TRUST COMPANY OF AUSTRALIA LTD v THE VALUER-GENERAL

Land and Environment Court Act 1979 Land and Income Tax Assessment Act 1895 Land Tax Assessment Act 1910-1924 Land Tax Assessment Act 1910-1926 Valuation of Land (Land Value) Amendment Act 1983 LEGISLATION CITED: Valuation of Land (Rating and Valuation) Amendment Act 1978 Valuation of Land (Rating and Valuation) Amendment Act 1981 Valuation of Land (Rating) Amendment Act 1989 Valuation of Land Act 1916 Valuation of Land Amendment Act 2000 Valuation of Land and Local Government (Amendment) Act 1959 Valuation of Land and Local Government (Further Amendment) Act 1961

Accident Towing & Advisory Committee v Combined Motor Industries Pty Ltd [1987] VR 529 Brisbane City Council v Valuer General for the State of Queensland (1978) 140 CLR 41 Campbell v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 49 Commonwealth Custodial Services Ltd as Trustee for Burwood Trust Fund v Valuer-General (NSW); Trust Company of Australia Ltd v Valuer-General (NSW) (2006) 148 LGERA 38; [2006] NSWSC 400 The Commonwealth of Australia v Oldfield (1976) 133 CLR 612 Denovan v Wagga Wagga City Council (1984) 53 LGRA 358 Department of Natural Resources and Mines v QNI Metals Pty Ltd [2002] QLAC 71 Fisher v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 242 Goode v The Valuer-General [1979] 22 SASR 247 Justin John Enterprises Pty Ltd v Valuer-General [1999] NSWLEC 208 Kelmea Pty Limited v State Rail Authority (Supreme Court of New South Wales, Bryson J, 10 December 1986 unreported) Kelmea Pty Limited v State Rail Authority of New South Wales (New South Wales Court of Appeal, 29 June 1988, unreported) Keogh v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 258 Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673 Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 CASES CITED: McGeoch v Federal Commissioner of Land Tax (1929) 43 CLR 277 Metropolitan Gas Co v Federated Gas Employees Industrial Union (1925) 35 CLR 449 Morrison v Federal Commissioner of Land Tax (1914) 17 CLR 498 Motrix Supplies Pty Ltd v Bonds & Kirby (Victoria Avenue) Pty Ltd (Supreme Court of New South Wales, Giles J, 12 September 1990, unreported) Pye v Valuer-General [1973] 2 NSWLR 385 Ritchie v Valuer-General (1961) 21 LGRA 296; (1970) 92 WN (NSW) 960 Sonnerdale v Valuer-General (1953) 19 LGR (NSW) 211 Spicer v Valuer-General (1963) 10 LGRA 319 Stubberfield v The Valuer-General [1991] 1 Qd R 278 Tetzner v Colonial Sugar Refining Co Ltd [1958] AC 50 Thompson v Council of the Municipality of Randwick (1950) 81 CLR 87 Tooheys, Ltd v The Valuer-General [1925] AC 439 Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160 Vanadi Pty Ltd v Valuer-General (Talbot J, NSWLEC, 9 November 1995, unreported) Whelpton v Ku-Ring-Gai Council (1994) 85 LGERA 120 Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50

PARTIES: Trust Company of Australia Limited - Appellant The Valuer-General - Respondent

COUNSEL: M Craig QC; A Galasso SC - Appellant J Robson SC; M Carpenter - Respondent

SOLICITORS: Mallesons Stephen Jaques - Appellant Crown Solicitors - Respondent

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT MEDIUM NEUTRAL CITATION: Commonwealth Custodial Services Limited as Trustee for the Burwood Trust Fund; Trust Company of Australia Limited v Valuer-General [2006] NSWLEC 400

The appellant is the owner of land at Ashfield in inner-western Sydney. The land has a zoning that permits, with Council consent, both mixed-use developments, and commercial developments. Upon the land currently stand two five-storey office buildings.

Section 14A(1) of the Valuation of Land Act 1916 (" the Act ") requires the Valuer-General to ascertain the land value of each parcel of land in New South Wales each year. Section 6A(1) of the Act provides that land value is to be determined " assuming that the improvements, if any, thereon or appertaining thereto … had not been made ". The respondent issued a determination of land value, as at 1 July 2003, pursuant to the Act. The valuation was based on the highest and best use of the land being for mixed-use development.

The appellant objected to the valuation, contending that, because the existing office buildings on the land could not be converted for mixed-use development and would have to be demolished if the land was to be put to its highest and best use, the existing office buildings were not " improvements " for the purposes of section 6A(1). Accordingly, the appellant submitted that the land value assessment should be reduced by the costs of demolishing the office buildings and the interest expense during the demolition period. The main issue for determination was the construction of the word " improvements ".

Three constructions of the word " improvements " were suggested:

(i) Any human operations on land that have the effect of enhancing the land's value for its highest and best use . This is the appellant's contention. (ii) Any alteration of the land by human hands, regardless of its effect in any way or at any time on the value of the land . This is the respondent's preferred contention. (iii) Any human operations on land that have the effect, as at the date of valuation, of enhancing the land's value compared with its natural state . This is the meaning adopted by the trial judge, and the respondent's fallback contention.

HELD (per Campbell JA; Beazley and Ipp JJA agreeing)

(1) For the purposes of section 6A(1) of the Valuation of Land Act 191 6 , " improvements" are any human operations on the land that have the effect, as at the date of valuation, of enhancing the land's value compared with its natural state.

(2) The office buildings on the land, whilst not suitable for the land's highest and best use, are improvements because they enhance the land's value compared with its natural state.

(3) No deduction from the assessed land value should be allowed for the cost of demolishing buildings, nor for the interest costs during demolition, that are not suitable for the land's highest and best use.

(4) The respondent was not in error in disallowing the appellant's objection to the land value assessment.

Justin John Enterprises Pty Ltd v Valuer-General [1999] NSWLEC 208 overruled Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160 distinguished Vanadi Pty Ltd v Valuer-General (Talbot J, NSWLEC, 9 November 1995, unreported) disapproved

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40482/06 LEC 31438/04

BEAZLEY JA IPP JA CAMPBELL JA

26 JULY 2007 TRUST COMPANY OF AUSTRALIA LTD v THE VALUER-GENERAL Judgment 1 BEAZLEY JA: I agree with Campbell JA. 2 IPP JA: I agree with Campbell JA. 3 CAMPBELL JA: This is an appeal from a decision of a judge of the Land and Environment Court. Because the proceedings in the court below were Class 3 proceedings, the appeal is limited to questions of law: section 57(1) Land and Environment Court Act 1979. The question for the trial judge in the court below was what was the "land value", within the meaning of the Valuation of Land Act 1916 ("the Act") and at the base date of 1 July 2003, of a parcel of land that the Appellant owns at Ashfield. That is a mixed question of fact and law. However, the Appellant contends that in the course of answering the question, the trial judge applied a wrong legal principle. An appeal that is limited to questions of law can decide whether there has been any such application of wrong legal principle: Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at [8], 116. 4 At the relevant time, the Ashfield land had two five-storey office buildings erected on it, with an underground car park. The area of the site was 8,367 square metres. The land included a small sliver of land that was zoned residential, which was used to provide vehicular access to the underground car park. No one suggests that that sliver of land is suitable for any other use. The rest of the land had a zoning that permitted, with Council consent, both mixed use developments, and commercial developments. "Mixed use" development involves a multi-storey building that contains both retail shops or commercial offices (normally on the ground floor), and residential units. 5 For both commercial use and mixed use, the maximum floor space to ground space ratio that was permitted under the relevant planning instrument was 2:1. Thus, whether the land was used for commercial use or mixed use, the maximum permissible floor space of any structure or structures on the land would be 16,734 square metres. 6 The statutory definition that the trial judge applied is that contained in section 6A(1) of the Act, which provides: "The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made." 7 The expression "land improvements" that appears in section 6A(1) is defined in section 4(1) of the Act as meaning: "(a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths, (b) the picking up and removal of stone, (c) the improvement of soil fertility or the structure of soil, (d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation, (d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land for the purpose of the erection of a building, structure or work, not being for the purpose of irrigation or conservation, (e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and (f) underground drains." 8 The trial judge approached the valuation task on the basis that the hypothetical purchaser is purchasing the land for the purpose of its highest and best use. His Honour held that the highest and best use of the land is for mixed use: Commonwealth Custodial Services Ltd as Trustee for Burwood Trust Fund v Valuer-General (NSW); Trust Company of Australia Ltd v Valuer-General (NSW) (2006) 148 LGERA 38; [2006] NSWSC 400. He ascertained the "land value" in two steps. First, he held that the value of the land, in a notionally vacant state with all alterations that have been made to its virgin condition ignored, was $650 per square metre of floor space that would be available if the land were developed for its highest and best use. That value is $650 multiplied by 16,734, ie $10,877,100. Next, his Honour held that the excavation for the car park was a "land improvement", and hence its value needed to be added to arrive at the "land value". He held that the value of the excavation was $347,329. There were no other relevant "land improvements". Thus, he concluded that the "land value" was $10,877,100 plus $347,329, ie $11,224,429. 9 It was common ground that if the land were to be developed for mixed use, then the existing multi-storey commercial office buildings constructed on it could not be converted to that use and would have to be demolished. That gives rise to the question of law with which this appeal is concerned. It is: if at the base date for valuation a parcel of land has structures on it, but those structures are not suited for the best and highest development of the land and would need to be demolished if the best and highest development were to be achieved, are those structures "improvements" within the meaning of the definition of "land value" in section 6A of the Act. 10 The Court has been presented with three different suggested meanings of "improvements" in section 6A. They are:

(1) Any human operations on land that have the effect of enhancing its value for its highest and best use. This is the Appellant's contention.

(2) Any alteration of the land by human hands, regardless of its effect in any way or at any time on the value of the land. This is the preferred contention of the Valuer-General.

(3) Any human operations on land that have the effect, as at the date of valuation, of enhancing its value compared with its natural state. This is the meaning adopted by the trial judge, and the fallback contention of the Valuer-General. 11 In approaching the task of construction, I bear in mind that a court is not limited to selecting between various views of the construction of legislation that are presented to it, but is entitled, and indeed required, to put on the legislation in question the construction that the court itself concludes is the correct one: Accident Towing & Advisory Committee v Combined Motor Industries Pty Ltd [1987] VR 529 at 547 per McGarvie J; Whelpton v Ku-Ring-Gai Council (1994) 85 LGERA 120 at 126. However, I can say at the outset that no plausible construction of "improvements" in section 6A has presented itself to me, apart from those that were put by counsel or in the trial judge's decision.

The Appellant's Submission 12 The Appellant submits that an "improvement" necessarily involves the notion of making better for some particular purpose. It submits that when one is talking about the value of land, "improvements" are necessarily things that enhance the value of the land. But enhancement does not occur, it submits, in a vacuum - an alteration of the state of land that is an enhancement for one particular purpose could be a detraction, or be neutral, for some other purpose. Ascertainment of land value under section 6A necessarily takes place by reference to the highest and best use of the land at the base date. Thus, in deciding whether particular structures are "improvements" within the meaning of section 6A, one should ask whether they make the land better for the purpose of the highest and best use. 13 Thus, the Appellant submits, if those structures add value to the land for the purpose of that highest and best use, they are "improvements". However, if (as in the present case) the structures add no value to the land for the purpose of the highest and best use, then they are not improvements. 14 The Appellant submits that the result of those structures not being improvements is, in the present case, that the commercial buildings on the site are not notionally removed from the site for the purpose of ascertaining the "land value". Because their presence on the site detracts from its value as a site for mixed use, there needs to be deducted from the value found by the trial judge further amounts representing the cost of demolition and removal of debris, and the interest or holding charges likely to be incurred during the period that demolition and removal of debris is taking place. The Appellant submits that the appropriate amount to allow for demolition cost is $2,518,406, and the appropriate amount to allow for interest is $97,518. The Appellant submits that this court should conclude that the "land value" is the amount found by deducting those two amounts from the "land value" as ascertained by the trial judge, giving a figure of $8,608,505.

The Valuer-General's Submission 15 The Valuer-General submits that it is a mistake to regard "improvements" as being identified by any effect on value. It submits that the concept of added value does not appear at all in the wording of the Act, and there is no need to read it in. Thus, it submits, this Court should not adopt either the trial judge's construction, or the Appellant's construction. 16 As well, the Valuer-General submits that the construction promoted by the Appellant would unduly complicate the operation of the legislation. It would require the Valuer-General at first instance (and the court in any appeal) to go through the process of determining the use (and value) of structures; whether structures on the land would be a hindrance or a benefit depending on a separate consideration of (and determination of) different potential users; and whether there was, in fact, one "highest and best use". The Valuer-General submits that it is unlikely that the legislature would have intended this sort of complication. Rather, it submits, it is more likely that the legislature intended that a simple exercise, of notionally removing all artificial interferences with the state of the land (other than "land improvements") be carried out.

The Trial Judge's Construction 17 The trial judge summarised his approach to construction at [42] of his judgment (148 LGERA 38 at 51): "A structure on land is not an improvement if it does not enhance the land's value compared with its natural state. The commercial buildings on the Ashfield Land enhance the land's value compared with its natural state. They are valuable to a purchaser who has a use for them. I do not accept the Applicant's submission that " improvements " have to add value to land for the purpose of its highest and best potential use."

The Proper Approach to Construction 18 The starting place for construing of a particular statutory provision is the meaning of the words of that statutory provision. Sometimes, ascertaining of the meaning can be assisted by considering the context in which the statutory expression occurs, and the history and purpose of that statutory provision. 19 A popular exercise amongst lawyers involves considering previous decided cases in which judges have considered the meaning of the same or similar words. That exercise can sometimes help in illustrating the nuances or range of meanings that the expression that is being construed is capable of having as a matter of ordinary English usage, or in a particular statutory context. However, unless the provision being construed in the previously decided case is in the same words and the same context as the provision whose meaning presently needs to be construed, that exercise is far from decisive. The words of the statute in question, in their context and with their history and purpose, have primacy.

Ordinary Meaning of "Improvements" 20 In my view, the first and third of the suggested meanings of "improvements" fall within the range of meanings that that word can have, as a matter of ordinary English. I do not think that the second meaning falls within that range of meanings. If someone were to soak land in a long-lasting toxic chemical and then bury mines in it, there would have been alteration of the land by human hands, but only someone trying to be ironic would say that "improvements" had thereby been effected to the land. 21 That not all alterations of land by human hands count as effecting "improvements" is confirmed by considering dictionary definitions. The Macquarie Dictionary defines "improvement", when used as a noun, as: "1. the act of improving. 2. the state of being improved. 3. a change or addition whereby a thing is improved. 4. some thing or person that represents an advance on another in excellence or achievement. 5. a bringing into a more valuable or desirable condition, as of land; a making or becoming better; a betterment. 6. something done or added to land which increases its value. 7. profitable use: the improvement of one's time ." 22 Many of those meanings are dependent upon the meaning of "improve" when used as a verb. The Macquarie Dictionary defines "improve", when used as a verb, as: "-- verb ( t ) 1. to bring into a more desirable or excellent condition: to improve one's health. 2. to make (land) more profitable or valuable by enclosure, cultivation, etc.; increase the value of (property) by betterments, as buildings. 3. to turn to account; make good use of: to improve an opportunity. -- verb ( i ) 4. to increase in value, excellence, etc.; become better: the situation is improving. -- phrase 5. improve on (or upon ), to make improvements in; do better than: to improve on one's earlier work." 23 It cites the etymological origin of "improve" as: "Anglo-French emprower , from Old French em- IM-1 + prou profit". 24 Thus, the notion of an increase in value or profitability is an inherent part of the concept of an "improvement". 25 There is ample recognition in the case law of the need for an improvement to ameliorate the land. In McGeoch v Federal Commissioner of Land Tax (1929) 43 CLR 277 the majority in the High Court (Knox CJ and Dixon J) held (as summarised in the headnote) "that the eradication, destruction and removal of prickly pear plants which would otherwise spread and deprive the land of its utility and value are "improvements on" the land within the meaning of the Land Tax Assessment Acts 1910-1924, 1910-1926." The Land Tax Assessment Acts contained a definition of "unimproved value" that was not materially different to the then New South Wales definition. At 287, Knox CJ and Dixon J quoted with approval from the judgment of Griffith CJ in Morrison v Federal Commissioner of Land Tax (1914) 17 CLR 498 at 504, where Griffith CJ listed various types of agricultural operation that he held were "improvements", and said "Anyone familiar with Australia knows that all these operations do improve the value of land, and make it saleable at a higher price." 26 In The Commonwealth of Australia v Oldfield (1976) 133 CLR 612 at 619, Jacobs J (with whom Gibbs, Stephen and Mason JJ agreed) quoted with approval from the judgment of Griffith CJ in Morrison at 503: "What operations of man are improvements? When I say 'operations of man' I think the term should be limited to what is done by the owner for the time being, that is, after the land has ceased to be Crown land. Any operation of man on land which has the effect of enhancing its value comes within the definition of 'improvement'." 27 While the Commonwealth Land Tax Assessment Acts contained a definition of "value of improvements" as "the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements", the remarks of Griffith CJ are not dependent upon the existence of that definition. 28 In Brisbane City Council v Valuer-General for the State of Queensland (1978) 140 CLR 41 Gibbs J, with whom the other members of the High Court agreed, construed the definition of "unimproved value" in Queensland legislation not materially different to the definition that formerly applied under the Act. He said, at 51: "… something done on or appertaining to land which reduces rather than enhances its value is not an improvement for the purposes of the Act, any more than it would be in the ordinary sense of the word." 29 The explicit connection between "improvements" and value was recognised in Goode v The Valuer-General [1979] 22 SASR 247. Wells J was considering a definition of "improvements" that said the word "means", followed by a long list of types of structures and other entities that could be placed on land or activities that could be carried out on land. At 257 his Honour said: "… there are some kind of named additions to land that fall within the specific descriptions that, in certain common situations, would not be improvements, using that word in its ordinary and natural sense. If, for example, an owner of suburban residential land were to erect an internal fence on his property for no discoverable purpose, and without producing any betterment of the land for its present use, it would be repugnant to common sense to call the fence an improvement, more particularly if the fence presented an obstacle to ordinary and natural user. But the word "fence" stands, according to the definition, as apparently descriptive, without more, of one kind of improvement. Then, again, a plant may be cultivated on land that has no possible claim to beauty and is, in fact, highly dangerous to health. It would be absurd to call that an improvement simply because the definition refers to "other plants planted or sown, whether for trade or other purposes". Indeed, it is not difficult to imagine circumstances in which any of the nominated things would not only not be an improvement but could amount either to a positive detriment or to waste. A third example is ringbarking; what is a tried and proven method of clearing land for grazing or the growing of crops would be an unmitigated disaster if visited upon a stand of ornamental trees in a residential suburb." 30 Other authority supportive of "improvements" to land involving a notion of something that improves the value of the land can be found in Campbell v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 49; Fisher v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 242; Keogh v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 258; Thompson v Council of the Municipality of Randwick (1950) 81 CLR 87 at 104; and Department of Natural Resources and Mines v QNI Metals Pty Ltd [2002] QLAC 71 at [10]. 31 When the context in which the word "improvements" appears is, in the present case, a statute dealing with the means of ascertaining the value of land, that context itself underlines that the type of "improvement" that is being talked about is one having an effect on the value of land.

How "Highest and Best Use" Fits into the Construction of Section 6A 32 There is no explicit recognition in the Act of the concept of "highest and best use". However it is well established that that concept is to be used for the purpose of ascertaining the land value under the Act: Spicer v Valuer-General (1963) 10 LGRA 319 at 320. Section 6A(1) requires the postulation of a notional sale. It has been accepted that this notional sale is one that is assumed to take place in a market, and that the seller would conclude the sale for the highest price it could obtain in that market. As well, if there is some use of the property that is more beneficial than its present use, it is assumed that the potential purchasers in the market would include at least one who was prepared to pay more for the land by reason of the land being able to be used in that more beneficial way. In this way, the concept of highest and best use comes to be applied through the notional sale that section 6A requires to occur. 33 It is particularly important, for present purposes, that there is a particular order of operations that section 6A requires to occur in ascertaining the "land value". In carrying out the thought-task that section 6A(1) calls for, first, the "improvements" other than land improvements are notionally removed. Only then does the notional sale occur. And it is by reference to that notional sale that the highest and best use is determined. Thus, it is necessary to determine the identity of the improvements that are to be removed before the highest and best use can be ascertained. 34 Support for that view of section 6A(1) can be derived from the speech of Lord Dunedin in Tooheys, Ltd v The Valuer-General [1925] AC 439. His Lordship said that the process that the original section 6 of the Act required a valuer to undertake was (at 443): "… what he has to consider is what the land would fetch as at the date of the valuation if the improvements made had not been made. Words could scarcely be clearer to show that the improvements were to be left entirely out of view…. What the Act requires is really quite simple. Here is a plot of land; assume that there is nothing on it in the way of improvement; what would it fetch in the market?" 35 I can see no relevant difference between the original section 6 that Lord Dunedin construed, and the present section 6A(1), so far as the order of operations that the section requires to be notionally performed is concerned. 36 According to the Appellant's submission, the identity of the improvements is ascertained by reference to what is the highest and best use. That requires the highest and best use to be known before the identity of the improvements is ascertained. But the temporal sequence of events that section 6A requires simply does not enable that to occur. This provides, in my view, a strong reason why the Appellant's submission is incorrect. 37 Further, the construction of "improvements" adopted by the trial judge permits the "improvements" that are on land to be identified before any notional removal of them occurs. That is, in my view, a significant point in favour of the trial judge's construction.

The Statutory Context 38 It is a fundamental principle of statutory interpretation that the particular words that are under focus must be read in their context, as part of the whole instrument: Metropolitan Gas Co v Federated Gas Employees Industrial Union (1925) 35 CLR 449 at 455. One part of reading in context the words that are in question is that there is a rebuttable presumption that where a single piece of legislation uses in different places the same word or grammatical cognates of the same word, the same meaning is intended at each of the places where that word or its cognate occurs: Pearce & Geddes, Statutory Interpretation in Australia, 5th edition, 2001, Butterworths, paras [4.4], [4.5] and cases there cited. To see if assistance can be gained from that presumption, I turn to other provisions in the Valuation of Land Act 1916 that use the word "improvements" or one of its grammatical cognates.

Provisions Concerning Land Value of a Stratum 39 Section 4(1) defines "stratum" as meaning: "… a part of land consisting of a space or layer below, on, or above the surface of the land, or partly below and partly above the surface of the land, defined or definable by reference to improvements or otherwise, whether some of the dimensions of the space or layer are unlimited or whether all the dimensions are limited; but refers only to a stratum ratable or taxable under any Act, and strata is the plural of stratum." 40 Section 7B sets out a special provision for ascertaining the land value of a stratum: "(1) The land value of a stratum is the capital sum which the fee-simple of the stratum might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require assuming: (a) that the improvements, if any, within the stratum and made or acquired by the owner or the owner's predecessor in title had not been made: Provided that where the stratum is wholly or partly in an excavation it shall be assumed that the excavation of the stratum had been made, (b) that means of access to the stratum may be used, and may continue to be used, as they were being used, or could be used, on the date to which the valuation relates, and (c) that lands outside the stratum, including land of which the stratum forms part, are in the state and condition existing at the date to which the valuation relates, and, in particular, without limiting the generality of this assumption, that where the stratum consists partly of a building, structure, or work or is portion of a building, structure, or work, such building, structure, or work, to the extent that it is outside the stratum, had been made. (2) Notwithstanding anything in subsection (1), in determining the land value of a stratum it shall be assumed that: (a) the stratum 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, and (b) such improvements may be continued or made in the stratum as may be required in order to enable the stratum to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the stratum may be used on the assumptions set forth in subsection (1)." 41 It will be seen that section 7B is closely analogous to section 6A, but that there are some differences. What is relevant for present purposes is that the definition of "stratum" contemplates that the boundaries of the stratum might be defined by reference to "improvements". Fairly clearly, the sort of thing that is here being referred to includes the walls, floor and ceiling that are part of the building within which a strata title unit exists. If one had an old home unit building on land that was ripe for development for some totally different highest and best use, if the contention of the Appellant were right, the walls, ceiling and floor of the building, that constituted the boundaries of the individual home units, would cease to be "improvements". The Appellant could perhaps say that the stratum did not then totally disappear for the purpose of the Act, and thereby became free of all rates and taxes, because its boundaries were defined "otherwise", by those walls, floor and ceilings that were no longer improvements. One can say with a fair measure of confidence that it is unlikely to have been the legislature's intention that home units in buildings on land that is ripe for development for a totally different use, should be freed from rates and taxes. Yet the means by which the Appellant would need to reach this conclusion involves the linguistic oddity that at one time, when remaining the site of a home unit building is the highest and best use of the land, the boundaries of the stratum are defined by improvements, while at another, once the alternative highest and best use has emerged, they are defined not by "improvements" but "otherwise". The trial judge's construction does not require this unusual use of language.

The Definition of "Land Improvements" 42 The definition of "land improvements" (para [7] above) is an exhaustive definition - it starts with the phrase "land improvements means". Yet, if "improvements" has a consistent meaning throughout the statute, that would suggest that "land improvements" are a subcategory of improvements. In Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 the High Court accepted that "land improvements" are a subset of "improvements". McHugh, Gummow, Kirby, Hayne and Callinan JJ said, at [13], 119: "It is plain that the definition is of improvements effected on and to an actual parcel of land itself, and not improvements external to the land." 43 That "land improvements' are a subcategory of improvements is also supported by the fact that "improvement" appears in paras (c) and (d) of the definition. 44 Two consequences follow from "land improvements" being a subcategory of "improvements". First, the legislature evidently regarded the types of activities identified in paragraphs (a), (b), (d1), (e) and (f) of the definition as the type of activity that would, either usually or always (it is not necessary to decide which) result in an improvement in the value of the land. That improvement is by comparison with the value of the land in its native state. That is consistent with the trial judge's construction. 45 Second, the definition of "land improvements" refers to the carrying out of particular types of activity, not limited to whether that activity in fact advances the highest and best use of the land. That is not consistent with the Appellant's construction.

Section 6A(2) 46 In section 6A itself, section 6A(2) provides: "Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) 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, and (b) 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, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made." 47 Section 6A(2) contemplates that "improvements" can be alterations that enable an existing use of land to be continued, regardless of whether that existing use is the highest and best use. That is, at first sight, a use of "improvements" that is not consistent with the Appellant's construction. 48 Of course, it could be submitted by the Appellant that section 6A(2) is an exception to section 6A(1), and that that might provide a reason for "improvements" to be used with different meanings in those two subsections. 49 The opening words of section 6A(2), and the history of section 6A(2) that is considered at para [78] ff below, both provide support for the subsection being read as an exception to section 6A(1). However, it is an exception in that it provides, for land that has the benefit of existing use rights, a method of valuation different to the method that is provided by section 6A(1). Being an exception in that sense is not a reason why the word "improvements" should be used in a different way in section 6A(2) to the way it is used in section 6A(1).

The Register of Land Values 50 Section 14CC obliges the Valuer-General to keep a Register of Land Values. It continues: "(2) The Register is to contain such of the following kinds of information in relation to land as is within the knowledge of the Valuer-General: (a) information as to the ownership of the land, (b) information as to the occupation of the land, (c) information as to the value of the land, (d) information as to the title of the land, (e) information as to the location or description of the land, (f) information as to the area of the land, (g) such other kinds of information as is permitted or required by this Act or the regulations to be entered in the Register. (3) An entry in the Register as to a land value, allowance or apportionment factor ascertained under this Part is conclusive evidence of the ascertaining of the value, allowance or factor on the date shown in the entry." 51 Section 7D(1) provides that (subject to a presently irrelevant exception) on and after 1 January 1973 the Valuer-General is not required "to record in the Register of Land Values the nature of the improvements on any land." However, section 7D(2) permits the Valuer-General to record in the Register of Land Values the nature of the improvements on any land if he or she so desires. 52 If the Appellant's contention is right, the nature of the improvements on land is quite important for ascertainment of the land value of the land. That is because it is only by considering the nature of the improvements that one can decide whether they are conducive to the highest and best use of the land, and hence whether they should be notionally removed before ascertaining the land value. It seems odd that section 7D excuses the Valuer-General from keeping a record of the nature of the improvements on the land if information about those improvements is part of the information that the Valuer-General is required to keep under section 14CC(2)(c) because it is "information as to the value of the land". 53 There is not quite the same oddity if the trial judge's construction is correct. On that construction, the task of the Valuer-General is to value the land in the condition it would be in if all structures or works that have increased its value from its native state were removed. To perform that task it will often not be necessary for the Valuer-General to identify the structures or works that had increased its value from its native state. 54 I recognise that this argument concerning the content of the Register of Land Values is not conclusive, because on the trial judge's construction it is still necessary for the Valuer-General to be able to take into account whether there are any "land improvements", and, if so, to what extent those "land improvements" have improved the value of the land by comparison with its native state. It is also necessary for the Valuer-General to know whether there are structures or works on the land that are detrimental to its value so far as all potential purchasers are concerned. Even so, the fact that the Valuer-General needs to take into account the effect, if any, of "land improvements" or detrimental structures or works on the value of any individual piece of land is likely to result in an entry being made in the Register of Land Values only concerning those particular parcels where there are in fact "land improvements" or detrimental structures or works that need to be taken into account. That would involve considerably fewer entries relating to improvements than would be necessary if the Appellant's construction were correct.

Valuation of Heritage Restricted Land 55 Section 14G(1) provides: "Land that is heritage restricted on the date by reference to which its land value is to be determined is to have its land value determined on the basis of the following assumptions: (a) that the land may be used only for the purpose, if any, for which it was used when the value is determined, (b) that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued, (c) that no improvements, other than those referred to in paragraph (b), may be made to or on that land." 56 Section 14G(1)(b) contemplates that improvements enable the existing use of the land to be maintained, regardless of what is the highest and best use of that land. That is not consistent with the Appellant's construction. 57 Again, the Appellant could submit that section 14G is an exception to the general principle upon which land value is to be ascertained, and that that provides an explanation for there being different meanings of "improvements" in section 6A(1) and section 14G(1). 58 Section 14G(1) is in some ways the converse of section 6A(2). Both of them provide a different method for valuation of land to that which is provided by section 6A(1). Section 6A(2) is concerned with ensuring that land is not undervalued when an existing use of the land is more valuable than any use to which the land could be put if the improvements on it had not been made, while section 14G(1) is concerned with ensuring that land is not overvalued when heritage restrictions on the land have the effect that continuing its existing use is less valuable than any use to which the land could be put if the improvements on it had not been made. I do not see why section 14G(1) being an exception to section 6A(1), in that sense, provides a reason why "improvements" should be used with a different meaning in the two provisions.

Allowances for Profitable Expenditure 59 Section 14L provides: "(1) For the purpose of ascertaining the land value of any land, the Valuer-General is to ascertain a reasonable allowance for profitable expenditure by the owner, occupier or lessee in respect of: (a) any effective land improvements on or appertaining to the land, and (b) any visible and effective improvements which, although not on the land, have been constructed: (i) for the purpose of supplying water to the land, or (ii) for the purpose of draining the land, protecting the land from inundation or making some other provision for the more beneficial use of the land. (2) In the case of a stratum, the Valuer-General is also to ascertain a reasonable allowance for profitable expenditure by the owner or occupier on any visible and effective improvements which, although not in the stratum, have been constructed exclusively for the benefit of the stratum. (3) An allowance for profitable expenditure is to be calculated on the assumption that: (a) the allowance is being calculated at the date by reference to which the land value is being determined, and (b) any improvements that have been taken into account for the purpose of ascertaining the land value of the land were in existence at the date referred to in paragraph (a). (4) An allowance for profitable expenditure is to be entered in the Register of Land Values in respect of any land value to which it relates." 60 Section 14L(1)(b) contemplates that "improvements" might have been constructed for the purposes listed in section 14L(1)(b)(i) and (ii). Those purposes do not seem to have any relationship to whether the improvements in question are useful for the highest and best use of the land. Further, section 14L is perfectly general in its application, applying on all occasions when land value is ascertained. While the Appellant could mount an argument to seek to explain the apparent anomaly in its preferred meaning of "improvements" not being the meaning in section 6A(2) and section 14G(1)(b), that each of those provisions is an exception to section 6A(1), such an argument is not available to the Appellant under section 14L. 61 Section 14Q provides: "(1) This section applies to the calculation of allowances for profitable expenditure for improvements constructed on or for the benefit of a number of parcels of land, where the profitable expenditure has (by agreement or otherwise) been apportioned between the various owners of the land. (2) The proportion of the total profitable expenditure on any such improvements to be allowed in relation to any one parcel of land is to be the same as the proportion of the total cost of those improvements that are paid or payable by the owner of that parcel." 62 Section 14Q contemplates that the one thing can be an "improvement" in relation to several different parcels of land. If the Appellant's construction were right, it is hard to see how section 14Q could be applied if the particular expenditure on that thing was useful for the highest and best use of one of those parcels of land, but not useful for the highest and best use of another of the parcels of land. The trial judge's construction does not encounter this difficulty.

Ascertaining an Apportionment Factor for Land Value of Mixed Development Land 63 Division 5 of Part 1B of the Valuation of Land Act 1916 sets out a regime under which the Valuer-General can ascertain an "apportionment factor" for the land value of mixed development land. Mixed development land is, in very broad terms, land with both office and residential development on it. Section 14BB(1) contains definitions, one of which is of "residential land". Section 14BB(4) provides: "For the purposes of the definition of residential land in subsection (1), a parcel of land does not cease to be occupied or used solely as the site of one single dwelling, one or more buildings comprising two or more flats, a boarding house or a lodging house by reason of there being on the parcel of land any building or improvement that is occupied or used for a purpose ancillary to the single dwelling, building or buildings, boarding house or lodging house, as the case may be." 64 That provision contemplates that something could be an "improvement" if it is occupied or used for a purpose ancillary to the single dwelling, etc, without any consideration of whether the use of the land for that particular residential purpose is its highest and best use. This is not consistent with the Appellant's construction.

Forms Sent to Land Owners 65 Section 15(1) empowers the Valuer-General to send to an owner of land a form to be filled in and returned to the Valuer-General by a particular time. Section 15(2) provides: "Such a form may contain such questions as the Valuer-General considers appropriate to facilitate the making of a valuation of the land concerned, such as questions relating to: (a) the area, situation or quality of the land, or (b) the purpose for which the land is being used, or (c) the nature of any improvements on the land, or (d) the existence of any tenancies to which the land, or any stratum of the land, is subject." 66 Section 15(3) imposes a criminal penalty on a person who receives a form but does not return it within time, or knowingly makes a false statement in filling it in. 67 There is inherent plausibility in Parliament expecting that a land owner will be able to provide accurate information about the physical condition of its land, and what structures are erected on it, or other changes that have been made from its native state. It is expecting a great deal of a land owner if (as would be the case if the Appellant's construction were right) complying with section 15 required the land owner to be able to form a view about what is the highest and best use of the land, and whether any changes that have been made from its native state are ones that are conducive to that highest and best use.

Conclusion Concerning Statutory Context 68 The various provisions of the Act to which I have referred each suggest, with varying degrees of force, that the construction of "improvements" contended for by the Appellant is incorrect, and that the construction adopted by the trial judge is correct. When those provisions are taken together, they provide a substantial confirmation of the conclusion arrived at by considering the terms of section 6A(1) itself, rejecting the Appellant's construction, and accepting that of the trial judge. 69 I record that there are some other provisions in the Act where "improvements", or one of its grammatical cognates, occurs, but which I have not found helpful in casting any additional light on the present problem. The provisions to which I refer are sections 5, 7A, 7C, 7D, 14N, 21, 22 and 26A.

Legislative History 70 The Land and Income Tax Assessment Act 1895 imposed a land tax that was payable by every owner of land, at such rate as Parliament should from time to time declare, "in respect of all land of which he is such owner for every pound of the unimproved value thereof …" (section 10). 71 Section 68 provided: "Improvements" includes houses and buildings, fencing, planting, excavations for holding water, wells, ring-barking, clearing from timber, or scrub, or sweet briar, or noxious weeds, or laying down in grass or pasture, and any other improvements whatsoever, the benefit of which is unexhausted at the time of valuation. … "Unimproved value" means, in respect to land, the capital sum for which the fee-simple estate in such land would sell, under such reasonable conditions of sale as a bona fide seller would require, assuming the actual improvements (if any) had not been made, and, in case of conditionally-purchased land, of which no grant shall have been issued, after deducting also the balances or amounts of purchase money due to the Crown in respect of the same: Provided that the unimproved value of lands reclaimed from the sea, or from any harbour or river, or made fit for building purposes by levelling or quarrying, or by the erection of retaining-walls, or by any similar operations or works, shall be the capital sum for which the said land would sell under reasonable conditions, after deducting from such sum the cost of the reclamation or making, as well as all other improvements." 72 It is to be noted that the definition of "improvements" is only an inclusive definition, and is circular because it contains the expression "and any other improvements whatsoever". It is also to be noted that it recognises that "improvement" is a concept that includes the conferring of benefit on land. It also recognises that something can cease to be an "improvement" if it ceases to confer a benefit on the land. In the two respects just mentioned, this 1895 definition accords with the construction adopted by the trial judge. 73 The broad policy that underlies this method of taxation can be seen to include the perceived inappropriateness of taxing a landholder of the value of land, to the extent to which that value has been contributed to by alterations that have been made to the land by the landholder or any of the predecessors in title of the landholder. As Knox CJ and Dixon J said in McGeoch v Federal Commissioner of Land Tax (1929) 43 CLR 277 at 290: "In the legislation in Australia imposing tax on the unimproved value of land we think it is clear that the subject matter is sought to be taxed has always been that part of the value of the land at the relevant date which has been commonly described as the "unearned increment". The value at any given date of any given parcel of land has been considered as including two factors, namely, (1) the portion of the value at the relevant date attributable to improvements on or appertaining to the land made by the owner or his predecessors in title and (2) the portion of the value at such date attributable to extrinsic circumstances, such as public roads or railways, increased settlement in the neighbourhood, public services brought within reach and other causes not brought about by the operations on the land of successive occupiers … we think the unimproved value which is the subject of taxation under this Act is the value at the relevant date of the land in its natural state as for the time being affected by extrinsic circumstances of every kind, as, for example, those above mentioned, but not by what has been done to it or upon it in the shape of the improvement of any kind effected by the operations of successive owners the benefit of which continues as a factor in the then present value of the land." 74 Any such broad policy can only be worked out in detail by reference to the particular words of the statute, and the course of judicial interpretation of the statute; that is what has happened over the years since 1895. One factor that is relevant in the present case is that Knox CJ and Dixon J recognised that "improvement" is necessarily a comparative notion, and held that the state of affairs by reference to which the legislative policy decided whether something was an "improvement" was "the land in its natural state as for the time being affected by extrinsic circumstances of every kind". That is consistent with the construction that the trial judge has adopted in the present case. 75 When the Valuation of Land Act 1916 was originally enacted, section 6 provided: "The unimproved value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, and made or acquired by the owner or his predecessor in title had not been made." 76 The Act contained no definition of "Improvements". Between 1916 and 1961 there continued to be no definition of any species of "improvements" in the Act. 77 Section 15 contained a provision requiring the Valuer-General before making valuation in any district to send to every land owner in the district forms containing "such questions as may be prescribed relating to … the nature of improvements thereon". Section 15(3), then, as now, made it a criminal offence for an owner to not return the form in time, or to make any false statement knowing it to be false in any material particular. Thus, from its beginning, the Act has given rise to the unlikelihood of the legislature intending every landowner to be in a position to make the fairly complex judgment that is involved in deciding whether a particular alteration of the state of land is one that is beneficial to the highest and best use of that land. 78 The Valuation of Land and Local Government (Amendment) Act 1959 introduced a new section 6(2), in the same terms as the present section 6A(2). 79 At the time of introduction of the bill that became the 1959 amending Act, the Minister for Local Government and Minister for Highways, Mr Hills, explained its purpose as being: "… to remove an anomaly relating to unimproved valuations that has been disclosed by a recent decision of the Land and Valuation Court. In that case, which related to an area of land used for industrial purposes in a living area zone under the County of Cumberland planning scheme, the court held that the unimproved value of the land must be assessed on the basis of its zoning, notwithstanding that the planning scheme gives complete protection to the continued use for industrial purposes of the land and the buildings thereon. The result of this decision is that considerably lower unimproved values must be fixed than at present in respect of all lands occupied by industrial and commercial buildings in living areas or in proclaimed residential districts. It follows that the court's decision will have a disastrous effect upon the determination of the unimproved values of land occupied by service stations, industrial buildings and commercial premises in living areas, and of land occupied by some classes of residential flat buildings. As a result, a very substantial body of ratepayers will be relieved of a great proportion of the rates that they should justly bear, and the burden thereof will necessarily be transferred to the other owners of property, namely, home owners." 80 Mr Hills quoted the following from "a recent decision of the Privy Council": "… the physical improvements, with any value which they may attach to the land on which they are situated, (must) be excluded from the valuer's computation. The land will then be valued as land void of buildings but situated in the community with the amenities and facilities which have grown up around it …"

(The passage quoted is from Tetzner v Colonial Sugar Refining Co Ltd [1958] AC 50 at 56.) 81 Mr Hills explained the mischief at which the introduction of section 6(2) was aimed as being: "In cases such as that which was before the court, the valuer is faced with the peculiar and anomalous situation that under the law he cannot arrive at the unimproved value by having regard to the best use of the land, which happens to be the purpose for which it is in fact being used and can continue to be used. Instead, he is forced to use as a basis either its value for the purpose for which it can be used without the consent of the responsible authority, or some value arrived at on the supposition that the council might allow its use for one of the permitted uses." (Hansard, 26 November 1959, page 2389 ff) 82 A speech in similar terms was made by the Honourable RR Downing, Attorney-General, Minister of Justice and Vice President of the Executive Council, when making the second reading speech concerning the bill in the Legislative Council: Hansard, 1 December 1959, page 2451 ff. 83 There has also been judicial recognition that the purpose of the former section 6(2) is to ensure that if land could not be newly developed for its present use under the relevant planning scheme, but can continue to be used for its present use by virtue of an existing use provision in the planning scheme, it can be valued on the basis of its existing use. The history of the development of that provision, - through Sonnerdale v Valuer-General (1953) 19 LGR (NSW) 211; Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50; Ritchie v Valuer-General (1961) 21 LGRA 296; (1970) 92 WN (NSW) 960; and Pye v Valuer-General [1973] 2 NSWLR 385 - is traced by Carter J in Stubberfield v The Valuer-General [1991] 1 Qd R 278 at 285-287. See also Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673 at [25], 682. 84 The Valuation of Land and Local Government (Further Amendment) Act 1961 added to section 4 a definition of "site improvements". It was: ""Site improvements": means - (a) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation; and (b) the excavation, grading or levelling of land, not being works of irrigation or conservation." 85 Section 6(1) and (2) were each amended to provide that "improvements" would not include site improvements. 86 The Valuation of Land (Rating and Valuation) Amendment Act 1978 introduced into section 4(1) a definition of "land improvements". That definition was identical to the present definition of "land improvements", except that it did not contain paragraph (d1). It introduced a new section 6A that read: "The land value of land is the unimproved value of land determined under section 6 as if a reference in that section to site improvements were construed as a reference to land improvements." 87 When making the second reading speech in the Legislative Assembly for the bill that became the 1978 Act, the Minister for Local Government and Minister for Roads, Mr Jensen, said in the Legislative Council (Hansard, 21 November 1978, page 592) "Under this system of valuation the valuer is required to value the land as if it were in its original condition, disregarding timber clearing and other improvements. These may have been made in the distant past and it is anomalous that even to this day the owner of the land enjoys a concession for expenditure long since recouped. In many cases the land will not be in the same ownership." 88 He continued, at 592-593: "The unimproved system has perpetuated inequities between landholders with differing degrees of original timber, notwithstanding that its removal occurred many years ago and the lands are now of equal productive capacity. It falls with particular unfairness on owners of treeless plains land. In a number of local government areas until the advent of differential rating the owners of such land bore a disproportionate amount of the rate burden. The improvements proposed for inclusion in land value - in addition to the site improvements introduced in 1961 - are the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths; the picking up and removal of stone; the improvement of soil fertility or the structure of soil; and underground drains. Clauses (d) and (e) of the definition of land improvements are the existing site improvements. These improvements do not include buildings, structures or works that are distinct from the surface of the land." 89 The 1978 Act allowed assessment of unimproved capital value, and of land value, to both be possibilities under the legislation. As explained by the Minister when introducing the 1978 legislation (Hansard, 21 November 1978, page 593): "The adoption of land values will be optional until the Valuer-General has furnished land values in respect of all districts valued by him. It is expected that the change will become mandatory in 1982." 90 The Valuation of Land (Rating and Valuation) Amendment Act 1981 omitted the definition of "site improvements" from section 4(1), and omitted both the previous section 6 and section 6A. It inserted a new section 6A that was identical to section 6A(1) and (2) in its present form. 91 As a result of these changes, land came to be valued by reference to its "land value", which is a similar, but different, concept to its "unimproved value". The precise differences between the two concepts, and the course of legislation through which "unimproved value" came to be replaced by "land value" are traced in the decisions in Denovan v Wagga Wagga City Council (1984) 53 LGRA 358 at 360-361 (Cohen J); Kelmea Pty Limited v State Rail Authority (Supreme Court of New South Wales, Bryson J, 10 December 1986 unreported); Kelmea Pty Limited v State Rail Authority of New South Wales (New South Wales Court of Appeal, 29 June 1988, unreported); and Motrix Supplies Pty Ltd v Bonds & Kirby (Victoria Avenue) Pty Ltd (Supreme Court of New South Wales, Giles J, 12 September 1990, unreported). 92 Section 6A(3) of the Act provides: "Notwithstanding anything in subsection (1), in determining the land value of any land, being land in relation to which, at the date to which the valuation relates, there was a water right: (a) the land value shall include the value of the right, and (b) it shall be assumed that the right shall continue to apply in relation to the land." 93 Section 6A(3) was added in its present form by the Valuation of Land (Land Value) Amendment Act 1983 and the Valuation of Land (Rating) Amendment Act 1989. 94 The purpose of the introduction of section 6A(3) was explained in the second reading speech on the bill that became the Valuation of Land (Land Value) Amendment Act (1983) by the Minister who introduced the bill into the Legislative Council (Hansard, 10 November 1983, page 2914) as being: "… to remove all doubt that the land values of irrigation land and the like should include the value of any right to take and use water. Advice from the Crown Solicitor is that the Valuation of Land Act as it now stands does not, in every instance, authorize the Valuer-General to account for the effect of taking and using water when determining land values. The reason for this advice is that, in most parts of the State, access to water is only available where such right is granted under the Water Act, 1912. Such rights attach to improvements that must be disregarded by the Valuer-General when determining land values. The legal view is that because improvements are to be disregarded in making land valuations, access to water as a result of these rights must also be disregarded."

Conclusion Concerning Legislative History 95 What I draw from this history of the provision is that the initial broad policy, whereby a landowner should not be taxed on the value of land to the extent to which that value has been contributed to by alterations made to the land by the landholder or any of the predecessors in title of the landholder, has been altered over the years by permitting taxation to be imposed on the component of the value of land that results from site improvements and water rights. However, one element of the broad policy that the legislature has given effect to by imposing taxes by reference to "unimproved capital value" or "land value" has remained constant. It is that the relevant comparator by reference to which "improvement" is gauged is the land in its natural state. That supports the trial judge's construction. Further, I find nothing in the legislative history that supports the Appellant's submission about the meaning of "improvements" in section 6A(1). Indeed, insofar as the Ministers who introduced legislation that has contributed to the present form of section 6A used the notion of "improvements" in explaining the bills they were introducing, that usage seems consistent with the construction favoured by the trial judge, and not that favoured by the Appellant. These are modest conclusions to draw from an examination of the legislative history, but when they are consistent with the view at which I have arrived using other aids to construction, they provide a small measure of extra confidence that the trial judge's construction is correct.

The Argument From Convenience 96 The Valuer-General has argued, as summarised in para [16] above, that its preferred construction of the legislation should be adopted so as to simplify the administration of the Act. I accept that the Valuer-General's construction would make administration of the Act simpler than administration would be using the trial judge's construction. However, I am not persuaded that the extent of this simplification is such that I can infer that Parliament could not have intended the trial judge's construction to be adopted. Even on the approach of the Valuer-General, it is still necessary for the Valuer-General to enquire about each individual parcel of land that is valued, to ascertain whether there are any land improvements that affect its value, and, if so, what is the value of the land improvements. 97 In any event, while there is a principle of construction whereby a court leans against adopting a construction of a statute that produces irrational or grossly impractical consequences, there is no principle of construction that the legislature must have intended the construction that would be simplest to apply in practice. 98 Further, section 15 provides a means whereby the Valuer-General can ascertain from a landowner, before a valuation is made, whether the landowner asserts that there are any alterations to the natural state of the land that would be detrimental to all potential purchasers. The Act contains, in sections 29 to 42, provisions for notification of valuations by the Valuer-General, for certain persons with an interest in the amount of the valuation to object to it, for the determination by the Valuer-General of any such objection, and for an appeal to the Land and Environment Court if a person with an interest in the amount of the valuation remains dissatisfied with the Valuer-General's determination. In this way, the Act provides an appropriate machinery for implementation in practice of the construction of "improvements" that the trial judge adopted. 99 I do not regard the Valuer-General's argument from convenience as one that justifies displacement of the meaning of the words of the statute, the policy underlying the statute, and the many decades of judicial interpretation of closely similar statutory provisions.

Fenton Nominees 100 The Appellant placed reliance upon the decision of the High Court in Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160. Fenton concerned the ascertainment of the "unimproved value", within the meaning of the relevant South Australian statute, and as at 11 June 1979, of a parcel of land in Mount Gambier. The statutory definition of "unimproved value" in the South Australian legislation was not materially different, for present purposes, to the definition of "unimproved value" that formerly applied under the Act. The subject land in Fenton had been developed in 1973 as a Target Variety Store. The highest and best use of the land at the date of valuation was for a use similar to that of a Target Variety Store. Since 1973, three parcels of developed land had been acquired in the vicinity, with the intention of demolishing existing buildings as a preliminary to redevelopment by constructing retail store or shopping centre developments similar in kind to the Target Variety Store. Eventually, those three parcels were developed as Woolworths, Coles, and Half-Case stores. It was common ground that those three parcels provided the most appropriate comparables for ascertaining the unimproved value of the Target site. The question at issue concerned the manner in which those three parcels should be used to ascertain the unimproved value of the Target site. The Valuer-General contended that the unimproved value of each of the comparables should be ascertained by considering the prices that had been paid by Woolworths, Coles, and Half-Case for their respective sites with buildings erected on them, adding the cost of demolishing those improvements and of earthworks to restore the site, and dividing the resulting cost by the number of square metres on each of the sites. The owner of the Target site contended that the correct method of valuation was one whereby one subtracted from the overall price of each of the comparables the value of the improvements on it, and adopted the resulting figure as the unimproved value of that comparable. 101 The joint judgment of Mason, Murphy, Wilson, Brennan and Dawson JJ held that the approach adopted by the Valuer-General was the correct approach to the valuation. However, the problem with which the court was concerned in Fenton is fundamentally different to the present problem. In Fenton, the present use of the subject land at the date of valuation was its highest and best use. In the present case, the present use of the subject land at the date of valuation was not its highest and best use. In Fenton, the question at issue concerned whether demolition costs relating to the comparables should be taken into account in ascertaining the unimproved value of the subject land. In the present case, the question at issue concerns whether demolition costs relating to the subject land itself should be taken into account in ascertaining the land value of the subject land. In the present case, in the court below no question of principle was raised about the manner in which the sites that were adopted as comparable sales should have their "land value" ascertained. Indeed, it appears that the Valuer-General's valuer in the court below, Mr McGuirk, in at least some instances took into account the demolition costs of an existing building in arriving at the land value that he attributed to a particular comparable. 102 In these circumstances, the only assistance I can derive from Fenton is that, at 165, their Honours stated that: "… the unimproved value of the respondent's land on 11 June 1979 was to be ascertained by reference to the capital amount that an unencumbered estate in fee might reasonably be expected to realize upon sale, on the assumption that the improvements then existing on the land - the Target Store and associated facilities - had not been made. It is well settled that in establishing what that capital amount might be it is necessary to inquire what the hypothetical purchaser would pay for the land in a notional condition shorn of its improvements and that it is not permissible to arrive at the figure by identifying the value of the site in its improved state and then subtracting the value of the improvements ( Toohey's, Ltd v The Valuer-General [1925] AC 439, at p 443.)" 103 The passage is consistent with the conclusion at which I have arrived.

Vanadi and Justin John 104 Two first instance decisions in the Land and Environment Court have held that, within section 6A(1), a structure on land is an improvement regardless of whether it adds to the value of the land or detracts from its value: Vanadi Pty Ltd v Valuer-General (Talbot J, NSWLEC, 9 November 1995, unreported), and Justin John Enterprises Pty Ltd v Valuer-General [1999] NSWLEC 208 at [12]-[13]. 105 Vanadi involved land with buildings erected on it that were listed as an "item of the environmental heritage" in the relevant Local Environmental Plan. They had no utility in their present form for any purpose that was permissible under the Local Environmental Plan, and the cost of making them useful would be greater than the cost of demolition and replacement with buildings with a similar floorspace. Though counsel for the landowner, Mr Davison SC, argued that those particular buildings were an encumbrance on the land, not an improvement, that argument was not accepted. Part of the judge's reason for so doing was that, if the landowner's argument were accepted, "… it would require the valuer to take a subjective approach to determine whether what is erected on the land in fact adds value to the property. Existing improvements may be valuable to a purchaser who has a use for them whereas a developer acquiring the land in order to convert it into unimproved land might place no value on the same improvements. To approach the construction of s 6A (1) on the basis that only those works and buildings that add value to the land to be treated as if they had not been made would be to determine the value of one parcel on an alternative basis to another. The object of this section is to, as far as practicable, place all parcels of land on an equal footing for the purpose of the valuation. For that purpose the land is to be stripped of all of its structures beyond those defined as land improvements in s 4. It is as if nothing had ever been built on the land. The use of the words "had not been made" is directed to removing anything that is there no matter by whom or when it was erected. A practical approach demands that improvements be regarded as anything erected on the land since it passed from its primitive condition, save as to the land improvements as defined. … The use of the word "improvements" in s 6A (1) should be taken in the context of additions made to vacant land rather than in the colloquial sense where the confined meaning attributed to it by Mr Davison might otherwise apply." 106 That reasoning does not, with respect, meet the circumstances with which Vanadi was concerned, where the improvements had no utility for any permitted purpose in their present form. Further, it does not, in my view, provide a sufficient reason based in the text or context of section 6A(1) to depart from the meaning of "improvements" that is its ordinary English meaning, and the meaning adopted in a long line of authority over many decades. I also note that, since Vanadi was decided, a new section 14G (the text of which is set out at para [55] above) has been included in the Act (by the Valuation of Land Amendment Act 2000, section 3, Schedule 1), to provide a special principle of valuation for land containing heritage restricted buildings. 107 Justin John held that fire damaged structures on land, that did not enhance the value of the land, still counted as "improvements" for the purpose of section 6A(1). In my view, that case is wrongly decided.

2. Appellant to pay costs of the Respondent of the appeal. **********

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