Williams v Valuer-General of NSW

Valuation of Land Act 1916

1. The VL Act relevantly provides: Part 1 Preliminary 6A Land value (1) 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. (2) 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. ... Division 2 How land is to be valued 14K Assumption as to physical condition and manner of use of land (1) For the purpose of valuing any land, it is to be assumed: (a) that the physical condition of the land, and of any other land, and (b) that the manner in which the land, and any other land, may be used, were the same on 1 July of the valuing year in respect of which the land is being valued as they were on the date on which the valuation is made. (2) For the purpose of ascertaining any allowance or apportionment factor for any land, it is to be assumed: (a) that the physical condition of the land, and of any other land, and (b) that the manner in which the land, and any other land, may be used, were the same on 1 July of the valuing year in respect of which the allowance or apportionment factor is being ascertained as they were on the date on which the land became eligible to have an allowance or apportionment factor ascertained for it.

Documentary evidence

1. Mr Williams tendered a bundle of documents which became Exhibit A. The bundle contained various documents relating to the Valuer-General's impugned valuation of the subject land, Mr Williams' formal objection to the valuation including his contentions on appeal to this Court and evidence of a 2009 valuation of the land. Exhibit B was a vegetation management plan relating to the subject site prepared by Whelans InSites Development Consultants dated 19 May 2010. Exhibit C was a notice of valuation concerning the adjacent property Lot 9 DP1172869 dated 1 July 2015.
2. The Valuer-General tendered a bundle of documents which became Exhibit 1. The bundle contained a supplementary ecological issues report by Gunninah dated June 2015, a statement of environmental effects by Cowman Stoddart Pty Ltd dated August 2015 and a flora and fauna assessment report by SLR Consulting Pty Ltd dated 17 March 2014. Exhibit 1 also contained various documents related to a development application for an eight lot subdivision of Lots 9 and 10. These were a letter from Wingecarribee Shire Council notifying local residents of the proposed subdivision, a letter from Cowman Stoddart Pty Ltd dated 7 April 2016 responding to the Council's request for further information including an ecological report by Biosis Pty Ltd and the notice of determination from the Council dated 5 July 2016 issuing approval of the development application. The Valuer-General also tendered statements of evidence from Mr Haskew town planner dated 9 December 2016 (Exhibit 2) and Mr Sharpe valuer dated 16 December 2016 (Exhibit 3).

Operation of Rural Fires Act 1997 and "10/50 rule"

1. The first issue requiring determination is the legal impact of the clearing permitted by the Rural Fires Act 1997 (NSW) (RF Act) regime on the land at the base date.
2. Following devastating bushfires in 2013 the RF Act was amended to implement a "10/50 rule". At the base date the RF Act relevantly provided: Part 4 Bush fire prevention Division 9 Vegetation clearing work 100P Definitions In this Division: 10/50 Vegetation Clearing Code of Practice means a code of practice under section 100Q, as in force from time to time, relating to the clearing of vegetation on land situated in a 10/50 vegetation clearing entitlement area. 10/50 vegetation clearing entitlement area means land determined by the Commissioner to be a 10/50 vegetation clearing entitlement area and identified on a map published on the NSW Rural Fire Service website. high-risk facility means a child care centre, school or hospital within the meaning of the Standard Instrument. residential accommodation means: (a) residential accommodation within the meaning of the Standard Instrument, and (b) tourist and visitor accommodation within the meaning of the Standard Instrument, and (c) caravans installed in caravan parks within the meaning of the Standard Instrument, and (d) manufactured homes installed in manufactured home estates within the meaning of the Local Government Act 1993. Standard Instrument means the standard local environmental planning instrument prescribed by the Standard Instrument (Local Environmental Plans) Order 2006. tree means a perennial woody plant having a single stem or trunk and which is 3 or more metres in height and the trunk of which has a circumference at a height of 1.3 metres above the ground of more than 0.3 metre. A tree does not include a shrub, which is a small, low growing, woody plant with multiple stems, nor a vine, which is a woody plant that depends on an erect substrate to grow on. 100Q The 10/50 Vegetation Clearing Code of Practice (1) The Commissioner is to prepare a 10/50 Vegetation Clearing Code of Practice for the carrying out of vegetation clearing work on land situated within a 10/50 vegetation clearing entitlement area pursuant to section 100R. The Code must (without limitation) deal with the following: (a) the type of vegetation that can and cannot be cleared, including the types of trees, (b) the circumstances in which vegetation should be pruned and not entirely removed, (c) use of herbicides, (d) managing soil erosion and landslip risks, (e) protection of riparian buffer zones, (f) protection of Aboriginal and other cultural heritage, (g) protection of vegetation that the owner of the land on which vegetation clearing work may be carried out is under a legal obligation to preserve by agreement or otherwise. (2) The Commissioner may amend the 10/50 Vegetation Clearing Code of Practice from time to time. (3) The 10/50 Vegetation Clearing Code of Practice prepared under this section, including any amendment of the Code: (a) must be published in the Gazette, and (b) takes effect on the day on which it is published in the Gazette. (4) The 10/50 Vegetation Clearing Code of Practice is to be made publicly available, as soon as practicable after publication in the Gazette: (a) by publishing it on the NSW Rural Fire Service website, and (b) by providing it as a hardcopy, on request and without charge, to any owner of land situated within a 10/50 vegetation clearing entitlement area. 100R Carrying out vegetation clearing work (1) The owner of land situated within a 10/50 vegetation clearing entitlement area may carry out any of the following vegetation clearing work on that land despite any requirement for an approval, consent or other authorisation for the work made by the Native Vegetation Act 2003 or the Environmental Planning and Assessment Act 1979 or any other Act or instrument made under an Act: (a) the removal, destruction (by means other than by fire) or pruning of any vegetation (including trees or parts of trees) within 10 metres, (b) the removal, destruction (by means other than by fire) or pruning of any vegetation, except for trees or parts of trees, within 50 metres, of an external wall of a building containing habitable rooms that comprises or is part of residential accommodation or a high-risk facility. (2) Vegetation clearing work carried out pursuant to subsection (1) must be carried out in accordance with the 10/50 Vegetation Clearing Code of Practice. (3) It does not matter whether the residential accommodation or high-risk facility is located on the owner's land or on adjoining land. (4) Vegetation clearing work on any land may only be carried out pursuant to subsection (1) by or with the authority of the owner of the land. (5) This section does not apply to a building containing habitable rooms if there is no development consent or other lawful authority under the Environmental Planning and Assessment Act 1979 for the use of those rooms as habitable rooms. (6) The Commissioner may prescribe in the 10/50 Vegetation Clearing Code of Practice whether particular rooms of a building are or are not habitable and what is or is not an external wall of a building.
3. The "10/50 rule" in s 100R(1) allows landowners situated within a 10/50 vegetation clearing entitlement area (10/50 area) to undertake specified clearing on their land in specified circumstances in accordance with the 10/50 Vegetation Clearing Code of Practice (s 100R(2)), which is provided for in s 100Q. The Rural Fire Service Commissioner's 10/50 Vegetation Clearing Code of Practice - Version 1.0 (10/50 Code) provided further instruction on the manner in which clearing is to be conducted on properties within a 10/50 area. Section 100R and the 10/50 Code permitted the clearing of all vegetation including trees within 10 m of an external wall of a building containing habitable rooms that comprises or is part of residential accommodation or a high-risk facility. Vegetation except trees within 50 m of an external wall could also be cleared. A tree is defined in s 100P of the RF Act as a perennial woody plant having a single stem or trunk and which is 3 m or more in height and the trunk of which has a circumference at a height of 1.3 m above the ground of more than 0.3 m.
4. Importantly cl 7.8 of the 10/50 Code stated: 7.8 Protection of vegetation to which a legal obligation exists to preserve that vegetation by agreement or otherwise Clearing under this 10/50 Code cannot be inconsistent with any of the following land management agreements: › any conservation agreement entered into under Division 12 of Part 4 of the National Parks and Wildlife Act 1974; › any Trust Agreement entered into under Part 3 of the Nature Conservation Trust Act 2001; › any property management plan approved by the Director-General of the NSW National Parks and Wildlife Service under section 113B of the Threatened Species Conservation Act 1995; or › any Property Vegetation Plan agreement entered into under Part 4 of the Native Vegetation Act 2003; or › any Biobanking Agreement entered into under Part 3 of the Threatened Species (Biodiversity Banking) Regulation 2008.
5. Instruments under s 88B of the Conveyancing Act were not included at the base date in the above list in cl 7.8 and consequently clearing inconsistent with such instruments was permissible under the 10/50 Code.
6. The subject land was within a 10/50 vegetation clearing entitlement area at the base date. The Gunninah report included a page from the Rural Fire Service website dated 28 June 2015 which showed the result of an online search that indicated that the subject land was in a designated 10/50 area. The town planning evidence of Mr Haskew also demonstrated that the location of habitable dwellings on adjacent lots and potential future dwelling sites on Lots 9 and 10 meant that almost the entirety of the subject land was within or had the potential to be within 50 m of an external wall. The subject land could at the base date be cleared of virtually all vegetation except trees as defined in the RF Act including Woodlands EEC if Mr Williams was agreeable to clearing, see s 100R(4). Such clearing is in addition to the clearing of any vegetation for 10 m around any future house on Lot 10.

Submissions

1. Mr Williams contended that the Valuer-General failed to properly take into account the requirements of the positive covenant resulting from the presence of Woodlands EEC on the land when it undertook its valuation. As a result of the constraints imposed by the covenant any development could only occur on a building envelope approximately 14% (or 1,000 m2) of the subject land's total area. The land value is sharply circumscribed as a result. He argued that the RF Act is a separate legal regime which does not interact with the Conveyancing Act regime.
2. Mr Williams relied on the prohibition against clearing trees that were further than 10 m but within 50 m from an external wall. He contended that since some trees and all roots needed to be preserved in accordance with the vegetation clearing provisions of the 10/50 Code the land could not have been said to be free of vegetation at the base date. There would be regrowth and the positive covenant would continue to meaningfully apply.

Effect of 10/50 rule on land at base date

1. I accept the submissions of the Valuer-General that the "10/50 rule" and 10/50 Code permitted substantial clearing of land for bushfire protection that overrode previous protections such as positive covenants as at the base date. For the purposes of the valuation the subject land could be cleared legally at the base date of substantial vegetation as identified in the report of Mr Haskew town planner summarised above in par 13. For completeness I note that the 10/50 Code has been amended since the base date such that clearing contrary to a positive covenant over land is no longer permitted. This is an irrelevant consideration in this case as the Court is required to determine the actual value of the land with reference to the base date of 1 July 2015.
2. The Valuer-General's primary submission that the amendments to the RF Act in ss 100P, 100Q and 100R and the creation of the 10/50 Code altered the entitlements of the owner of the subject land such that previous restrictions under the positive covenant created under the Conveyancing Act were at the base date effectively nullified by the clearing permitted under the "10/50 rule" is correct. As the positive covenant regime implemented under s 88B of the Conveyancing Act was not included in cl 7.8 of the 10/50 Code, clearing inconsistent with it was permitted. Mr Williams appeared to concede this in the course of the hearing. The consequence of my finding is that the land could be valued on the basis that residential subdivision development was not likely to be constrained by the positive covenant.
3. Mr Williams' contention in par 15 was not supported by evidence and is directly contradicted by evidence of the actual condition of the vegetation on the land at the base date discussed below at par 20.

Substantial removal of vegetation on the land at the base date established

1. The Valuer-General submitted in the alternative that even if the Court did not find that clearing was permitted under the RF Act the land had been substantially cleared at the base date severely compromising its ecological value. It was not ultimately disputed at the hearing that Mr Williams had caused clearing on the land to be carried out pursuant to the "10/50 rule" and in accordance with the 10/50 Code prior to the base date.
2. The Valuer-General nevertheless provided evidence that the vegetation which remained at the base date was insignificant and the positive covenant had become redundant. The Gunninah ecological report dated June 2015 stated that the ecologist had visited the land on several occasions since 2003. On his most recent inspection on 28 May 2015 he observed that clearing had occurred for bushfire protection pursuant to the "10/50 rule". Several photographs attached to the report showed the extent of the clearing on the land with the only vegetation shown being widely spaced trees and grass. The ecologist concluded that vegetation on the subject land "cannot be rehabilitated to typical SHSW [Woodlands EEC], and consequently could not contribute to the conservation of this community in this locality". A statement of environmental effects prepared by Cowman Stoddart Pty Ltd dated August 2015 said that "the site no longer contains vegetation that could be described as containing SHSW community". Even before the clearing undertaken in accordance with the "10/50 rule" occurred the Woodlands EEC was in poor condition and "[did] not represent a stand of significant native vegetation" according to the SLR Consulting Pty Ltd report dated 17 March 2014. These reports were relied upon by Mr Williams in support of a development application submitted on 12 August 2015 for an eight lot residential subdivision across Lots 9 and 10.
3. Mr Williams referred to the Biosis Pty Ltd report dated 7 April 2016 in the Valuer-General's bundle which stated that part of the site contained Woodlands EEC that met TSC Act status, albeit in poor condition. This report was prepared well after the base date and is of no assistance in ascertaining how much clearing had occurred at the base date.
4. Substantial clearing of the land occurred by the base date which means the land can be valued on the basis it could in all likelihood be used for residential subdivision.

Valuation of the land

1. The value of the land must now be determined as required by s 6A and with regard to s 14K of the VL Act.

Planning evidence

1. In addition to evidence about the application of the "10/50 rule" to the subject land (referred to above in par 13), Mr Haskew town planner provided advice a hypothetical prudent purchaser would be likely to have received as to the highest and best use of the land at the base date. Mr Haskew said in his report that the extent of the clearing pursuant to the "10/50 rule" would degrade the ecological value of the vegetation on the land to such a degree that the positive covenant would be rendered redundant. There would then be reasonable grounds for removal of the covenant from the s 88B instrument after which time the land would be available for residential subdivision. Mr Haskew formed the conclusion that the highest and best use of the land was for a seven lot residential subdivision.

Valuation evidence

1. Mr Sharpe valuer prepared a report (Exhibit 3) for the Valuer-General in these proceedings. He undertook an analysis of sales to determine the value of the subject land on two bases. Mr Sharpe relied on the town planning advice of Mr Haskew in the preparation of his report.
2. In his first approach Mr Sharpe analysed comparable sales based on the highest and best use of the subject land as residential subdivision. Mr Sharpe considered three sales in the R2 low density residential zone. The first sale was of a slightly smaller property in Mittagong with a development application for a 17 lot residential subdivision with allotments approximately 800 m2 each. The sale showed a rate of $84,375 per allotment. The sale occurred in May 2014 and no adjustment was made for market movement. Adjustments were made for superior location (+10%) and higher construction costs (-10%) leaving a total adjustment of 0%. Sales 2 and 3 occurred in Moss Vale (which Mr Williams said was too far away from the subject land to be useful for this valuation exercise). Sale 2 had been developed into 12 residential allotments of approximately 2,000 m2 each. The rate per allotment was $86,667. No adjustments were made for market movement, location or construction costs. Sale 3 had been developed with eight residential allotments of approximately 2,000 m2 each. The rate per allotment was $153,125. As in Sale 2, no adjustments were made in arriving at the analysed land value. Based on this approach Mr Sharpe derived an adjusted rate per allotment of $85,000 for the subject land. If the subject land were developed as a seven lot subdivision, as recommended in the planning evidence of Mr Haskew, its value would be $595,000.
3. In his second approach Mr Sharpe analysed comparable sales based on the highest and best use of the subject land as a single residential home site. Mr Sharpe considered three different sales of land in the R2 zone using this method. Sales 5 and 6 involved adjustments of 51% and 53% respectively which are too great to be instructive as comparable sales. Sale 4 was the most relevant. This sale occurred in nearby Balaclava in September 2014. This property contained improvements including a house and landscaping which added value of $295,000. This was reduced from the sale price to show a deduced land value of $425,000 as the subject land did not contain any improvements at the base date. Mr Sharpe made adjustments to account for Sale 4's smaller size (+6%) and single street frontage compared to two on the subject land (+5%). He arrived at an adjusted land value for Sale 4 of $472,000 on a direct comparison basis with the subject land.
4. The issued land value of $430,000 is supported on either of Mr Sharpe's approaches. While relying on Mr Sharp's report the Valuer-General does not press for a higher land value in these proceedings.

Applicant's criticism of experts' approach

1. Mr Williams disputed the validity of the experts' evidence. He contended that Mr Haskew was too categorical in assuming that the positive covenant would be revoked by the Council because of the ongoing application of the "10/50 rule". It should have been made clear in his report and to Mr Sharpe that a hypothetical prudent purchaser might not be able to obtain development consent for residential development. Mr Williams alluded to the many attempts to obtain development approval that he had made unsuccessfully over the past 15 years because of the positive covenant encumbering the land. As both experts relied on this false assumption in Mr Williams' view the statements of Mr Haskew and Mr Sharpe were "based on hypothetical evidence and good luck".
2. Mr Williams did not rely on any expert valuation evidence. He contended for a land value of $215,000, the value issued by the Valuer-General on 1 July 2015 for the adjoining Lot 9, also owned by Mr Williams. Mr Williams submitted that Lot 9 was unencumbered by any covenants and is approximately the same size as the building envelope on Lot 10 (1,000 m2). Therefore, the development potential of Lot 9 was equal to that of the subject land and the valuation should reflect that.

Valuer-General's expert evidence on land value accepted

1. Mr Williams' submissions were essentially his personal opinion on how the experts should have approached their task. Their approach appears orthodox. Mr Haskew's opinion of the highest and best use of the land was prescient given that Mr Williams obtained development consent for an eight lot subdivision of Lots 9 and 10 on 5 July 2016. I do not accept Mr Williams' criticism of the experts. I accept the opinion of land value found by Mr Sharp, relying on Mr Haskew, addressing the requirements of s 6A of the VL Act.
2. Mr Williams sought to rely on a statutory notice of land valuation of Lot 9, adjoining land owned by him. Statutory land valuations are generally afforded no weight, Falk v Valuer-General [2005] NSWLEC 141 at [20]-[29].
3. As a practical matter the Lot 9 notice of land valuation is not useful. Lot 9 is far smaller than the subject land, 1,144 m2 compared to 6,974 m2. For the reasons given at par 16 above I do not accept that on the base date development on the land was confined due to the operation of the positive covenant to the area of the building envelope. I have also not been provided with any evidence of the physical properties of Lot 9 so as to draw an accurate comparison between it and the subject land. I reject Mr Williams' submissions on land value. It follows that Mr Williams has not discharged the onus of proof he bears under s 40(2) of the VL Act.

Conclusion

1. Given my finding above on the operation of the "10/50 rule" at the base date, Mr Sharpe's first methodology applies. He derived a value of the land of $595,000. Given the Valuer-General's approach of not seeking a higher land value I will not determine a higher amount, but confirm the amount of $430,000 as the land value at the base date. Consequently this appeal will be dismissed.

Orders

1. The Court makes the following orders: 1. The appeal is dismissed. 2. No order as to costs. 3. The exhibits are returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 March 2017