of the Land and thereby confirms to the Court, as judicial valuer, that it is appropriate to traverse the s 6A(2) pathway to determine the value of the Land. It is in order to arrive at that hypothetical end point, without more being required, as s 6A(2) does not require the current building to "run the gauntlet of planning provisions" as the words "may be continued" in s 6A(2)(b) proceeds by way of an assumption. As I explained in Olefines LEC at [123], "[t]he assumption necessarily contains within it an acceptance that all necessary approvals have been obtained and that nothing more is required in order to accept that the existing use with necessary improvements upon the land may continue".

Valuation determination

1. The evidence of Mr Hill, the expert valuer retained by the Respondent, was primarily prepared with reference to s 6A(1) of the Valuation of Land Act (Ex 1, pp 128, and 168). He had regard to the joint report of the town planners, in which he extracted the GFA calculations adopted by the planners. In particular, he based his calculations on a GFA for a four storey apartment building of 719 m2 GFA. Working with that figure, Mr Hill proceeded on two bases: first, described as the primary valuation, being based on a hypothetical four storey residential development without on-site car parking provision; and secondly, the secondary valuation, based on a three storey residential development with rooftop car parking.
2. As summarised earlier at [66]-[67], in response to Mr Rennie's approach relying on s 6A(2), in the valuers' joint report (Ex 1, p 168) Mr Hill provided an alternative valuation calculation on the assumption that the Court might consider s 6A(2) applied. He applied the GFA rate of $3,750/m2 which he had derived from the comparable sales evidence. Mr Hill then applied two 10% uplift factors, one on the basis that the extant apartment building had all its approvals in place, presumably on the basis that an approved development avoids all the uncertainties of a still-to-be-approved development. The second uplift factor was due to the GFA for the current apartment building only having a GFA of 390 m2, expressing the view that a smaller GFA delivers economies of scale, lesser risks and more market participants. The Court rejects Mr Hill's second uplift factor, being of the view that despite the smaller GFA, the access and parking issues associated with the Land severely limits the range of market participants. Whether it is warranted to provide a 10% uplift for the certainty which follows from the hypothetical reinstatement of the apartment building, having all its approvals in place, will be considered below in [121].

Comparable Sales

1. Whilst acknowledging that the Land is a uniquely difficult site to be valued due its peculiar locational circumstances with numerous inherently negative factors, being land-locked with extremely difficult access issues, the Court sympathised with the valuers' efforts to identify sales of other properties that might be considered relevant and helpful to the valuation exercise. Unfortunately, the Court gained limited assistance from the sales examined by the valuers.
2. As earlier described at [55] and [64] the Court was presented with just four comparable sales. With due respect to the valuers, the Court considers all four sites proffered as comparables to be bordering on being unhelpful given the wildly different circumstances of each property compared to the Land resulting in the necessity for somewhat extreme adjustments. The extrapolation exercise that each valuer applied to the sales data, in order to render the sales comparable, pushed the limits of that which might be considered relevant or useful evidence.

Sale 1 - Lower Spofforth Walk

1. The Court has decided that Sale 1, at 1a Lower Spofforth Walk, Mosman, was the closest to a sale that could be considered comparable, albeit there were highly material differences. Although the Court has somewhat reluctantly accepted this property as an admissible comparable sale, it arrived at that conclusion with difficulty. In the Court's opinion, Sale 1 was a somewhat anomalous property, almost uniquely different, as the Land is, from other properties. Despite the Court deciding to rely on this sale, it does so with hesitation considering that conclusions derived from an analysis of it are somewhat unreliable. In the absence of more reliable comparable sales, perhaps the old adage that "beggars can't be choosers" is apt.
2. The Court largely agrees with the Respondent's list of inferior factors set out earlier at [73] with respect to this Sale 1 compared with the Land. The differences between the Court and Mr Hill are that, although Sale 1 is in a bushfire protection zone and so can be assumed to be in a risky location as far as fire is concerned, the location of the Land would present real fire-escape route problems for occupants of the apartment building should a fire break out (unless they leapt into the Neutral Bay harbour). Secondly, insofar as access for potential redevelopment, the extreme difficulties of both sites is probably on par, rather than the Land being "significantly superior" to that at Sale 1 as argued by the Respondent.
3. The fact that the Sale 1 site fetched the price that it did is extraordinary and, in the Court's view, was not satisfactorily explained. The Court queried the valuers during the view whether they had any information as to the purchaser, such as whether one or other of the adjoining landowners, with established homes, had purchased the property as a garden or bush block extension. No such information was forthcoming. As an elaboration of the sixth negative point listed by the Respondent, the Court formed the view that it was inconceivable that access would be allowed to the Spofforth block across the public nature reserve abutting its lower boundary, being a mature and obviously nurtured fern gully through which a bubbling brook meandered. Signage by a "Friends" group inviting volunteers to help maintain the gully, confirmed to the Court that there would probably be effective objection preventing the gully being traversed for, say, six months while that block was developed. In short, Sale 1 is probably an exceptional and peculiar sale which is so dissimilar to the Land, that if the Court were presented with further, truly comparable, options that sale would not be relied upon as a comparable sale. Sadly, the Court was not presented with reliable options.
4. Based on Sale 1 Mr Hill arrived at an adjusted GFA rate compared to the Land of $4,403/m2. He arrived at that figure by increasing the GFA per square metre for Sale 1 on its sale date of $3,364/m2 by 20% to arrive at a comparative GFA rate for valuing the Land.

Sale 2 - 17 Glenferrie Ave, Cremorne

1. The Court considered this property was so dissimilar to the Land, that it was of minimal relevance and unhelpful for the valuation exercise. It is true that it had no on-site parking available and was only accessible via a long pedestrian pathway, but thereafter any remote similarity ended. The Sale 2 property was improved by an older-style single two-storey free-standing dwelling, giving the feel of a picturesque "Granny flat" in someone's attractive well-kept backyard. It was quaint and on its modest garden allotment, offers a quiet and secluded lifestyle which would appeal to many in a niche market. The access pathway was pleasantly landscaped, with clear visibility adjoining, as it did, a landscaped verge, a safe and comparatively gently sloping access way - bearing no relationship to the difficult approach to the Land. Kerbside parking on Glenferrie Avenue was apparently plentiful, in contradistinction to the situation on Ben Boyd Road with the Land.
2. The Court has concluded that it is inconceivable that the Sale 2 site would ever be considered as a potential development site offering a highest and best use better than the current dwelling. Accordingly, all the issues of comparable access and restraints upon development would not arise as considerations in the comparative exercise of comparing property to property. This property would most probably be valued pursuant to the s 6A(2) pathway, with the existing dwelling being deemed to be hypothetically reinstated in order to determine its highest and best potential use.
3. Mr Hill concluded that in order to reach comparability a 50% negative adjustment on the sale price of Sale 2 to reach a GFA figure for the Land was required. Extreme adjustments are undesirable. In short, the Court agrees with Mr Rennie's assessment (at Ex 1, p 171), that Sale 2 is not comparable and so does not assist the valuation exercise.

Sale 3 - 41 Churchill Cres, Cammeray

1. The Court considered that Sale 3 could barely be considered comparable to the Land. Sale 3 was followed by the demolition of an older-style house and its replacement with an architecturally stylish dual occupancy. The starkly different aspect of Sale 3 to the Land was the ease of access to it from Churchill Crescent. With a standard-width suburban street and a level camber, access for development purposes is directly from the street. Although the block sharply slopes down to the bushland at its rear, the construction would have been very significantly easier to manage from the street (compared to any conceivable development mode that might be contemplated on the Land), as the Sale 3 site provides ample construction access and storage at surface. Once built, access to the garages of both dual occupancies has been directly from the street on a level plane. Easily accessible, safe for all manner of occupants, and clearly visible easy access for all purposes is a starkly different situation to accessing any prospective development or the extant apartments at the Land.
2. The Court had a number of concerns with the adjustments applied by Mr Hill to Sale 3. For instance, a 10% upward adjustment to the sale was made because the Land had the land improvement of an extant flat building pad to facilitate development, whereas Sale 3 was a sloping block. The fact that the Land's building pad is well-nigh inaccessible compared to Sale 3 having direct road abuttal at a level plane from the street, would seem to the Court to render any upward adjustment due to the building pad unwarranted, indeed the adjustment should have been in the opposite direction. However Mr Hill did provide a 40% downward adjustment on Sale 3 for parking and access, to make it more comparable to the Land.
3. Secondly, Mr Hill considered the differential location between the site of Sale 3 and the Land warranted a 20% uplift in favour of the Land because it has water frontage. Mr Rennie, whilst acknowledging Sale 3 had "elevated superior views", nevertheless felt it was an "inferior non-direct waterfront location" (Ex 1, p 176). Although the Court accepts that views to Neutral Bay would generally be considered superb, given the activity and vibrancy in the viewscape, Mr Hill's description of the Sale 3 site as simply being a "bushland reserve" underplays that there would be significant market appeal of uninterrupted views across and through the abutting bushland reserve to the small coastal inlet known as Willoughby Bay, which leads to Long Bay. With Willoughby Bay being within the immediate viewscape of Sale 3, graced by moored boats, all part of Middle Harbour, with longer uninterrupted distance views to Primrose Park to the right and bushland reserve on the other side of the Bay, an effective discount of 20% compared to the Neutral Bay viewscape is not accepted by the Court - 5%, or 10% at best, might be warranted.
4. Concluding the Court's analysis of the valuers' evidence on Sale 3, the Court is concerned that the number and degree of adjustments required to be made to Sale 3 in order to try and reach comparable status were too numerous and too extreme. Although both valuers believed Sale 3 provided a reasonable comparison, the Court remained concerned as to the reliability of such evidence. Accordingly, the Court will not rely on it.

Sale 4 - 1 Alan Street, Cammeray

1. Sale 4 was a property introduced into the comparable sales exercise by Mr Rennie. The evidence in relation to this sale has been briefly summarised earlier at [60]-[61]. This property had been sold eight months before the relevant date. The Court has had real difficulty in accepting this property as a relevant comparable sale. The Court was told that at the time of purchase the property had a single dwelling upon it and that dwelling was demolished and replaced with a new development comprising two up-market duplex residences.
2. In the Court's opinion the site differences between the Land and the Sale 4 property were so stark that it was fair to question whether there is any utility in its being accepted as a comparable sale. The site of Sale 4 is on a street corner with excellent access from its frontage and sideage, in a somewhat standard suburban residential setting. Construction of any new development would appear to be simple. Once built, access to both the new duplex residences, whether by foot or by vehicle, is simple and safe at a level plane, with clear visibility, directly onto the abutting public streets. Save that the Sale 4 site sloped from rear to front and provided open and long distant views across a valley to bushland, there were in the Court's opinion no similar considerations enabling the Court to rationalise any comparability. The Sale 4 property was so dissimilar in circumstances to the Land, there could be no doubt that the highest and best use of Sale 4 would be a straightforward s 6A(1) valuation exercise.
3. Due to the extreme differences in characteristics, requiring, for instance, a massive deduction to allow for the ease of access for construction and subsequent liveability, but then a relatively massive increase to allow for the superb views from the Land and more interesting harbourside setting of the Land, compared to the relatively bland distant bush views across the valley in front of the Sale 4 property, the Court considers that Mr Rennie's adjustments were unrealistic. In conclusion, like the proverbial "swings and roundabouts", as required adjustments both downwards and upwards would be relatively extreme, the Court finds Sale 4 to be an unreliable sale proffered on the basis that it was said to be comparable. Consequently, the Court does not rely on Sale 4.

Valuation uplift factor

1. With s 6A(2) being applicable, the Court has proceeded on the basis that the current apartments remain. However, as earlier stated at [91], the Court has concluded that the potential, indeed necessity in order to remain in use, of the extant apartments to be upgraded over time, being modernised, probably with an eye to appealing to a higher rental market, is a realistic expectation. Accordingly, this is a case where s 6A(2)(b) will apply allowing the owner of the Land to modify and make improvements in order to enable the existing land use to continue to be so used. Consequently, the current apartments hypothetically remaining does not mean that they will remain static, falling into disrepair or even falling foul of modern occupancy standards which might over time be required to be met.
2. So with the Court accepting that the highest and best use of the Land is that of the extant apartments hypothetically remaining in situ, the Court concurrently anticipates that improvements will, hypothetically, occur over time. Such potential upgrades represent a relevant uplift factor in determining the value of the highest and best use. Determining what such an uplift factor might be will depend upon the circumstances in each case. Given that the access and parking issues will always severely blight the Land, it is quite possible an owner might over-capitalise in carrying out improvements. Accordingly, in this case the Court determines that the uplift factor will be modest, estimated at 5%.
3. The Court accepts that the location of the Land is superb on many bases, save for the huge disadvantage of exceedingly poor access. Without a doubt, the waterfront views from the Land across Neutral Bay harbour are delightful which in most circumstances would be promoted by land vendors as being views to "kill for". The amenity of residential living graced with such waterfront views, by any measure, would add value. Absolute waterfrontage, with no possibility of being built out, further adds to the "perpetual" value of these locational characteristics, albeit in this instance without actual water access. Compared to the Sale 1 property, the views are starkly different, however the Court accepts that there would be many in the Australian community who would treasure views into a secluded mature fern gully, a true window into the bush at close quarters. Add to that the prospect of filtered views through tree canopies of Mosman Bay from the Sale 1 property, there can be no doubt that such a viewscape has value, albeit appealing to a different niche market. Without the special closeness of the Sale 1 property's abutting fern gully, the Court would have made a 20% adjustment upwards to take into account the Land's views of Neutral Bay harbour, however in the circumstances, the Court considers that a 10% upward adjustment is sufficient.
4. Another factor "informing" the valuation exercise, in the Court's opinion, are issues regarding access to the Land which do, and will forever, blight the Land. The steeply sloping pedestrian path across a Council reserve, by any measure, is a severe disadvantage. One only needs to reflect on the difficulty of carrying anything other than a suitcase into the flats currently built on the Land, to understand the degree of disadvantage. Throw in considerations of potentially poor illumination during the darker winter months and inclement weather that may render the pathway potentially unsafe in wet conditions, especially if one is carrying anything cumbersome. Further, the fact that the walk by foot from the high elevation of Ben Boyd Road, might not commence from the couple of public on-street parking spaces nearest to the access footpath (which are not adjacent in any event), but rather may be some considerable distance further away, is to be considered. Further, the Land is clearly within a neighbourhood where parking on the street is at a premium, with the occupants of many properties, or visitors, or service people, in competition for the few available spaces.
5. There is another related negative impact on the Land's value due to the severe limitation on access: market appeal. The access difficulties would limit the range of potential occupants who might consider living in the extant apartments. Considering the range of potential occupants of the hypothetically reinstated extant apartments, the Land is clearly inappropriate for very young children, being partially built onto the rock platform at the actual water edge. The narrow sloping path, potentially slippery and unsafe in wet weather, would clearly be a serious disadvantage for the elderly and the disabled. Further, the total absence of parking provision on-site, together with the exceedingly few spaces competitively available on Ben Boyd Road, would be a strong disincentive for any occupants that have a car or might require one.
6. Comparing the various facets of access disadvantages of the Land, as just described in [118] and [119] above to the Sale 1 property, although the Court is challenged to treat Sale 1 as anything other than an anomalous sale, nevertheless for the purposes of the exercise the Court must consider the prospect of development and occupancy of the Land compared to the development and occupancy of the Sale 1 property. With the s 6A(2) pathway to valuation determined to be applicable, the hypothetical reinstatement of the apartment building brings with it all the negatives of the current access arrangements, but knowledge that the owner will not actually have to redevelop it in a real world sense. However, with the Sale 1 property, inconceivable as it may be to envisage it being developed, the Court nevertheless must presume some comparative effort. On this basis, the difficulties of both sites are virtually on par, with the Sale 1 property being marginally worse off. Accordingly, the Court determines that a minimal uplift is appropriate to account for the Land being marginally better. Consequently, the uplift factor is deemed to be a mere 2.5%.
7. Finally, should the Court adopt Mr Hill's approach and add a 10% uplift due to the s 6A(2) pathway providing a certain outcome? Presumably the avoided uncertainties are those that relate to a DA and its associated costs, which would, in normal circumstances, be incurred. As said earlier by reference to the Olefines judgments, the hypothetical reinstatement of the apartment building on the Land assumes all approvals are in place. In the circumstances of this case, the Court has determined that the highest and best use of the Land is simply identified by the hypothetical reinstatement of extant improvements. In Olefines LEC the applicant company failed in its efforts to have the potential DA costs of rehabilitating contaminated land taken into account as part of a s 6A(2) valuation exercise, in circumstances where it was seeking to have the assessed valuation lowered because of the financial burden it said it would face. The Court ruled that those hypothetical DA costs of development should not be taken into account as the s 6A(2) exercise involved a hypothetical reinstatement of the Olefines improvements, the petrochemical plant, with all necessary approvals in place. Now in this case the Respondent, via Mr Hill's proposition, is saying that the Land under the s 6A(2) scenario should have an increment of 10% added to the value of the Land by reason of the avoidance of the costs and uncertainties of a DA application. However, the hypothetical reinstatement of the improvements, the extant apartments, with all approvals such as a DA in place, still remains nothing more than an artificial exercise for the purposes of determining the highest and best use of the Land for valuation purposes. In such circumstances, Mr Hill's 10% uplift proposal would introduce a "real world" component to a purely hypothetical exercise seeking to identify the underlying value. Mr Hill's 10% uplift proposition is rejected.

COURT'S CALCULATION OF VALUE

1. At par 58 of the joint valuers' report (Ex 1, p 172) the valuers agreed that for determining the most appropriate valuation it is necessary to utilise the zoned or approved GFA or the equivalent FSR of the Land and each comparable sale relied upon. On the basis that the Court has decided that the s 6A(2) pathway provides the means to identify the highest and best use of the Land for the valuation calculation, the extant apartment building on the Land has a GFA of 390 m2, a figure agreed by the experts. With that GFA agreed, the derived dollars per square metre for the Land is to be multiplied by 390. So the next step is to arrive at an adjusted square metre value for the Land.
2. Mr Hill, having arrived at $3,750 m2 on the basis of his analysis of the comparable sales, then argued that it was reasonable to add a 20% uplift (as described earlier at [97]) arriving at $4,500/m2 for the purposes of the s 6A(2) calculation. So with 390 m2 GFA multiplied by $4,500/m2, Mr Hill arrived at $1,755,000, some $355,000 above the valuation figure sought by the Applicant in his Class 3 application.
3. Mr Rennie at par 42 of the valuers' joint report (Ex 1 p 169), submitted that he disagreed with Mr Hill's 20% uplift. Without the 20% uplift, the value of the Land would be $1,462,000, using Mr Hill's derived dollars per square metre figure. Mr Rennie was of the view that Mr Hill's 20% upward adjustment for the s 6A(2) pathway could not be supported by reference to the sales evidence.
4. The Court, in the context of a dearth of useful comparable sales, has concluded (albeit subject to the misgivings already expressed) that the Sale 1 Lower Spofforth Walk, property is the most usable sale. The dollars per square metre of GFA for that property as at the 2015 valuation was $3,669/m2. Mr Hill then applied various adjustments, set out in his own valuation report (Ex 1 pp 143-44) to arrive at an adjusted sale GFA rate for the Sale 1 property of $4,403/m2, representing a 20% uplift for comparability.
5. As the Court has decided that s 6A(2) is the appropriate pathway, Mr Hill's negative adjustment of 20% for the GFA differential between the Sale 1 property and the Land is no longer applicable and the 10% positive adjustment because the Land had a better building pad is also irrelevant as the extant apartments are deemed to hypothetically be reinstated. Mr Hill's 10% uplift for better road access at the Land compared to the Sale 1 site is considered excessive, as although Ben Boyd Road abuts the access pathway, it is the aggregate access issues which blight the Land. The Court will apply a mere 2.5% uplift. As for Mr Hill's assessment that the shape of the Sale 1 property is worse than that of the Land, thereby warranting a 10% uplift, the Court rejects that the Site 1 pan-handle access path is any worse than the steep pedestrian pathway down to the Land - they are as bad as each other. The Court agrees with Mr Hill's first two adjustments, one for land status (the Land being a harbourside site) requiring a 20% uplift on Sale 1 and the other for location, Sale 1 being a Mosman, address requiring a 20% downward adjustment to accord with the Land. As these two adjustments cancel each other out, the comparison on these points is moot. The Court agrees that there must be a 10% uplift for the better views at the Land, although it was said that the Sale 1 site could achieve filtered views of Mosman Bay through the tall trees growing in the adjoining gully reserve.
6. The Court is of the view that inherent in the s 6A(2) pathway is a consideration of further improvements being allowed pursuant to (b) - "that such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used". The capacity to improve the Land, perhaps to renovate the older-style apartments so as to bring them up to modern standards of living, must logically be an opportunity that has value. If old apartments are not improved they may fall into disrepair or deteriorate to a condition where, conceivably, they might not be able to continue to be so used as apartments. This ability to improve must be an attribute of the Land which adds value to the Land. Logically, the highest and best use of the Land must be well-maintained apartments, continuously improved, as required, in order to ensure that they do not fall into disrepair but also to remain as viable apartments within the marketplace. Although not addressed by the parties, as judicial valuer, I consider that a 5% uplift would be reasonable to allow for such further improvements to the extant apartments.
7. So, the Court's calculation, in summary, with each figure rounded up or down as considered appropriate, is as follows. $3,669/m2 - being dollars per square metre GFA for Sale 1 at the base date, uplifted by 10% for better views at the Land compared to the Sale 1 site, uplifted by 5% for the inevitable s 6A(2)(b) contemplated improvements to ensure the apartments can continue to be so used uplifted by 2.5% for better access at the Land over the Sale 1 site, resulting in a $4,311/m2 adjusted figure as at the base date, multiplied by 390/m2 GFA at the Land Derived value = $1,681,290
8. As the Court's calculation of the value of the Land is $1,681,290, which is a mere $1,290 above the Respondent's assessed value of the Land on the base date for the 2015 valuation, the Court will round it down to $1,680,000 so as to precisely accord with the assessed value. Accordingly, the Applicant has failed to satisfy the onus that the Respondent's valuation should be disturbed.

Difference between Respondent's unimproved land value and the issued land value

1. The Court has concluded that the Respondent's issued land value of $1,680,000 is correct and so, in accordance with s 40(1)(a) it is confirmed. However, there remains a discrepancy between that confirmed land value and that which the Respondent contended at the hearing, on the basis of the evidence of Mr Haskew and Mr Hill, which was $2,700,000. The Respondent, at par 5 of its submissions, advised the Court that it was "content for the Court to simply affirm the issued land value" however, in its closing paragraph, par 39, submitted that the Court should "determine that the land value of the Land as at the 1 July 2015 base date was $2,700,000". As stated earlier at [78], the Court is concerned to simply leave this issue on the basis of the Respondent being content with the lower figure.
2. It is conceivable, without the Court expressing its conclusions regarding the higher $2,700,000 figure, that the Respondent at its next valuation date would simply leap forward to the higher valuation on the basis that its case before this Court had "succeeded". That scenario would be a misunderstanding of the outcome and would, in the Court's view, result in an unjust situation for the Applicant. In these proceedings, the Applicant has simply failed to satisfy the onus of proving his case that the issued land value should be revoked. However, the Court has concluded, on the basis of the evidence before it as analysed above, that had the Respondent pushed harder for a judgment that the higher assessment of $2,700,000 was correct, the Respondent would have failed to establish that proposition.
3. As is clear from the Court's analysis of the evidence and examination of the issues earlier in this judgment, the Court is not satisfied that the higher figure of $2,700,000 was ever sustainable as being the unimproved land value. Although the Applicant has failed to disturb the Respondent's issued land value, the Court is nevertheless of the view that there is sound reason why the case put by the Respondent in support of that higher figure ought to be rejected. The Court has reached a number of conclusions which, as explained above, are contrary to those deposed of in Mr Haskew's evidence, finding itself more in accord with that deposed by Mr Le Bas. Accordingly, the Court formally concludes that the issued land value of $1,680,000 was correct as at the 2015 valuation and that the figure of $2,700,000 was never appropriate.

ORDERS

1. At the conclusion of the hearing on 29 June 2018, the Court made the following orders, whilst confirming that the judgment was reserved: 1. The Applicant's appeal be dismissed. 2. In accordance with s 40(1)(a), the Valuer General's issued land value as at the July 2015 base date of $1,680,000 not be disturbed, therefore it is confirmed. 3. There will be no order as to costs.

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: 23 November 2018