Detlev Peter Roth, Odin Properties Pty Ltd, J A Connolly & Associates Pty Ltd

Roth v Commissioner of State Revenue (Taxation) [2006] VCAT 2536

The respondent's assessment is amended such that it reflects an unencumbered value of the subject property as at 11 February 2005 of $1,400,000.

Mr Foster of counsel instructed by Coadys, solicitors

Mr O'Brien of counsel instructed by the Solicitor to the Commissioner for State Revenue

1 A familiar story in property development underlies the present proceeding. Mr Oman is a professional property developer and investor. He is the sole shareholder in a company called Odin Properties Pty Ltd. In 2003 he joined a group of five other investors - a Ms Connolly who owned a company known as J A Connolly & Associates Pty Ltd, a Mr Detlev Roth (one of the applicants in this proceeding), Mr Stan De Silva, Jean McInerney and Lai Sie Murphy. They decided to carry out one or more property development ventures and incorporated Gamma Properties Pty Ltd appointing it as trustee of the Gamma Property Unit Trust which unit trustee company was intended to be the vehicle through which the venturers would conduct their property development business.

2 They identified a property at 88 Beach Road, Sandringham, as the first property to be developed. On 14 November 2004, Ms Fong of this Tribunal's Planning and Environment List directed the issue of a planning permit for 88 Beach Road, Sandringham, for the construction of alterations and additions to an existing two-storey building used as five dwellings at that address. She directed the inclusion of some fifteen conditions in the permit. This permit was obtained upon the application of Greencape Pty Ltd. She directed a condition that the permit would expire if the development was not started within two years of the date of the permit or if the development was not completed within four years of the date of the permit.

3 In her determination Ms Fong noted that No 88 has a frontage of 19.8 metres with a depth of 47.5 metres giving a site area of 942 square metres. It contained a double-storey block of five flats built in the 1930s.

4 Gamma entered into a contract to purchase No 88 by Contract of Sale dated 14 April 2003 for a price of $1.5M. It bought with the benefit of Bayside City Council Planning Permit No 2001/6901 which was the permit directed to issue by the Tribunal in proceeding P1782/2002. Mr Oman said that at this stage the venturers had carried out the calculations as to the cost of completing the alteration and refurbishment provided for in the permit and the likely sale price of the strata title units which it was intended to offer for sale following the refurbishment concluding that there was a reasonable profit to be had. According to Mr Oman however -

The property market peaked in approximately November 2003. The turn in the market resulted in the proposed development of the Property becoming significantly less viable as the projected sale values on the units to be developed dropped. Accordingly, the initial investors decided to sell the property to preclude the incurring of additional expenses of developing the property in a declining market and also the holding expenses entailed in waiting for the market to turn.

5 The venturers being directors of Gamma met as a Board on 22 January 2004. The Board determined to place the property with the well known estate agent Buxtons (Mr Chris Tulloch) "with advertising for sale in the region of $1.4 million, 60 days' authority, marketing costs in the area of $7500 and a performance based commission".

6 Buxtons produced a colour sale brochure describing the property as "88-89 Beach Road, Hampton". The brochure offered the property for private sale and included a colour photograph of the front of the building and of the nearby Port Phillip Bay looking over the well known Bayside bicycle path. The brochure stated inter alia :

Reap the benefits before you build! Currently home to a solid (and solidly tenanted) 1930s apartment block, this clever property will finance itself while you plan. Perfect for a luxury multi-unit development (STCA), the site comprises over 10,000 sqft (approx) of prime Beach Road land beautifully located half-way between Hampton's latte strip and Sandringham's shopping village. Few sites offer so many recreational opportunities residents can take to the bike path, watch the Zebras train or wander across to the Yacht Club for a quiet drink with the twilight sailors! Whatever your interest, whatever your plans, this great value site is the most potentially rewarding opportunity on Beach Road today! Do the sums, look at the value and then build your dreams.

7 The reference to the "Zebras" is to the fact that the property is opposite the "Trevor Barker Oval" where the Sandringham Football Club (known as the Zebras) train. Even although the Port Phillip Bay seascape and the bike path are depicted, in fact the property does not enjoy sea views and the advertising copy does not in terms claim such a benefit.

8 According to Mr Oman, from 31 January 2004 to 1 May 2004, an extensive advertising campaign was undertaken costing a total of $11,219.10. The highest offer which was received in the form of a signed contract of sale offered a price of $1.4 million. In early March the venturers held a Board meeting to consider this offer. Mr Oman was somewhat reluctant. Nevertheless, by a majority the Board determined to accept the offer. Unknown to it, the very day that the offer was made, it was withdrawn. In fact it seems it had been withdrawn before the Board ever met to consider it.

9 Ultimately the property was withdrawn from sale in December 2004.

10 On 9 March 2004, at a Board meeting, a number of venturers expressed their unease as to the turn that events were taking. The minutes of the meeting recorded that one of the venturers, described as Ted, was particularly concerned -

Ted said he would rather lose 50K now than probably lose more later on. Ted feels the future outlook is grim. We should cut our losses.

12 Mr Oman favoured holding the property for perhaps five years.

13 Once the offer for $1.4 million had fallen away, according to Mr Oman, "the only other offers received in respect of the property were verbal offers ranging between $1.2m and $1.3m, which was below the reserve price set at the time".

14 In December, three of the venturers viz Stan De Silva, Jean McInerney and Lai Sie Murphy wished to opt out. The rationale seems to be that the continuing venturers would purchase their interests for a price which would give a result similar to a sale of the property on the open market for $1.2m.

15 The parties entered into a sale of shares and units agreement to give effect to this arrangement. In accordance with s 80 of the Duties Act 2000 the applicants in the present proceeding lodged what is known as a Land Rich Acquisition statement disclosing an acquisition of a 50% interest in the property by means of acquisition of units in the Gamma Property Unit Trust on 11 February 2005. The unencumbered value of the property was specified as $1.3M. On the basis of this unencumbered value, duty in the sum of $20,976 was paid pursuant to s 84 of the Duties Act 2000.

16 Subsequently, the Commissioner for State Revenue considered that the duty had been unpaid because according to the Valuer General the unencumbered value of the property as at the acquisition date was $1.5m not $1.3m. As a result, an assessment was made on 17 October 2005 for duty of a further $19,864 together with "market interest of $489.54". The total amount said to be due was $20,853.54.

17 The applicants lodged a Notice of Objection dated 15 December 2005 with respect to the assessment which had been issued on 17 October 2005.

18 On 5 April 2006, a delegate of the Commissioner disallowed the objection. At the request of the applicants, the Commissioner referred this matter to the Tribunal for review pursuant to s 106 of the Taxation Administration Act 1997 on 2 June 2006.

19 The scheme of Part 2 of the Duties Act 2000 under the terms of which the relevant statement was lodged is to bring to charge at land conveyance rates transfers of commercial control of underlying land assets which are effected by transfers of shares or units in land owning corporations or unit trusts. Prior to the introduction of this provision and corresponding provisions in the now repealed Stamps Act 1958, tax payers could achieve the commercial effect of transferring land by transferring the shares in a company or units in a unit trust which owned the relevant land with duty charged at the much lower rates applicable to transfers of marketable securities. The duty is charged upon the lodgement of statements required to be lodged in these circumstances pursuant to s 80 of the Act.

20 Section 51 of the Victorian Civil and Administrative Tribunal Act 1998 provides, inter alia :

(1) In exercising its review jurisdiction in respect of a decision, the Tribunal -

(a) has all the functions of the decision-maker; and

(b) has any other functions conferred on the Tribunal by or under the enabling enactment; and

(c) has any functions conferred on the Tribunal by or under this Act, the regulations and the rules.

(2) In determining a proceeding for review of a decision the Tribunal may, by order -

(c) set aside the decision under review and make another decision in substitution for it; or

(d) set aside the decision under review and remit the matter for re-consideration by the decision-maker in accordance with any directions or recommendations of the Tribunal.

21 These provisions derive ultimately from the review jurisdiction granted to the Commonwealth Administrative Appeals Tribunal pursuant to the Administrative Appeals Tribunal Act 1975 of the Commonwealth. They were inherited by this Tribunal as successor to the Victorian Administrative Appeals Tribunal established under the Administrative Appeals Tribunal Act 1984. In Gray Bruni Constructions Pty Ltd v WorkCover Authority [2006] VCAT 1969, I considered the nature of the Tribunal's review jurisdiction. I take the liberty of setting out part of what I there said :

In exercising this merits review jurisdiction the Tribunal reaches its own decision on the merits of the matter before it rather than reviewing the propriety or legality of the decision made by the initial decision-maker. A question for the Tribunal is not whether the decision under review was 'open' to the initial decision-maker as a matter of fact or law but rather what the correct decision upon the material before the Tribunal is. In the famous case of Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577, these principles were laid down by a Full Court of the Federal Court consisting of Bowen CJ, Smithers and Deane JJ. In a joint judgment Bowen CJ and Deane J said:

The function of the Tribunal is, as we have said, an administrative one. It is to review the administrative decision that is under attack before it. In that review, the Tribunal is not restricted to consideration of the questions which are relevant to a judicial determination of whether a discretionary power allowed by a statute has been validly exercised. Except in a case where only one decision can lawfully be made, it is not ordinarily part of the function of a Court either to determine what decision should be made in the exercise of the administrative discretion in a given case or, where a decision has been lawfully made in pursuance of a permissible policy, to adjudicate upon the merits of the decision or the propriety of the policy. That is primarily an administrative rather than a judicial function. It is the function which has been entrusted to the Tribunal.

The question for the determination of the Tribunal is not whether the decision which the decision-maker was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision is the correct or preferable one on the material before the Tribunal.

(1979) 24 ALR 577, 589

It is a commonplace of the Tribunal's review jurisdiction that its duty is to reach the 'correct or preferable' decision on the material before it. Dr Neal, SC and Mr Rozen who appeared for the applicants in these proceedings contended that this was the appropriate way of determining these proceedings. Mr Pizer who appeared for the respondent WorkCover Authority submitted that in the context of the relevant legislation this Tribunal's role was a much more limited one.

22 Hence, it is a commonplace to say that in its review jurisdiction, the Tribunal should reach the "correct or preferable" decision on the material before it. Mr O'Brien, on behalf of the Commissioner, submitted that in the present proceeding, the Tribunal's jurisdiction and functions were more constrained so as to be in the nature of judicial review rather than the provision of a full administrative review. Mr O'Brien relied upon s 111 of the Taxation Administration Act 1997 which governs review applications to the Tribunal under the Duties Act. Since Mr O'Brien's submissions and the responses from Mr Foster, on behalf of the applicants, rely heavily upon the text of the relevant provisions and comparing and contrasting them, it is necessary to quote the statutes at greater length than considerations of literary style would otherwise dictate. Section 111 of the Taxation Administration Act provides :

(1) The Tribunal must review a matter referred to it and, subject to sub-section (2), may confirm, reduce, increase or vary the assessment or decision.

(2) If the taxpayer does not appear before the Tribunal, the Tribunal must confirm the assessment or decision. However, if good cause is shown, the Tribunal, within the time prescribed by the regulations, may re-open and review the matter.

(3) If the matter under review relates to a valuation by the Valuer-General used by the Commissioner in an assessment of land tax, the Tribunal has the same powers with respect to that matter as it has in a review under Part III of the Valuation of Land Act 1960 and the provisions of that Part, with any necessary modifications, apply accordingly.

(4) The powers of the Tribunal under sub-section (3) are in addition to its powers and functions under this Act and the Victorian Civil and Administrative Tribunal Act 1998.

23 The essence of Mr O'Brien's contention was that whilst the Tribunal and certain powers under Part III of the Valuation of Land Act 1960 which were expressly referred to in sub-section (3), those powers were not available in the present proceeding. He said :

This is a Taxation List matter, not a Land Valuation List matter. This is not a land tax case.

24 For the purposes of comparison, I should also set out s 25 of the Valuation of Land Act 1960 stating the Tribunal's powers on a review proceeding under that Act -

(1) On a review or appeal, VCAT or the Court (as the case requires) may -

(a) by order, confirm, increase, reduce or otherwise amend any valuation; and

(2) An appeal to the Court of Appeal from an order of the Court under this section lies only on a question of law.

Note: Section 148 of the Victorian Civil and Administrative Tribunal Act 1998 provides for appeals on a question of law from orders of VCAT.

25 Mr Foster on behalf of the applicant submitted that since the present proceeding related to a valuation by the Valuer General used by the Commissioner, the Tribunal had the powers under the Valuation of Land Act by virtue of s 111(3) of the Taxation Administration Act. Mr O'Brien's contentions on this score seem to be correct. According to its text, s 111(3) applies only where the review application is with respect to "an assessment of land tax". The present is not such a proceeding. I can put aside s 25 of the 1960 Act and s 111(3) of the 1997 Act.

26 Mr O'Brien's submission would have it that the Tribunal's powers in this proceeding derive entirely from s 111 of the 1997 Act to the exclusion of s 51 of the VCAT Act. Assuming without deciding at this stage that Mr O'Brien's contention on this point is correct, it by no means leads to the conclusion that this proceeding is one of judicial review rather than administrative review. The Tribunal does have power in certain circumstances to make orders and determinations by way of judicial review. Section 149B of the Planning and Environment Act 1987 is an example. Where a declaration is made by the Tribunal under s 124 of the VCAT Act to the validity of administrative action, the power is also in the nature of judicial review, rather than administrative review. Where the Tribunal exercises such a power or for that matter where a court does, it does not have to determine whether or not had it been charged with making the decision under attack, it would have decided the same way. Rather, the question is did the person or body making the decision act illegally in making the decision that it did. The grounds for attacking the validity of an administrative decision by way of judicial review are numerous and there may not be a simple exhaustive list which can be quoted. However, grounds would include findings that the decision-maker misdirected himself in law as to some step in the decision-making process or misconceived his function or deprived an interested party of natural justice. In Mr O'Brien's written submissions, he contended that the Tribunal's function here was not to review the issue of valuation generally but rather to determine which of the two postulated valuations - the one carried out on behalf of the Valuer General on the other hand or the one advanced by the applicants' expert witness - was correct. If that were the Tribunal's function in this proceeding, it would not properly be characterised as "judicial review". The characterisation of the Tribunal's function as "judicial review" was made by Mr O'Brien only in oral submission.

27 Division 2 of Part 10 of the Taxation Administration Act 1997 which governs this proceeding deals with "reviews and appeals". The language of the various sections describes proceedings in the Tribunal as "reviews" and those in the Supreme Court as "appeals". There is no doubt that this proceeding is in accordance with the "review" provisions. Why then would one think that Parliament was using that expression to mean anything other than the well known usage of the word to describe an administrative review as analysed in Drakes' case? The Supreme Court hearing a taxation appeal under Division 2 of Part 10 carries out a judicial review and this Tribunal does not.

28 Focussing then solely upon s 111 of the Taxation Administration Act, the words which bestow the Tribunal's powers are quite general in their terms and whilst not identical to those of s 51 of the VCAT Act are to the same general effect. I see no basis for accepting the restriction on the Tribunal's powers postulated by Mr O'Brien.

29 Mr O'Brien noted that the Tribunal's power under s 100 is to review the determination of the Commissioner who made the assessment. Section 100A of the Taxation Administration Act dealing with objections requires the Commissioner where an objection is lodged to refer the matter to "the Valuer General or another competent valuer for valuation of the property". Mr O'Brien stressed that the Tribunal's duty was to review the Commissioner's determination, not the one made by the Valuer General. In my view, these considerations lead to no different conclusion as to the scope of the present proceeding. There is nothing in s 100A of the Taxation Administration Act which requires the Commissioner to accept the valuation. The Commissioner's power is to refer to the Valuer General or to another valuer. It seems unlikely that Parliament intended a valuation made by a purely private valuer not acting under the auspices or on behalf of the Valuer General to be final and binding upon the Commissioner and the taxpayer subject only to a review or appeal. In my view, the Commissioner retains a discretion as to whether or not to accept the valuation provided upon referral. It is that discretion which this Tribunal reviews in a proceeding such as the present.

30 An alternative route to the conclusion of the Tribunal's function in this proceeding is to carry out a full review of the valuation is based on the terms of s 111(1) of the Taxation Administration Act 1997. Accepting for the sake of the argument that the Commissioner is bound by the valuation provided on referral under s 100A of that Act, the Tribunal's powers under s 111(1) enable it to "confirm, reduce, increase or vary the assessment or decision". These powers could be seen as more extensive than those possessed by the Commissioner if he or she is in truth bound to accept the valuation rendered on referral under s 100A and the Tribunal's power to deal generally with the Commissioner's assessment must necessarily carry with it the power to review the valuation upon which such assessment is based.

31 The final question which the present inquiry as to the Tribunal's powers throws up, is the relationship between s 111(1) of the Taxation Administration Act and s 51 of the VCAT Act. The legislative basis for this Tribunal's jurisdiction is to be found in the VCAT Act which establishes the Tribunal and makes basic provision for its structure and procedures and in "enabling enactments" as they are defined in the VCAT Act which bestow jurisdiction on the Tribunal as to various subject matters. Clauses in Schedule 1 make special provision for particular jurisdictions in the Tribunal. Clauses 88 to 91 dealing with hearings under "taxing Acts" (including the Taxation Administration Act 1997) exclude certain of the provisions of the VCAT Act when the Tribunal is exercising jurisdiction under "taxing Acts". Section 51 is not one of the excluded provisions. Section 159 of the VCAT Act provides that if there is an inconsistency between the VCAT Act and an enabling enactment :

The provision of the enabling enactment prevails to the extent of the inconsistency.

32 This is in accordance with the statutory maxim "generalibus specialia derogant" [special things derogate from general things] which might otherwise have operated. Are Section 111(1) of the Taxation Administration Act and s 51 of the VCAT Act inconsistent? One view might be that they both purport to be an exhaustive statement of the Tribunal's powers and functions on hearing a review application and in accordance with established constitutional analysis in the operation of s 109 of the Commonwealth Constitution both purport to "cover the field" and are for that reason inconsistent. If that is the correct analysis, then s 111(1) of the Taxation Administration Act "covers the field" and applies to the exclusion of s 51 of the VCAT Act.

33 In Rumpf v Mornington Peninsula Shire Council [2000] VSC 311; (2000) 2 VR 69, 106 [128]-[132], considering a similar problem as to the relationship between the Tribunal's powers under s 51 of the VCAT Act and certain provisions of the Planning and Environment Act 1987, Balmford J proceeded upon the footing that the two were to be read together presumably creating cumulative powers.

34 In the end I do not have to express a view on this interesting question. Wether the one, the other or both provisions applies, in my view, the Tribunal's function is to carry out a full review of the valuation.

35 Finally, I note that Mr O'Brien placed some emphasis upon the fact that s 110 of the Taxation Administration Act 1997 places a clear onus upon the taxpayer in a review proceeding to prove its case. As I understand his submission, he suggested that this was supportive of the narrow view of the Tribunal's function in this proceeding which he advocated. As a matter of logic, I do not see why this should be so. Section 76(2) of the Transport Accident Act 1986 casts an onus of proof upon a claimant for compensation under that Act relative to claims for entitlement to compensation "during the first 18 months after the transport accident". Yet the existence of that burden of proof has not been regarded as, in any way, modifying the scope of the Tribunal's review jurisdiction under s 77 of the statute beyond in appropriate circumstances simply establishing an onus of proof in the course of the review proceeding.

36 The applicant relied upon expert evidence from Mr Thomas Geoffrey Young, a senior valuer and consultant to Hay Property Consultants Pty Ltd. He provided a report and valuation dated 7 July 2005 which concluded :

We consider the most probable selling range for the property is between $1,100,000 and $1,300,000; our opinion of market value being $1,200,000 ...

37 The acquisition which led to the requirement to file the statement under s 80 of the Duties Act was on 11 February 2005, hence that was the date for valuation and Mr Young provided his report for this purpose. He gave this valuation upon the footing that the planning permit which had previously been directed to issue by the Tribunal had expired. In this report he analysed some three sales which he regarded as comparable, namely, a sale of 386 Beach Road, Beaumaris for $1,003,000 in February 2005; a sale of 51 Fourth Street, Beaumaris for $1,000,000 in November 2004 and a sale of Lot 6, The Close, Beaumaris for $747,500 in February 2005. He analysed the first sale as showing land sold at $1,522.00 per sqm; the second as showing a sale at $747 per sqm and the third as showing a sale price of $1,155.00 per sqm.

38 Mr Young provided a further report dated 15 September 2006 for the purposes of this hearing. In that latter report, he said :

On the day of inspection the existing building was considered dated and in need of renovation. Personal experience suggests that, invariably, the retention of improvements on redevelopment sites often adds to the overall construction costs beyond the costs that would normally apply if the developer starts with a vacant site. This situation does vary depending on the standard of the existing development and the appeal that the resultant development will have in the market. It is our professional opinion that the existing improvements offered no or little added value to the overall value of the site. In the absence of a costing schedule for redevelopment, it has been deemed appropriate to consider the improvements offering no added value and that the valuation should be assessed on a vacant land basis.

39 Mr Young observed that there were no sea views. As to the market generally, Mr Young said :

The residential property market up to late 2003 had experienced a strong increase in capital value across the Melbourne metropolitan area. In 2004 the market had turned and evidence was available that many metropolitan suburbs were beginning to show reductions in value from their peak in 2003. At the end of 2004 many property values across Melbourne had yet to recover to those levels of the peak in the market in the previous calendar year. In 2005 we experienced further increases in value, however not at the same rate as experienced up to late 2003. From December 2005 to today (September 2006) the market in good locations, eg close to the city or bayside locations have continued in their upward movement at levels around 10%.

We believe the subject property also experienced the down turn in the market during the period Oct/Dec 2003 to late 2004 with minimal increases in value up to February 2005. In conclusion we believe the value of the property as noted in our report as at February 2005 can be supported.

40 In his evidence to the Tribunal, he amended his valuation from $1,200,000 to $1,300,000 in light of the fact that contrary to the assumption made in his report, the planning permit had been extended and was still current as at February 2005.

41 In a supplementary report, Mr Young said that in view of the fact that the highest and best use for this property was redevelopment, he disagreed with the use of capitalisation of income as a basis for valuation. Mr Young conceded that his inspection was made only externally. He said however :

Our belief that all or most of the flats had a fair to average presentation commensurate with external areas is supported by the floor plans provided together with views obtained internally through windows plus advice from the owner.

42 In his supplementary report, Mr Young referred to additional sales at 215 Beach Road, Black Rock, in December 2005, for a sale price of $1,005,000 with a permit for redevelopment. He analysed this as entailing a sale at $1,106/sqm assuming that the permit was regarded as having a value of $100,000. He said this was a superior location to the subject property. He also referred to a sale at 219 Beach Road, Black Rock, in March 2006, for a sale price of $1,285,000. He assessed $285,000 as representing the value of improvements leaving $1,000,000 as the price for the land. He analysed this as showing a sale at $1,200/sqm of unimproved land.

43 He referred to a sale at 326 Beach Road, Black Rock, for $1,400,000 which he analysed as representing a sale of $1,478/sqm; and the sale of 340 Beach Road, Black Rock, for $1,553,000 in November 2004 with a permit for town houses. He said this represented a sale for $1,603/sqm. He observed that there was -

Traffic congestion outside the front of the subject property during peak hours with lengthy delays experienced by commuters manoeuvring through the Beach Street, Bridge Street and Hampton Street intersection. In addition, the subject property is located adjoining a car sales yard and in close proximity to other commercial premises. ....

44 Mr Patel of Patel Dore Valuers Pty Ltd carried out the valuation on behalf of the Valuer General on reference from the Commissioner under s 100A of the Taxation Administration Act. He assessed the value on the property as at 11 February 2005 at $1,500,000 which was the basis of the assessment for which review is now sought. Mr Patel observed :

Services and facilities complementing the residential occupation of the property can be found in close proximity including the Sandringham Football Club, parkland, shops in Bay Road and Station Street and private and public schools. Bus services are available along Beach Road and the nearest railway station is the Sandringham Station situated approximately 600 metres south-east of the property.

45 Mr Patel referred to some six "comparable" sales at 133 Beach Road, Sandringham, sold in February 2004 for $920,000. He observed :

The property features views of Port Phillip Bay and rear access from Tennyson Street. The sale represents $2,096,000 p.s.m. for a much smaller site with superior views.

46 Next, he referred to 326 Beach Road, Black Rock, sold in May 2005 for $1,400,000 which he described as -

A development site with unobstructed bay views .... The sale represents $1,478 p.s.m. for a similar sized site with superior views but inferior improvements ....

47 Next, he referred to the sale of 340 Beach Road, Black Road, in November 2004 for $1,553,000. He analysed this as representing a sale for $1,603 p.s.m. "for a similar sized site with a superior outlook and town planning permit". He said there was "no value in improvements".

48 Next, he referred to 333 Beach Road, Black Rock, sold for $1,342,300 in November 2003. He described this as -

A residential development site with excellent bay views. The sale represents $1,575 p.s.m. for a comparable sized allotment with superior views.

He said there was "no value in improvements".

49 Next, he referred to the sale of 386 Beach Road, Beaumaris, for $1,003,000 in February 2005. He described this as -

A vacant residential development site with ocean views over treetops. The sale represents $1,522 p.s.m. for a smaller block with superior outlook but no improvements.

50 Finally, Mr Patel referred to the sale of 28 Beach Road, Beaumaris, for $1,280,000 in September 2004. He commented

Residential development site including a 2 level, solid brick dwelling providing 4 bedrooms plus study accommodation complemented by an inground pool and automatic garage. The dwelling has since been demolished. The site enjoys ocean views over tree tops. The sale represents $1,196 p.s.m. Regarded as inferior.

51 Mr Patel also applied a valuation check method by reference to capitalisation. He judged that the five units in the existing premises were being let at slightly under market. He assessed the market rent at $56,160 per annum. He referred to a sale at 88 Beach Road, Sandringham, for $1,500,000 in April 2003 representing a yield on rental of 3.63%; a sale at 74 Beach Road, Mentone, for $1,950,000 in August 2004 said to represent a yield of 3.50%; a sale at 423 Tooronga Road, Hawthorn East, for $2,710,000 in May 2005 which he analysed as constituting a yield of 3.61%; a sale at 23 Denham Street, Hawthorn, for $1,130,000 said to constitute a yield of 3.95% and the sale at 118-118A Murray Street, Caulfield, for $2,900,000 in February 2004 said to constitute a yield of 3.83%. He capitalized this at a market rate of 3.75% per annum based on market rentals of $56,160 per annum rather than the $54,500 passing rent at the time as purchase of the property in 2003 and reached a figure of $1,500,000 by the check method.

52 Mr Patel said that, in his view, none of the "inland" properties relied upon by Mr Young as comparable sales was properly comparable. He said that once one moved inland from Beach Road, the values fell quite markedly. He disagreed with Mr Young that no allowance should be made for the improvements on the subject land. He said their replacement cost was $855,000. Depreciating them to 30%, he found that they added $256,500 to the value of the property as at the sale in April 2003. He said this represented a rate per square metre of $1,327 including the value of the permit.

53 Mr Patel was critical of the way the marketing campaign was carried out in 2004. He said that it went on for far too long and was calculated to "tarnish" the property. It was necessary he said for matters to be "brought to a head" by the use of an auction or a private tender process. He accepted that those matters apart, the property was well marketed. He was surprised at the relatively disappointing result, in particular that no offer for a sale price of more than $1,400,000 was forthcoming.

54 Mr O'Brien, on behalf of the Commissioner, submitted that either the evidence relative to the outcome of the marketing campaign should be disregarded entirely or, alternatively, it should be given minimal weight. He placed primary reliance on a decision of the High Court of Australia in McDonald v The Deputy Federal Commissioner of Land Tax for New South Wales [1915] HCA 54; (1915) 20 CLR 231. This was an appeal on a question of valuation of rural land for land tax purposes. One of the grounds of appeal against the determination of the primary judge Ferguson J of the Supreme Court of New South Wales was that he had disregarded for the purposes of a valuation of land for the year 1911, a letter written in 1908 on behalf of the vendor offering to sell the property for a price less than the assessed value. Isaacs J who delivered the judgment of the Court on behalf of himself, Powers and Rich JJ rejected this ground of appeal stating :

Apart from the distance of time - three years - it is plain that the mere fact of a statement by an owner to a stranger that he would be willing to sell at a given figure, and that the offer was not accepted, for some reason undisclosed, is no evidence of what the Statute requires, namely, the price which a willing buyer would give, supposing the seller announced reasonable conditions. At most, it is evidence of the owner's bona fide belief at that time as to the value of his land. Nor is the refusal of the person to whom the offer was made to accept it, even if specifically on the ground of excessive amount, any more than an expression of his opinion on the point. [1915] HCA 54; (1915) 20 CLR 231, 237.

It is true that from a logical standpoint, a bona fide offer of £1,000 is just as good evidence the moment before acceptance as the moment after. Why, then, should one be received, and the other rejected? The answer is found in the same principle, namely, the better service to justice on the whole.

When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. Some advantage to justice is therefore manifestly possible from considering it, and the law presumes that up to that point the disadvantages of having to undertake the collateral inquiries as to comparison do not outweigh the possible advantages.

But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer of a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted. [1915] HCA 54; (1915) 20 CLR 231, 239-40.

55 In the second passage, his Honour was dealing with the possibility of evidence relative to an offer to purchase other allegedly comparable land.

56 Mr O'Brien also referred to Hyam - The Law Affecting Valuation of Land in Australia (3rd ed 2004) pp 90-99. In the pages 92-98, the learned author referred to a number of decisions of State Supreme Courts and the Federal Court which have considered the remarks made by Isaacs J in McDonald's case. The effect of the several cases there referred to is that evidence of offers to purchase or sell are not entirely excluded but may be received for certain limited purposes.

57 Mr O'Brien also referred to the celebrated formulation of value adopted by the High Court in Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 to the effect the value must be set by reference to the price which a willing but not anxious vendor might accept and a prudent but not anxious purchaser might offer. Unless a binding contract results the mere offers cannot, he said, constitute what is required for the proper application of that test.

58 In my view, every judicial utterance must be judged not in a vacuum but in its context.

59 The second group of remarks made by Isaacs J are not applicable at all here because his Honour was referring to evidence as to offers relative to pieces of land other than the subject premises. The first passage relates to a very specific set of circumstances, namely, an offer made by the owner himself to sell or at any rate made on his behalf. The evidence that the applicant seeks to rely upon here is not evidence of mere offers but of the total result of a marketing campaign. Suppose in a hypothetical sense, an owner of land had offered it for auction and no bid was received or if the only bid made was by a wiseacre who offered $100 for a property that might have been expected to fetch say $1,000,000, are we to say that this evidence is inadmissible? Needless to say if this evidence were admitted, it would not prove either that the land was worthless or that it was worth $100. In my view, however, it would be an indication which ought properly be brought into consideration. Similarly, here, in my view, the results of the marketing campaign ought be considered. If it were thought that no evidence should be received of offers in a positive sense, one might consider receiving evidence that no offer of $1,500,000 or more was made to purchase the property in the course of the marketing campaign. It would, of course, be sheer sophistry to distinguish between offers and no offers. In my view, I should give consideration to the outcome of the marketing campaign.

60 The fact that this property was purchased for $1,500,000 in 2003 is clearly a relevant matter. I accept the submission made by Mr O'Brien that little or no weight should be given to the fact that the venturers ascribed a value of $1,200,000 to it for the purpose of the buyout of units. The outgoing unit holders could not, in the circumstances, be regarded as "not anxious".

61 This remits us then to the reports by the experts. I accept in general terms that the presentation made by Mr Patel was more generally impressive and more technically accomplished than the one made by Mr Young. Nevertheless, we are ultimately concerned with the value of one unique piece of property on a particular date, namely, 11 February 2005. The extensive comparable sales analysis carried out by Mr Patel is most impressive and convincing. Nevertheless, it fails adequately to explain the limited marketing success obtained by the 2004 marketing campaign.

62 It is perhaps unfortunate that we did not hear any response to the criticisms made of that marketing campaign as to its duration and lack of a process to bring to a head as postulated by Mr Patel. These were not put to Mr Oman in cross-examination nor raised with Mr Young in the course of his cross-examination. The criticisms made by Mr Patel, however, emerged in the course of cross-examination and for that reason, it would appear that Mr O'Brien was not aware that Mr Patel would give this evidence and hence was not aware of any need or desirability in putting that to the applicant's witnesses. For his part, Mr O'Brien was critical of the applicant's failure to call the agent who managed the sale campaign of 2004. That criticism is, I think, to some degree justified. Nevertheless, it must be seen in the context of a proceeding which took an unusual length of time for taxation review applications in this Tribunal, viz, a full two days. Even an applicant who succeeds on every point would recover no costs. (Victorian Civil and Administrative Tribunal Act 1998 clause 91 schedule 1). In these circumstances, an applicant could be forgiven for omitting witnesses in case of doubt rather than considering calling additional ones. The fact remains, however, that Mr Patel agreed it was puzzling why in light of his analysis, there was not a better response to the marketing campaign.

63 The criticism made by Mr Patel of the campaign's failure to bring matters to a head by for instance an auction must be seen in light of the recently enacted sections 39 and 41 of the Sale of Land Act 1962. These sections prohibit the making of vendor bids under the guise of genuine purchaser bids. The provisions increase the risk that a property would be tarnished by an auction where no genuine bidder attended. Mr Oman says the selling agents recommended against an auction.

64 Whilst Mr Patel's view that the "inland" sales relied upon by Mr Young were not comparable, was, I think, justified, the comparability of the sales relied upon by Mr Patel in his report was also open to question. These sales were of sites which had views which the subject property does not. Mr Patel made adjustments but these adjustments may not have been adequate. Moreover, he seems to have made no adjustment at all for the fact that the subject property is located next door to a car yard which he agreed in cross-examination was a distinct negative. Nor am I able to attach much significance to the Unit Trust's accounts valuing the property at $1,500,000. This was the cost of acquisition. Accounting standards would require that the asset be shown at the lower of cost and net realisable value. The failure to write the asset down may be the result of inertia or a reluctance to book an unrealised loss. The entry is not an expert opinion.

65 The result is that I am not satisfied that either group of properties is really comparable. They are both suggestive but do not provide evidence to reach a clear and confident conclusion as to the value of this property at the relevant date. When one considers the results of the marketing campaign, one is forced to the conclusion that whilst Mr Young's valuation is too low, Mr Patel's is too high. What I do know however is that there was an offer to purchase this property for $1,400,000. Mr Oman's evidence gave the impression that this offer was withdrawn almost as soon as it was made. This would raise serious questions as to its bona fides. Reference to the Unit Trust's records however discloses that the offer was made on 1 March but that the unit holders did not vote to accept the offer by majority until the evening of 9 March by which time the offer had been withdrawn. $1,400,000 seems to me to be the fair value in accordance with the principles in Spencer's case to attach to this property as at 11 February 2005 albeit that it was an offer and not sale.

66 Mr O'Brien referred me to the well known authorities which preclude valuation determinations being made by means of averaging out the valuations postulated by competing valuers or taking averages from comparable sales, seeking medians and so forth. As it turns out, $1,400,000 is the arithmetic mean and also the median between competing valuations of $1,300,000 and $1,500,000. I adopt this figure however not on the basis of either of these processes or "splitting" the difference but because having found the allegedly comparable sales not to be an accurate reflexion of the true value of the land in light of the considerations which I have mentioned above relative to views and proximity to commercial premises and also in light of the marketing experience in 2004.