Valuer-General - V - Perpetual Trustee Australia Limited [1999] NSWLEC 10

Appeal, s56A LEGISLATION CITED: Whether any question of law involved A caes may be decided on a principle not referred to by either party

DATE OF JUDGMENT DELIVERY: 02/10/1999

Appellant J A Ayling (i/b Taylor Kelso) LEGAL REPRESENTATIVES: Respondent P D McClellan QC (i/b Clayton Utz)

These are two appeals under the Land & Environment Court Act 1979, s 56A against the decisions and orders of the Senior Assessor (as the Senior Commissioner was then called). The proceedings which were heard and determined by the Senior Assessor were appeals under the Valuation of Land Act 1916, s 38(1) against the Valuer-General's refusal to support an objection in each case to his assessment of land value under that Act.

Each of the two appeals involves the valuations of land in two separate cities, Bathurst and Orange. Because each appeal involves similar facts and similar issues, the Senior Assessor directed that the two appeals before him be heard concurrently. The appeals before me were also heard concurrently and similar (but not identical) grounds of appeal were relied upon in each case.

The similarities shared by the two appeals are appreciated by reference to the following common facts:

· the subject of the dispute involves frontage land and land behind the main street frontage buildings; · the rear land had previously been owned by the respective city council; · the rear land had previously been provided by the respective city council as a car parking area; · the rear land is substantially isolated from surrounding streets; · subsequently to the transfer of ownership of the rear land by the respective city council, the rear land was incorporated into new shopping complexes incorporating the main street frontage land; · the current owner is in each case the same.

Land value under the Valuation of Land Act is relevantly defined in s 6A as follows:

"6A(I) 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 had not been made."

Section 14A of the Valuation of Land Act requires the land value to be assessed as at the date of the last relevant general valuation, which in the case of the Bathurst appeal the parties agreed as being 1 July 1992 ("the base date"). Sub-section (2) requires the valuer to assume that the physical condition of the land and of any other land and the manner in which any other land may be used were the same at the base date as they were on the date on which the valuation is made ("the relevant date").

In each case there was in existence at the relevant date a development consent for a shopping centre and car park on the land. The parties accordingly accepted that the land in each case was to be valued as part of a development site for a shopping centre and car park. In each case the land, which had been previously owned and used by the local council for a car parking area, had been sold by the Council to a developer for a nominal sum.

An appeal under the Land & Environment Court Act , s 56A is limited to a question of law. The appellant will fail if the error (if any) of the Senior Assessor is of fact.

It is convenient to consider each ground of appeal relied upon separately, although grounds 1, 2 and 5 in each case can be considered together..

"1. The learned Senior Assessor erred in finding that an approach to valuation which commenced with an assessment of the sum of the financial benefit obtained by the Council as a result of a sale of the subject land upon certain conditions was contrary to section 16A of the Valuation of Land Act 1916."

"2. The learned Senior Assessor erred in law in holding that he was unable to consider or sustain that approach to valuation for that reason or alternatively because he for that reason failed to consider that approach."

"5. The learned Senior Assessor erred in law in treating as irrelevant the true value of the subject land to the vendor council as evidenced by and taking into account the conditions attached to its sale and/or the true cost to the purchaser of the land taking into account those conditions."

10. The principal issue was one of valuation methodology. The Senior Assessor appears to have generally accepted the valuation methodology of Mr Smith, the respondent's expert valuer and to have rejected the valuation of the valuation methodology of Mr Parmenter, the appellant's expert valuer. The Senior Assessor said ( inter alia) :

" … I find the approach taken by Mr Smith to be intrinsically more persuasive."

The preference by the Senior Assessor for the valuation methodology adopted by Mr Smith rather than that adopted by Mr Parmenter was a decision on a question of fact. Even a perverse finding of fact cannot, in an appeal limited to a question of law, be disturbed ( Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139 at 155-156). Mr J A Ayling, who appears for the appellant, submits that in preferring the methodology of Mr Smith and rejecting the methodology of Mr Parmenter the Senior Assessor erred in principle. That does not, however, turn a question of fact into a question of law. If the Senior Assessor erred (and I am not convinced that he did) then he erred in fact.

"3. The learned Senior Assessor misdirected himself in law when he concluded that a comparison between the state of the land at the base date and at the date of valuation was necessary in order to come to a conclusion as to 'land value' as defined."

"Evidently to come to a conclusion as to 'land value' as defined, it is necessary to consider the state of the land as it was in July of 1992 and compared with the situation at 9 November 1995 at which time the valuation was made."

That is to say, the Senior Assessor thought it necessary to consider the state of the land as it was at the base date as compared with the situation on the date of the valuation. The Senior Assessor then itemised a series of matters amounting to a comparison of the physical and planning qualities of the land on each of the two dates.

13. Mr Ayling submits that if the Senior Assessor believed that he was obliged to make such a comparison in order to reach a conclusion as to land value, he was in error: the effect of ss 6A and 14A is to require land value to be assessed as at the base date as if the physical condition of the land and of any other land and the manner in which any other land may be used, were the same on the date at which the value is being determined as they were at the relevant date. Accordingly, Mr Ayling submits, the Senior Assessor's exercise in making the comparison which he did amounted to a misdirection.

14. I do not agree. Neither s 6A nor s 14A precludes a comparison of the subject land as at the two dates if such a comparison otherwise aids in the assessment of the value of the subject land. Mr Ayling does not identify how such a comparison could amount to an error of law, neither does he show how this exercise otherwise vitiated the Senior Assessor's decision.

"4. The learned Senior Assessor erred in law in concluding that the value of the land should be ascertained by aggregating $1,237,000 and $11 (being the contract prices of the 'Coles land' and the subject land) and redistributing that aggregated sum over the combined site, with various adjustments."

The appellant abandoned this ground at the hearing.

"The learned Senior Assessor erred in law in applying the so-called 'Australian rule otherwise known as the 4-3-2-1 Rule' without any evidence to support the adoption of that rule."

Although the Senior Assessor rejected the valuation approach of Mr Parmenter, preferring generally the valuation approach of Mr Smith, he did not accept the entirety of Mr Smith's views. There were two aspects of Mr Smith's approach with which the Senior Assessor disagreed. One exception is the discount rate which is the subject of Ground 7 of this appeal. The other is the method of apportionment of value across the amalgamated site. As to the latter the Senior Assessor adopted the so-called Australian Rule otherwise known as the 4-3-2-1 Rule which had not been propounded by either valuer.

The 4-3-2-1 Rule is a principle of valuation which is based on an assumption that the value of a parcel of urban land increases in accordance with, but not in direct ratio to, the depth of the land. The front 25% of the land attracts 40% of the aggregate value, the next 25% attracts 30% of the value, the third 25% attracts 20% of the aggregate value and the rear 25% attracts 10% of the aggregate value.

Mr Ayling submits that the rule is now obsolete and out of date. Depth tables and similar formulae, he submits, no longer provide a satisfactory basis for valuing parcels of land which may possess varying degrees of utility. He relies upon R O Rost and H G Collins, Land Valuation and Compensation in Australia (3rd Edition, 1993) Australian Institute of Valuers and Land Economists at 133, 645-651 and to Dr J F N Murray, Principles and Practice of Valuation (5th Edition, 1973) Commonwealth Institute of Valuers at 145-149, 494-506 in support of this submission. The authors' views in these works are to be contrasted with earlier works on valuation practice, such as the 3rd Edition of Dr Murray's book (1954) in which no such criticism is made.

Mr Ayling submits that neither party identified such a rule or sought to rely on such a rule. There was no evidence that such a rule existed. In Mr Ayling's submission it is an error of law to decide a case, or an issue in a case, upon a basis which was not argued and thus not addressed by either party. In doing what he did the Senior Assessor deprived the parties of natural justice.

Mr P D McClellan QC, who appears for the respondent, submits that the evidence of Mr Smith and the respondent's submissions at the hearing were predicated on an express assumption that land with street frontage is more valuable than land at the rear of a block. This is also implicit, according to Mr McClellan, in the acknowledgment by the parties that the car park land, being at the rear of a block, could not be developed to achieve its highest and best use unless it was amalgamated with land having significant street frontage. Furthermore, there was evidence during the hearing which expressly supported a valuation analysis based on an increased value of land having a street frontage and a decreased value of land without a street frontage.

I do not agree with Mr Ayling's submissions. It cannot be said that there was no evidence to support the Senior Assessor's approach to the question of valuation. The evidence is that identified by Mr McClellan; in particular, the concession by the appellant's valuer, Mr Parmenter, that as a general principle land in a country town having a street frontage is more valuable than land at the rear of a block with no such frontage. Neither was the Senior Assessor confined to accepting the views of either one expert or the other, or the submissions of one party or the other. The Land & Environment Court is not bound by the rules of evidence in proceedings such as this and may inform itself on any matter in such manner as it thinks appropriate ( Land & Environment Court Act 1979, s 38(2)).

In another way, the Senior Assessor was faced with the appellant's valuer who adopted valuation approach "A" and the respondent's valuer who adopted valuation approach "B". It is not an error of law for the Senior Assessor in his capacity as a judicial valuer to reject both approaches and adopt valuation approach "C".

The views to which I have come in rejecting Mr Ayling's submissions is confirmed by common experience and practice. As one would expect, it is common for parties at a hearing of any case to make submissions and to cite authorities in support of their submissions. It is by no means uncommon for the judicial officer, in sitting down to write the judgment, to find an additional authority or authorities in the cause of researching the case or in researching a topic or an issue in the case, to which neither party made any reference. The authority or authorities thus found may be determinative. Is the judicial officer under an obligation to reconvene the hearing to afford the parties the opportunity of making further submissions in the light of the judicial officer's research? I think not. The judicial officer may do so if he or she requires further assistance. It is not an error of law, however, neither is it a denial of natural justice, for the case to be decided on the basis of some principle disclosed in an authority which was not referred by either party at the hearing.

In the present case the 4-3-2-1 Rule was not referred to in the evidence or submissions. Although some commentators regard the rule as obsolete and out of date it is, nevertheless, a principle of valuation. There is some support in the evidence for a valuation approach for which the Rule stands. These considerations, together with the Court's powers under the Land & Environment Court Act , s 38(2) lead to the conclusion that this ground of appeal fails.

"7. The learned Senior Assessor erred in law in adopting a discount rate of 15% (to base rate) without any evidence to support the adoption of that rate and in the face of a finding that 12.5% was reasonable."

In order to make the adjustment from the relevant date to the base date, the appellant's valuer, Mr Parmenter, adopted a discount factor of 12.5%. The respondent's valuer, Mr Smith, adopted a discount factor of 50%. The Senior Assessor concluded that he could accept neither Mr Parmenter's nor Mr Smith's discount figures. In so concluding the Senior Assessor said:

"Although the evidence of comparable sales did not provide any clear indication of an appropriate growth over the two and a half year period from 1992 to 1995, it appears to the Court that a figure of 100% (50% depreciation) is simply unsustainable. On the contrary, the evidence such as it was is suggestive that particularly in country towns the rate of growth in commercial areas was very slow. In this respect, the Valuer-General's figure of 12.5% which equates with a growth of 14.28% is likely to be more realistic for the two and a half year period than Mr Smith's figure."

The Senior Assessor then adopted a discount figure of 15%, holding that this was "probably a reasonable figure to apply".

28. Mr Ayling submits that having found on the available evidence that 12.5% is likely to be more realistic than 50%, it was not open to the Senior Assessor arbitrarily and without giving any reason to reject 12.5% in favour of 15%: there was no evidentiary basis whatsoever for 15%.

29. In Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409, Moffitt P said (at 418):

"I do not see how a party in a valuation case contending for a higher valuation can argue that an error of law is inherent in the determination of a lower valuation because some step in the method of valuation used is not supported by any evidence and is arbitrarily fixed, where the alternate method of valuation also involves some arbitrary judgment or, where the court, as a matter of fact, decides that to be the case or, where on factual considerations, it is open to the court to discard and it does discard that method of valuation as unsatisfactory. … If the answer required to be given cannot be arrived at by reliance on evidence in the sense that is required by the judicial process in other fields, then I do not see how a decision given can be disturbed on an appeal limited to errors of law upon the argument that there was not evidence presumably in the ordinary sense to support each of the steps taken in the method of valuation used. Decision required to be come to is not amenable to the appellate process based on error of law."

30. It is clear in the present that whilst the Senior Assessor preferred the discount rate adopted by Mr Parmenter, he found as a matter of fact that this rate was not entirely satisfactory. Accordingly the Senior Assessor was required to apply the most appropriate discount rate which he could ascertain, based upon the available evidence. The fact that he did so does not amount to an error of law for the reasons described by Moffitt P in the passage quoted above. If there is any error then it is one of fact. Accordingly this ground of appeal fails.

"1. The learned Senior Assessor erred in finding that an approach to valuation which incorporated an assessment of the sum of the financial benefit obtained by the Council as a result of a sale of part of the subject land upon certain conditions was contrary to section 6A of the Valuation of Land Act 1916.

2. The learned Senior Assessor erred in law in disregarding that approach because he for that reason considered that it was flawed or unable to stand up to close inspection.

5. The learned Senior Assessor erred in law in treating as irrelevant the true value of the subject land to the vendor Council as evidenced by and taking into account the conditions attached to its sale and/or the true cost to the purchaser of the land taking into account these conditions>"

33. In this case the base date is 1 July 1993 and the relevant date 9 January 1996. The other notable difference is that whereas the Bathurst site comprised the former Council car park which had been acquired for incorporation into a shopping centre on adjoining land, the Orange site was already an amalgamated site comprising both the former Council car park and land comprising a supermarket. In the Orange appeal, as in the Bathurst case, the appellant challenges those findings and conclusions of the Senior Assessor which relate to the former car park land and the means by which that land, as an element of the whole valuation, should be considered.

34. As in the Bathust case, the Senior Assessor generally rejected the valuation approach of Mr Parmenter and preferred generally the valuation approach of Mr Smith. For the reasons given in relation to the Bathurst appeal there is no error of law. The Senior Assessor made findings of fact with which the Court on an appeal limited to a question of law cannot interfere.

"3. The learned Senior Assessor misdirected himself in law when he concluded that it was necessary to consider the state of the land at the base date n order to come to conclusions as to 'land value' as defined."

36. This ground is similar to Ground 3 in the Bathurst appeal. The appellant did not address this ground in his submissions. In the Orange appeal, however, the Senior Assessor did not undertake a comparison of the state of the land at the relevant date and the base date. He lists in the judgment the factors which existed in relation to the land at the base date. Each of the valuers performed a similar exercise, upon which basis they formed their valuations. I cannot see any error in law as having occurred. Again, if there be any error it is one of fact.

"4. The learned Senior Assessor erred in law in concluding that the value of the land should be ascertained by aggregating $1,100,000 and $11 (being the contract prices of the Coles land" and the carpark land) and redistributing that aggregated sum over the combined site, with various adjustments."

38. Although the appellant abandoned the equivalent ground of appeal in the Bathurst case, he did not expressly do so in the Orange appeal. Moreover, the appellant made only a cursory reference to this ground in his submissions in the Orange case. I am not satisfied that this ground raises a question of law. The question is, at most, a question of fact.

"6. The learned Senior Assessor erred in law in adopting a discount rate of 15% (to base rate) without any evidence to support the adoption of that rate and in the face of a finding that 12.5% was reasonable."

40. This is the same ground as ground 7 in the Bathurst case. For the reasons described in paragraphs 29 and 30 above this ground does not raise a question of law.

41. It follows that the following orders should be made:

2. The appellant (the Valuer-General) must pay the respondent's costs.

2. The appellant (the Valuer-General) must pay the respondent's costs.

I certify that this and the 16 preceding pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice Lloyd.

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