Did the primary judge err in rejecting MFI "E"? - Ground of Appeal 4
84 MFI "E" is dated 3 December 2004. It commences by setting out Mr Preston's statement in Exhibit "R", which I have emphasised in [29] above. It then continues in these terms:
"I still adhere to the above view but I omitted in the Joint statement to express a view as to the appropriate discount factor which should be applied to the available sales evidence to take into account the differences between those comparable sales and the subject land.
The comparable sales, which I refer to, are that of the two sales in Trivett Street.
Based on the sales evidence I would adopt a $150 pm² for the subject property as a starting point. However, I now see the need to adjust this rate to be directly comparable based on applying a discount factor.
I have now considered the appropriate discount factor, which should be applied. I consider that the discount factor to be applied is 55% for the following reasons:
· Discount attributable to size, 20%;
· Discount attributable to risk of achieving industrial land value in an acquisition under SREP 31 where SREP 31 is set aside in the resumption process 35%; and
· Total Discount, 55%
The 55% discount factor is a reasonable valuation estimate only, I concede that the exact amount of the discount factor to be applied is ultimately a matter for the Court having regard to the planning evidence and legal issues relating to the operation of SREP 31."
85 At the outset, one can ignore Mr Preston's contention that there should have been a discount attributable to the difference in size of 20%. This is because at Black 1/118 E-F and N-P, Mr Preston gave evidence that his striking a rate of $150/m² for the Trivett Street sales was predicated on size, in that the land the subject of the sales was smaller in size than the 10 hectares of the respondents' land. He further agreed that that differential in size required an adjustment in the use of the sales evidence. There is therefore no doubt that he took the differential in size between the properties the subject of the sales and the respondents' land into account but that he had forgotten that he had given this evidence when he suggested a further discount of 20% attributable to size in MFI "E".
86 The primary judge set out his reasons for the rejection of MFI "E" at [27]-[33] of his judgment. It was tendered on 3 December 2004 at the very end of the hearing. By this stage, the hearing was concluded except for the parties' final addresses. The respondents objected to the admission of this statement upon three grounds. First, the statement was far too late. Second, it involved Mr Preston recanting from his evidence as set out in Exhibit "R" in circumstances where, under the Land and Environment Court's Practice Direction No. 22, a party was not entitled to adduce expert evidence inconsistent with any matter agreed by expert witnesses in a joint report without the leave of the Court. There can be no doubt that, at least inferentially if not expressly, the valuers had agreed in Exhibit "R" that there was no necessity that they provide a discount for risk with respect to the underlying zoning of the respondents' land in the "before" valuation and, according to Mr Preston in his "after" valuation, the highest and best use of the retained land was still for industrial purposes. That was the underlying zoning he accepted without any discount for risk.
87 The third basis upon which the respondents objected to the admission of this evidence was that, if it were admitted, it would require that the whole case be substantially re-examined and possibly re-opened. Moreover, the respondents would need to reconsider their earlier position of abandoning their reliance upon valuation approach (c) (see [13] above) based upon the planning assumption of a change of the existing use of the respondents' land to a higher one, given that that basis of valuation may have exceeded the value based upon the application of SREP 31 if Mr Preston's discount factor was to be applied to his value in Exhibit "R" based on approach (a).
88 It is interesting to note that in advancing its arguments for the admission of MFI "E" into evidence, the appellant contended that it was duty bound to bring Mr Preston's revised opinion to the Court's attention as it had the practical effect of significantly increasing the value of the acquired land from Mr Preston's and, therefore, the appellant's viewpoint based upon the application of SREP 31. This was because on approach (a) Mr Preston had determined that the market value of the acquired land in Exhibit "R" was $59,360 whereas in MFI "E" it increased to $1,618,330.
89 The primary judge set out his reasons for rejecting the tender in [33]. First, he was satisfied that no prejudice would be caused to the appellant's case by not admitting the document into evidence. Second, that prejudice would be caused to the respondents' case if it was admitted, particularly given that there would be a serious dislocation of the hearing, which had, by then, virtually been concluded. Third, that prejudice would be caused to the efficient management and discharge of the Court's business if the deliberately abandoned approach (c) based upon a change in existing use to another higher use had to be re-opened.
90 Having noted that the material did not significantly advance the appellant's case, his Honour observed that the issue of a discount for risk could be legitimately raised by the appellant in its final address (as in fact it was) without the need to rely upon valuation opinion evidence to support any such contention.
91 With regard to that final point, the appellant points to [158] of his Honour's judgment, in which the primary judge turned to the appellant's submission that there should be a significant deduction made to Mr Dobrow's valuation to allow for the risk that the DIPNR, upon acquisition of the respondents' land pursuant to clause 19 of SREP 31, would not pay a price reflecting an underlying industrial zoning. His Honour observed that the submission was "not supported by any valuation evidence" although he noted that had he admitted Mr Preston's belated revision of his valuation into evidence, that revision included an allowance of 35% for such a risk.
92 Accordingly, the appellant submitted, firstly, that MFI "E" would have provided the valuation evidence which his Honour said was not available to support the appellant's submission on the issue of risk. Secondly, the appellant submitted that his Honour's rejection of the need for a discount for risk, being based on the valuers' commonly held position that the two Trivett Street sales were the most comparable sales governed by SREP 31 and were capable of being applied to the respondents' land "by direct comparison", involved a factual error. This was so because, as a consequence of the view expressed by Mr Preston in MFI "E", the two valuers, notwithstanding Exhibit "R", were no longer ad idem on this issue. In other words, they no longer adopted a common position.
93 In my view it is not open to the appellant to rely on his Honour's statement in [158] of his judgment that there was no valuation evidence to support its submission with respect to a discount for risk if his Honour was otherwise entitled to reject MFI "E". The same comment applies to his Honour's rejection of the appellant's contention with respect to risk on the basis of the valuers' commonly held position as set out in Exhibit "R". Accordingly, the appellant must establish that his Honour's discretion to reject MFI "E" in some way miscarried in the sense expounded in House v The King (1936) 55 CLR 499 at 504-505 and, for that purpose, cannot rely ex post facto on the rejected evidence as if it had been admitted in the first place. That would constitute an impermissible "boot straps" argument.
94 It was therefore submitted that his Honour's discretion had miscarried in that, firstly, he allowed extraneous or irrelevant matters to guide or affect him. Such matters included the supposed prejudice to the management of the case if the abandoned issue of value based upon a change in existing use to another higher use had to be reopened, as it was asserted that any such consequence was imaginary. Second, it was argued that it was unreasonable, plainly unjust or substantially wrong for his Honour to have concluded that the rejection of the report would cause "no prejudice" to the appellant's case or that the material in the report "did not significantly advance" that case.
95 With respect to the latter submission, it was contended that, if MFI "E" had been admitted into evidence, it would have provided some evidentiary alternative to Mr Dobrow's unqualified application of the undiscounted rate derived from the Trivett Street comparable sales.
96 It is common ground that in the concurrent evidence of the valuers recorded at Black 1/107-190, Mr Preston never suggested that there should be a discount for risk in applying the Trivett Street sales to the "before" valuation of the respondents' land. At Black 116U, he expressly said that he agreed with Mr Dobrow that those sales were
"probably the best evidence to use in support of the subject property."
97 During the course of their concurrent evidence, the appellant's counsel cross-examined Mr Dobrow. At Black 1/160X-161O it was suggested to Mr Dobrow that even if the DIPNR treated the respondents' land as having an underlying industrial zoning, as a matter of valuation methodology it would have been appropriate to apply a discount to the value derived by reference to at least two factors: the first being the risk that the DIPNR would not view the respondents' land as having that underlying zoning, and the second being the risk involved in the whole administrative and legal process requiring the DIPNR to acquire the respondents' land under clause 19 of SREP 31.
98 Mr Dobrow's response to this question was that even if there were any such risk elements, they were already built into the prices paid by the DIPNR for the land the subject of the two Trivett Street sales. As such, it was unnecessary when applying the analysed rate per square metre of those sales to discount that rate further in respect of the same risks because doing so would, in effect, be to double count. This last part of Mr Dobrow's answer was then challenged upon the basis that whatever the position with respect to the negotiated sales of the two Trivett Street properties, it was still appropriate to apply the risk factor when determining the underlying zoning upon which the DIPNR would be prepared to treat with the respondents with respect to the purchase of their land.
99 Immediately before the luncheon adjournment on 26 November 2004, the respondents' senior counsel referred to the above line of cross-examination, suggesting that it was intended to found a submission that, based on legal and valuation principles, approach (a) was not available for adoption by the Court. Senior counsel then said (at Black 1/166X):
"So if my friend is going to make that submission and Mr Preston is going to make any retraction in regard to the way that he's studied this land, then the matter would have to be reconsidered your Honour."
100 Senior counsel then invited the appellant's counsel to consider his position over lunch and suggested that Mr Preston would have an opportunity think about it as well. The luncheon adjournment was then taken.
101 When the parties returned to Court after the luncheon adjournment, the appellant's counsel informed his Honour (at Black 169) that his submission, at the end of the day, would be that the approach whereby the Trivett Street sales were regarded as directly comparable in respect of the value of the respondents' land was not in accordance with the approach that should be applied in determining the value of that land as a matter of law and valuation methodology. He submitted that that contention was "well and truly out in the open" after his cross-examination of Mr Dobrow.
102 Counsel submitted that the proper approach to the valuation of the respondents' land under SREP 31 was to consider a hypothetical market transaction relating to that land which would be affected by what a purchaser might think about the cost of acquiring clause 19 rights. The determination of the value of those rights involved a question of planning principle and the written evidence of the planning experts went to that question, namely the underlying zoning. There was also the additional question of what the DIPNR would have informed a potential purchaser of the respondents' land who enquired as to the basis upon which it would pay compensation.
103 Although there had not been any joint report from the town planners about the appropriate underlying zoning of the respondents' land because his Honour had already ruled that SREP 31 was the relevant planning control, the appellant's counsel informed his Honour that he was not seeking to entirely discard valuation approach (a). This was because whatever the rate was per square metre that one adopted for the purpose of the argument, such as Mr Preston's 150 m², the appellant's submission would be that Mr Preston had applied the correct approach in considering that far from their being any adverse effect after acquisition, there was an enhancement of value.
104 His Honour then accepted (at Black 1/169 S-T) that in the light of that submission there was no need to invite Mr Preston to recant or reconsider what he had subscribed to in Exhibit "R". However, the primary judge said that would not preclude the appellant, from advancing the submission its counsel had foreshadowed in the course of his cross-examination. Accordingly, no suggestion was made that Mr Preston intended to in any way recant or vary the approach he had adopted in Exhibit "R" by seeking to suggest either that there should be a discount attributable to the risk of achieving industrial land value in an acquisition by the DIPNR under SREP 31 or what that discount factor ought to be.
105 After the conclusion of Mr Dobrow's cross-examination, his Honour asked Mr Preston whether he wished to say anything in response. The primary judge asked him whether he was suggesting that his use and analysis of the Trivett Street sales indicated that those bargains had been struck on a misconceived basis. Mr Preston informed his Honour that the sales were acquisitions under clause 19 and, being lands adjacent to the Wetherill Park Industrial Area, were therefore assessed for compensation on the basis of an industrial zoning. His Honour then asked Mr Preston whether he accepted that they constituted the best market evidence of the value of the respondents' land, given the basis upon which the prices of those sales were struck. Mr Preston responded that he wished for an opportunity to think a little more about that given that those sales did not reflect a value commensurate with the permissible uses under clause 7.3 of SREP 31. However, Mr Preston accepted that they were market transactions, which were the stock-in-trade of a valuer's evidentiary material.
106 His Honour then suggested to Mr Preston that if he had "some qualms" about approach (a), he would be grateful to hear from him as soon as he could resolve those qualms in his own mind, a proposition with which Mr Preston agreed. Nevertheless, it is apparent from the transcript that Mr Preston did respond in a manner which indicated that he had no qualms about the basis upon which he had used the Trivett Street sales in assessing the "before" valuation of the respondents' land.
107 In my opinion, no discernible error of the relevant kind has been demonstrated by the appellant with respect to the reasoning of the primary judge in rejecting the tender of MFI "E". There is no doubt that prior to 3 December 2004, Mr Preston was given more than one opportunity to reconsider his position, particularly in the light of the cross-examination of Mr Dobrow in Mr Preston's presence, and which directly raised with Mr Dobrow the question of a discount for the risk of not obtaining a price from the DIPNR for the respondents' land prior to acquisition based upon an underlying industrial zoning. For all intents and purposes, Mr Preston simply never foreshadowed the need for any such discount prior to the date of MFI "E".
108 Furthermore, in my opinion his Honour was correct when he suggested that there was nothing in MFI "E" that could be regarded as significantly advancing the appellant's case. In particular, Mr Preston did not set out any reasons in MFI "E" as to why he suddenly considered that there should be a discount of 35% attributable to the risk of achieving industrial land value in an acquisition under SREP 31 where the latter was required to be disregarded "in the resumption process". Given the nature of the surrounding land uses, it is difficult to imagine any other possible zoning of the respondents' land other than industrial and no such other zoning was suggested by Mr Preston either in his evidence generally or in MFI "E". Equally, the discount rate of 35% seems to be entirely arbitrary and, again, was not supported by any reasoning process. In fairness to Mr Preston, he noted that it was "a reasonable valuation estimate only", it being ultimately a matter for the Court to determine having regard to the planning evidence and the legal issues relating to the operation of SREP 31.
109 Accordingly, for the foregoing reasons I am of the opinion that there was no miscarriage of the primary judge's discretion in refusing to admit MFI "E" into evidence. I would therefore reject the appellant's submission that his Honour erred in rejecting its tender.
110 On the other hand, even if the primary judge was in error in rejecting MFI "E", it does not necessarily follow that this Court would set aside his Honour's assessment of compensation and would exercise its discretion pursuant to s57(2) of the Land and Environment Court Act 1979 to remit the matter to the Land and Environment Court for further determination. The latter would require the primary judge to consider the weight, if any, he would give to Mr Preston's opinion. In my view it is patently clear from his Honour's judgment that in the circumstances, he would not have acceded to Mr Preston's assertion that a discount for risk should be applied.
111 As a consequence of Part 51 rule 23(1) of the Supreme Court Rules 1970, this Court has no power to order a new trial on the ground of error of law or on any other ground unless it appears that the error has occasioned some substantial wrong or miscarriage. In this respect, the relevant error, to amount to such a miscarriage, must have deprived the successful party of the possibility of a successful outcome. In order to negate that possibility it would be necessary for the Court to find that a properly conducted trial could not have possibly have produced a different result: see generally Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145, 147; Escobar v Spindaleri (1986) 7 NSWLR 51 at 57-58; Peakhurst Inn v Fox [2004] NSWCA 74 at [34]-[35].
112 Although the Land and Environment Court Act 1979 contains no equivalent to Part 5 rule 23(1) of the Supreme Court Rules and, in all respects, remitter may not necessarily be the equivalent of a new trial, this Court nonetheless has a discretion under s57(2) as to whether or not to remit the matter to the Land and Environment Court for further determination when error of law is established. Given the need for finality in litigation and the desire to avoid the hardships of a new trial or even a partial new trial such as might occur on a remitter, I see no reason in principle why this Court should exercise its discretion to remit a matter for determination by the Land and Environment Court unless it is satisfied that the relevant error of law which has been established could reasonably (or possibly) be supposed to have had some influence upon the result: cf Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 per Basten JA at [167]-[168]; Conway v The Queen (2002) 209 CLR 203 at 216 [27], [29].
113 Accordingly, I would favour the view that an order for remitter should only be made if such a remitter could possibly produce a different and more advantageous result for the successful party on the appeal. In the present case, I would not be satisfied in all the circumstances that the admission of MFI "E" could possibly, let alone reasonably, produce a different result in the Land and Environment Court if the matter were remitted to it in order for Mr Preston's evidence as contained in that document to be taken into consideration.
114 Nevertheless, I am of the opinion that no error on the part of the primary judge has been demonstrated in his rejection of MFI "E". It is therefore unnecessary to reach a conclusion as to whether this Court should exercise its discretion under s57(2) of the Land and Environment Court Act 1979 to remit a matter to the Land and Environment Court for redetermination where error of law is established, on the same principles as apply to the ordering of a new trial.