ADC Buildings Pty Ltd v Barana Properties No 1 Pty Ltd

[2004] NSWSC 810

CITATION:	ADC Buildings Pty Ltd v Barana Properties No 1 Pty Ltd [2004] NSWSC 810
HEARING DATE(S):	30 August, 2004
JUDGMENT DATE:	2 September 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Summons dismissed.
CATCHWORDS:	VALUATION - CONTRACT - CONSTRUCTION - Whether expert valuation binding - whether valuation carried out in accordance with requirements of contract.
LEGISLATION CITED:	- Land Tax Assessment Act 1910-1950 (NSW) - s.3 - Valuation of Land Act 1916 (NSW) - s.6, s.6A, - Valuation of Land (Ratings and Valuation) Amendment Act 1981 (NSW)
CASES CITED:	- Attorney General of The Commonwealth v Oates (1999) 198 CLR 162 - Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754 - Ferris v Plaister (1994) 34 NSWLR 474 - Gollan v Randwick Municipal Council [1961] AC 82 - Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 - McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579 - Perpetual Trustee Co Ltd v Valuer-General (2001) 115 LGERA 287 - Pye v Valuer-General [1973] 2 NSWLR 385 - Ritchie v Valuer-General (1961) 21 LGRA 296n - Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610 - Sonnerdale v Valuer-General (1953) 19 LGR(NSW) 211 - Stubberfield v Valuer-General [1991] 1 Qd R 278 - Sydney City Council v Valuer-General (1956) 1 LGRA 229 - Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50 - Seddon & Ellinghaus, Cheshire & Fifoot's Law of Contract (Butterworths 8th Aust Ed 2002)
PARTIES :	ADC Buildings Pty Limited - Plaintiff Barana Properties No 1 Pty Limited - Defendant
FILE NUMBER(S):	SC 3454/04
COUNSEL:	N.C. Hutley SC, D.R. Stack - Plaintiff S.D. Rares SC, R. Scruby - Defendant
SOLICITORS:	Deacons - Plaintiff Kemp Strang - Defendant

Introduction

1    On 8 June 1976 the Maritime Services Board of New South Wales (“the MSB”) and the Plaintiff (“ADC”) executed a Memorandum of Lease (“the Lease) pursuant to which ADC was granted a leasehold estate in the property known as 189 Kent Street, Sydney (“the Property”) for a term of ninety years expiring on 31 May 2062. 2    At some prior to 1996, the MSB was succeeded as owner of the property by the Marine Ministerial Corporation. For convenience, the parties have referred to that body also as “the MSB”, and I will continue to do so. 3    At some time after 1996, the Property was sold by the MSB to the Defendant (“Barana”). 4    By its Summons filed on 16 June 2004, ADC seeks declarations to the effect that the rent review carried out to determine the new rent as at 1 June 2003 has miscarried. It says that a valuation of the Property upon which the new rent calculation must be made has not been conducted in accordance with the terms required by the Lease. 5    It is common ground that if ADC makes out this submission the valuation should be declared of no effect notwithstanding a provision in the Lease that the valuation is to be final and binding: see Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-336.


The original rent review clause and its amendment

6    The original rent review provision in the Lease was relevantly in the following terms:
“… at a rental of … ($26,608) per annum for the period commencing on (23 November 1972) and expiring on (31 May 1973) and thereafter for each succeeding period of five years at the yearly rental for the preceding five years increased by eight per cent of the amount of increase (if any) in the unimproved capital value of the land since the commencement of each such preceding period of five years all such rents to be paid by equal monthly instalments in advance to the Board at its head office in Sydney on or before the First day of each and every month during the said term PROVIDED that such unimproved capital value as at (31 November 1972) shall be taken as ($360,000) and thereafter shall be valued by the Valuer General in accordance with the Valuation of Land Act 1916 and any amendment thereof …”
7    There is no definition of “unimproved capital value” of land in the Valuation of Land Act 1916 (NSW) (“the VL Act”). However, I think that it is clear that the parties intended that the value of the Property would be determined in accordance with the methodology for the ascertainment of the “unimproved value of land” required by the VL Act. 8 In 1976 s.6 of the VL Act defined “unimproved value of land” in the following terms:

“(1) 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.
For the purposes of this subsection ‘improvements’ in relation to land shall not include site improvements.

(2) Notwithstanding anything in subsection (1), in determining the unimproved value of 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 site improvements, referred to in subsection (1) had not been made.”
9 In 1981 s.6 of the VL Act was repealed by the Valuation of Land (Ratings and Valuation) Amendment Act 1981 (NSW) and the scheme for valuation of the “unimproved value” of land was replaced by a scheme for the valuation of “the land value of land” . A new s.6A was inserted in the VL Act in the following terms:

“(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 his predecessor in title had not been made.

(2) Notwithstanding anything in subsection (a), 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.”
10 Section 6A was further amended in 1983 and 1989 in terms which are not relevant to the present case. 11 The repeal in the VL Act of the concept of “unimproved value” made inappropriate the reference to that concept in the original rent review clause in the Lease. Between 1981 and 1996 MSB and ADC negotiated a variation of the rent review clause. 12 A Variation of Lease dated 16 December 1996 between the MSB and ADC relevantly provides:
“D. From (and including) each Review Date the annual rent payable shall be the sum which is eight per cent (8%) of the Value of the Land as at that Review Date.”
13    The following relevant definitions are provided in Clause C of the Variation of Lease:

“‘Value of the Land’ means the capital sum which the fee simple of the land hereby leased 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, had not been made. Despite anything in the preceding sentence, in determining such capital sum it will be assumed that:

(a) the said land may be used, or may be continued to be used, for any purpose which it could be used, at the relevant Review Date; 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 clause prevents regard being had, in determining such capital sum, to any other purpose for which the land may be used on the assumption that such improvements, if any, other than Land Improvements had not been made;

‘Land Improvements’ means:

(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;

(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.”
14    It should be noted that the definition in the Lease of “Value of the Land” is the same as the definition of “the land value of land” in s.6A VL Act, save that:


– in the Lease the words “despite anything in the preceding sentence” have been substituted for the words in subsection 6A(2) “notwithstanding anything in subsection (1)” ;

– in the Lease the words “in determining such capital sum it will be assumed” have been substituted for the words in s.6A(2) “in determining the land value of any land it shall be assumed” ;

– in the Lease the words “at the Relevant Review Date” have been substituted for the words in s.6A(2)(a) “at the date to which the valuation relates” ;

– in the Lease the words “clause” and “such capital sum” have been substituted for “section” and “that value” respectively in the proviso to subsection (2).

15 In my opinion, these differences between the words of the Lease and the words of s.6A of the VL Act are intended only to render the use of the words in the section apt for use in the Lease. 16 I note further that the definition in the Lease of the words “Land Improvements” is identical with the definition of “land improvements” in s.4(1)(a), (b), (c), (d) and (e) of the VL Act.


Mr Gothard’s valuation

17    In accordance with the provisions of the Lease as varied, ADC appointed its valuer to ascertain the “Value of the Land” as at 1 June 2003. ADC’s valuer assessed the value at $6.2M. Barana then appointed its own valuer who assessed the value at $39.6M. 18    In accordance with the provisions of the Lease, a third party valuer, Mr Gothard, was appointed to resolve the issue. By Clause F(f)(v) of the Variation of Lease Mr Gothard’s determination is final and binding on the parties. 19    Mr Gothard valued the Property as at 1 June 2003 at $25M. 20    The valuation methodology adopted by Mr Gothard is set out in these terms in his valuation:

“ The property which I am to value is the [fee] simple of the land. This means that, in assessing the value I am to assume that the Lease from which this task derives does not exist.

I am to assume that the improvements which occupy the land do not exist however, I am still required to recognise any Land Improvements. The excavation on the land is considered to be a Land Improvement and therefore should be included in the value.

The value is to reflect the highest and best use of the land. I should state that I believe I am required to adopt a reasonable approach to the highest and best use based on the planning and development controls at the valuation date.

Whilst considering the value based on the highest and best use I am also required to have regard to the value of the land for its existing use. In this valuation exercise I am to assume that the land may continue to be used for a building which is identical in type, use, size and style to that which is presently erected thereon.”


ADC’s submissions

21    ADC says that Mr Gothard’s valuation is not a valuation for the purposes of the rent review clause in the Lease because it has failed to apply the valuation methodology prescribed by the definition of “Value of the Land”. The submission proceeds as follows. 22    First, Mr Gothard was wrong to assess on the assumption that the Lease does not exist. He was required to value “the fee simple” .

“In the case of property which is subject to the Real Property Act , the unambiguous meaning of the words “fee simple of the land” is the interest of the registered proprietor in that property, subject to all encumbrances recorded on the title to that property, such as easements, covenants, mortgages and leases.

Accordingly, and in the context of the Lease and the Variation, Mr Gothard, in determining the “Value of the Land”, was required to determine the interest held by Barana in the Property, subject to all recorded encumbrances which relevantly included the Lease.” : Plaintiff’s submissions paras 24, 25.
23    Secondly, ADC says as follows:

“The second sentence in the definition of the “Value of the Land” required Mr Gothard, “despite anything in the preceding sentence” to assume that the Property could be used for any purpose which it was being used for or could be used for, as at 1 June 2003.

As at 1 June 2003, the Property could only be used for commercial purposes, it could not be used for residential purposes – in this regard, clause 16 of the Lease provides as follows:

‘That the said demised premises shall be used by the Lessee solely:–

(a) for the Lessee’s own offices and vehicle parking; and/or

(b) for letting (subject to the provisions of Clause 15 hereof) as offices, showrooms, car park and similar commercial activities or for such other purposes as the Board may from time to time approve.’ (our emphasis)

However, it is clear from the Gothard Valuation, that Mr Gothard had regard to and, in fact, determined the “Value of the Land” on the assumption that the Property could be used for residential purposes – in this regard, Mr Gothard noted on page 21 of the Gothard Valuation, that:

‘It can be seen that the value of the land as a site for residential development significantly exceeds that for the other uses. I have therefore concluded that the highest and best use for the property on the assumption that it is a vacant and excavated parcel, is as a site for residential development. I have therefore adopted $25,000,000 as the Value of the Land.’ ” : Plaintiff’s submissions paras 28-30.
24    I should note that there is no dispute that the zoning of the Property as at the valuation date permitted residential development with Council consent.


Barana’s submissions

25    Barana says, first, that Mr Gothard’s valuation correctly follows the valuation methodology prescribed by the definition of “Value of the Land” . Second, it says that Mr Gothard’s valuation follows the same methodology which ADC’s valuer used in his submission to Mr Gothard so that ADC should not now be heard to complain that that was not the appropriate methodology. Third, Barana says that ADC has irrevocably elected to accept Mr Gothard’s valuation. Finally, Barana says that ADC is guilty of laches in bringing these proceedings. 26    I may deal with the second and fourth submissions of Barana very briefly. 27    In my view, whether the methodology used by Mr Gothard was also used by ADC’s own valuer is beside the point. The point is whether that methodology was, or was not, in accordance with the requirements of the Lease. 28    As to laches, ADC advised Barana on 29 August 2003 that it was paying a rental founded on Mr Gothard’s valuation “under protest” since it firmly believed that the Mr Gothard’s assessment of the value of the land was excessive. ADC then expressly reserved its position. It commenced these proceedings on 16 June 2003. 29 I bear in mind that the lease is for a term of ninety years, expiring in 2062. I bear in mind also that ADC and the MSB took from 1981 to 1996 to negotiate a variation of the rent review clause upon the repeal of s.6 of the VL Act. Viewed in this context, the time taken by ADC to commence these proceedings does not, in my opinion, amount to laches.


The construction of “Value of the Land”

30    The first question which arises as to the construction of the Lease definition of “Value of the Land” is whether, by using a definition which was almost identical to the definition of “land value of land” in s.6A VL Act, the parties manifested an intention that the settled meaning which has been given to the words of that section should also be given to the words in the Lease definition. 31 Mr Hutley SC, who appears with Mr Stack for ADC, says that one must simply take the words as one finds them in the Lease, without importing any gloss derived from the cases which have considered those words in quite a different context, namely, the rating and land tax assessment cases. He points to the observation of the Privy Council in one of the seminal cases on the construction of “unimproved value” , Gollan v Randwick Municipal Council [1961] AC 82. 32 In that case, the submission had been made that the definition of “unimproved value of land” in the VL Act should be given the same meaning as the High Court had given to virtually the same definition in the Land Tax Assessment Act 1910-1950 (NSW). At p.100, Lord Radcliffe, delivering the opinion of the Privy Council, said that the Land Tax Assessment Act and the Valuation of Land Act were directed to different schemes of taxation:
“It is not therefore to be assumed without further consideration that, though words that are effectively identical are used to define unimproved value in both these Acts, they are to have the same meaning in their respective contexts.”
33 Mr Hutley also points to the fact that the words of the definition in the Lease differ somewhat from the words in s.6A. He says that the change from “notwithstanding anything” in the statutory definition to “despite anything” in the Lease definition is an important change. If the parties had wanted to replicate in the Lease the definition in the Act, he says, “it is almost unintelligible as to why you would change ‘notwithstanding’ to ‘despite’” . 34    I am unable to accept the submission that the change from “notwithstanding” to “despite” and the other minor differences between the words of s.6A and the definition of “Value of the Land” in the Lease indicate in themselves that the Lease definition was not intended to bear the same meaning as the s.6A definition. The change from “notwithstanding” to “despite” is merely an interchange of words having exactly the same meaning: see e.g. Attorney General of The Commonwealth v Oates (1999) 198 CLR 162, at para 33; Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754, at paras 12-14. If the parties to the Lease had intended that the Lease definition should mean something different from the definition in s.6A, there was a much more obvious way of making that intention unmistakeably clear than by changing words such as “notwithstanding” to “despite”. 35    In my opinion, the use in the Lease definition of “the Value of the Land” of the same words as appear in the definition of “the land value of land” in s.6A VL Act, with insignificant differences, indicates a common intention that the words in the Lease definition are to receive the same settled interpretation as has been given to the words in s.6A. My reasons are as follows. 36 In McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579, at 601, Kirby J:

“Where, especially in an insurance contract written for application in different jurisdictions, language has been used which enjoys a settled meaning, courts will ordinarily endeavour to adhere to such a meaning, particularly in a policy of a commercial character upon which the parties might have been expected to obtain expert advice from lawyers or insurance brokers.”
37    This principle of construction is by no means confined to contracts of insurance. It applies generally to commercial contracts: see Seddon & Ellinghaus, Cheshire & Fifoot’s Law of Contract (Butterworths 8th Aust Ed 2002) at para 10.31. For example, in Ferris v Plaister (1994) 34 NSWLR 474, the subject building contract contained a standard form arbitration clause. The words of that clause, or words to a similar effect, had been frequently considered by the Courts in determining the ambit of the powers of arbitrators. 38 At p.498, Mahoney JA said:
“In these circumstances, there is, in my opinion, a legitimate predisposition to conclude that the draftsman intended the words used by him to be construed in the light of the recent judicial considerations of them.”
39    In the present case, it may safely be assumed that the Lease was prepared by lawyers for the MSB and approved by lawyers for ADC. It may be safely assumed that both lessor and lessee, so advised, fully appreciated that the Lease definition of “Value of the Land” would have to be applied, not by the untutored layman, but by an expert valuer. Further, the parties, so advised, must have appreciated that a valuer would recognise instantly, as did Mr Gothard, that the Lease definition reproduced, with immaterial variations, the words of s.6A VL Act. In this case there is, in the words of Mahoney JA in Ferris v Plaister , “a legitimate predisposition to conclude” that the parties intended that the valuer applying the Lease definition should give to the words of that definition the same meaning as settled judicial authority had given to the words of s.6A VL Act. 40 I see nothing in the Lease or in the circumstances of its execution which militates against this conclusion. On the contrary, I think that it is supported by the following considerations:


– the original rent review clause expressly required the rent review to be carried out on the basis of a valuation according to the methodology provided by s.6 VL Act;

– upon repeal of s.6, the rent review provisions were varied to incorporate the words of the very section of the VL Act which had replaced the repealed s.6.

41    For these reasons, I am of the opinion that the words of the definition “Value of the Land” in the Lease are to be given the same construction as the Courts have placed on the words of s.6A VL Act.


Was Mr Gothard’s methodology correct?

42 I turn now to ADC’s submissions in the light of what the law has to say about the valuation methodology required by s.6A VL Act. 43 ADC’s first submission is that Mr Gothard, in valuing the “fee simple” of the Property, was required to take into consideration the title to the Property subject to all the encumbrances recorded thereon, such as easements, covenants, mortgages and leases. Of particular relevance is the Lease, because Clause 16 restricts the uses to which the Property may be put to those specified and only to such other uses as the lessor in its discretion approves. As Mr Gothard carried out the valuation of the Property on the assumption that the Lease did not exist it follows, says ADC, that he did not value “the fee simple” as required by the Lease. 44    In my opinion, I should accept the submission of Mr Rares SC, who appears with Mr Scruby for Barana, that well established authority makes it clear that a valuation of the “fee simple” to be conducted in accordance with the words appearing in s.6 VL Act and its predecessors must regard the “fee simple” as unencumbered by mortgages, leases or other restrictive covenants and must regard the use of the subject land as restricted only by such limitations as are imposed by statutory planning schemes. 45    In Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610, the High Court considered the meaning of “unimproved value” of land in the Land Tax Assessment Act 1916 . Section 3 of that Act defined “unimproved value” in the same terms as the former s.6 VL Act. The High Court said of this definition at 623:
“It seems evident that the fee simple mentioned must be taken as free from encumbrances which, if they impaired the value of his estate, nevertheless operated to confer upon some other person or persons an estate or interest in the land … The expression ‘the fee simple of the land’ naturally means the fee simple as the highest estate unencumbered and subject to no conditions.”
46    The decision in Royal Sydney Golf Club was applied to the construction of s.6 VL Act by Sugarman J in Sydney City Council v Valuer-General (1956) 1 LGRA 229, at 230, 236. 47 In Gollan v Randwick Municipal Council (supra), the subject land had been vested in its owners by the Crown subject to a private deed of trust which restricted the manner in which the land could be used. A lease of the land had been granted pursuant to the trust deed. The owners contended that because of the restrictions as to use contained in the deed, the value of the land for the purposes of s.6 VL Act should be nil or nominal. The Privy Council decided that, consistently with the decision in Royal Sydney Golf Club , the deed should be ignored for the purposes of valuing the land. Lord Radcliffe, delivering the advice of the Privy Council, said at p.94:
“A sale of the fee simple has to be assumed whether or not the land in question can legally be sold, and the fact that there is some lawful impediment to sale cannot be allowed to enter into the assessment of value. Similarly, it is irrelevant that the land may be so settled or encumbered that there is no single person or even combination of persons who can at the relevant date effectively transfer the fee simple. All this follows from the fact that the sale of such an estate has to be assumed.”

At p.100, his Lordship said that the “unimproved value” of the land for the purposes of s.6 VL Act was to be determined on the hypothesis “of a fee simple unencumbered and subject to no conditions” . At p.101, his Lordship said:
“Prima facie, it appears to their Lordships, ‘the fee simple of the land’ as used in s.6 does not refer to the actual title vested in the owner at the relevant date but to an absolute or pure title such as constitutes full ownership in the eyes of the law.”
48    It will be observed that the definition of “unimproved value of land” in the repealed s.6(1) VL Act is the same as the definition of “the land value of land” in the substituted s.6A(1) save that in the latter subsection it is expressly made clear that “land improvements” are not to be excluded from consideration. However, “land improvements” which may be taken into account are of their nature consistent with the notion that the land is being valued as vacant land. In those circumstances, I do not see any reason that the words of s.6A(1) should be construed differently from the words of s.6(1). 49 It follows that, in accordance with the construction which the Courts have placed on the words of s.6(1) VL Act, the words “fee simple” in the Lease definition of “Value of the Land” should be construed as requiring the Lease itself, and any restrictions on use created thereby, to be excluded from consideration in the valuation exercise, as Mr Gothard did. 50    ADC’s second submission founds upon a construction of the second sentence of the Lease definition of “Value of the Land” . That sentence is in substantially the same terms as s.6A(2). 51 ADC says that the words of the second sentence of the Lease definition require the valuer to take into account the fact that as at the date of valuation the Lease did not permit the Property to be used for any purpose other than those actually specified in Clause 16 of the Lease. 52 In my opinion, ADC’s second submission is disposed of by the answer to its first submission. The construction which has been placed upon s.6(1) and (2) VL Act requires that for all relevant purposes of valuation the restrictions on use imposed by the Lease are to be ignored. 53 The history of s.6(2) VL Act makes it clear that it was inserted, not as an exception to the provisions of s.6(1), but in order to cure an anomaly seen to arise from the words of the section as they previously stood. 54 In Sonnerdale v Valuer-General (1953) 19 LGR(NSW) 211, Sugarman J had to consider a situation in which the relevant land was used for industrial purposes as at the date of valuation although its only permissible use under the current planning legislation was residential. The statutory scheme nevertheless provided for the continuation of existing non-conforming uses. Sugarman J took the view that because the existing industrial improvements on the land were required by s.6 to be disregarded, valuation on the basis of a continuance of the existing non-conforming use was not possible. That decision was applied by Hardie J in Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50. 55 Sub-section (2) of s.6 was inserted in 1959 by the Valuation of Land and Local Government (Amendment) Act 1959 . The purpose of the Act, as was made clear by the Second Reading Speech, was “to remove an anomaly relating to unimproved valuations that has been disclosed by a recent decision of the Land and Valuation Court” . The Minister said:
“The purpose of this Bill is to … provide that, in assessing the unimproved value of land on the basis already existing, it shall be assumed that the land may be used or may continue to be used for the purpose for which it was in fact used, or could have been used, at the date of valuation and that the improvements on the land may be continued or made in order to enable the land to continue to be so used.
…
The amendment contained in the Bill accords with the generally accepted principle of valuation that the unimproved value should be determined on the basis of the most favourable use permitted by law.”
56 The ameliorating purpose of s.6(2) was expressly recognised by Sugarman J in Ritchie v Valuer-General (1961) 21 LGRA 296n, at 296, and by Else-Mitchell J in Pye v Valuer-General [1973] 2 NSWLR 385, at 388, 389. In Ritchie , his Honour said:
“It is sufficient to say that the purpose or object of the amendment was to remove the obligation which ensued from s.6(1) to determine the unimproved value on the basis of the land having no potentiality of use for the very purpose for which it was in fact being used at the date of the valuation.”

See also Stubberfield v Valuer-General [1991] 1 Qd R 278; Perpetual Trustee Co Ltd v. Valuer-General (2001) 115 LGERA 287.

57    In accordance with these decisions, it is clear in my opinion, as Mr Rares submits, that the purpose and effect of the second sentence of the Lease definition of “Value of the Land” is not to introduce into the valuation process the restrictions on use contained in the Lease. Rather, its purpose and effect is to provide for a situation where a lawful existing use of the Property is a non-conforming use under current planning legislation. In the circumstances of the present case, that consideration was irrelevant in the valuation exercise. 58    For the above reasons, I conclude that the valuation conducted by Mr Gothard was entirely in accordance with the requirements of the Lease definition of “the Value of the Land” .


Election

59    My conclusions as to the methodology employed by Mr Gothard are sufficient to dispose of the case. However, for the sake of completeness I should give my view as to Barana’s submission that it is not open to ADC to challenge the validity of the valuation. 60    Mr Rares SC says that when Mr Gothard delivered his valuation ADC was put to an election between two inconsistent contractual rights. The first right was to have the Lease performed by Barana upon payment by ADC of a rent calculated in accordance with Mr Gothard’s valuation. The second right was to treat Mr Gothard’s valuation as a nullity and to invoke the provisions of Clause F(f)(vi) of the Variation of Lease, which is as follows:
“If any Determining Valuer fails to hand down his determination of the Value of the Land within twenty-eight (28) days of his being instructed to proceed, then either the Board or the Lessee (or both) may request the President of the Australian Institute to appoint a replacement Determining Valuer.”

Handing down a “nullity” was, according to Mr Rares, a failure by Mr Gothard to “hand down his determination” .

61    Mr Rares says that ADC, having invoked Clause F(f)(vi), could then elect pursuant to Clause G to pay a lesser rent until the “Value of the Land” was properly determined in accordance with the provisions of the Lease. 62    Mr Rares says that ADC elected to exercise the first of its rights on 20 August 2003 when it accepted a refund of three months’ rent calculated on the basis of Mr Gothard’s valuation, or on 29 August 2003 when it paid rent calculated on the basis of that valuation. 63    I am unable to accept this submission, essentially for the reasons advanced by Mr Hutley SC. An election between two inconsistent contractual rights did not arise in the present case. Clause F(f)(vi) does not come into operation when the Determining Valuer fails to hand down “ a determination” , so that one may arguably say that a determination which is not made in accordance with the Lease is not “ a determination” at all. The clause operates when the Determining Valuer fails to hand down “ his determination” , that is, a determination which he has actually made, whether or not in conformity with the requirements of the Lease. 64    In my opinion, Clause F(f)(vi) operates only when the Determining Valuer fails to hand down any decision at all within the time required by the sub-clause – for example, due to death, incapacity or unwillingness. The clause does not apply where the Determining Valuer hands down a decision which one party says is valid and the other says is a nullity. In such a case, the dispute whether the valuation is a nullity is to be resolved by the Court, not by the process of appointing a “replacement valuer” under Clause F(f)(vi), with the prospect that the same position may arise when that valuer hands down his determination. If Mr Rares’ submission is correct, the process of appointing “replacement valuers” could go on indefinitely. 65    In the present case, when Mr Gothard handed down his determination ADC was faced with the choice whether to adhere to a position that the valuation was invalid, refuse to pay the rent calculated on the basis of that valuation, and risk having the Lease terminated by Barana for non-payment of rent, only to find in the ensuing litigation that the Court ultimately upheld Mr Gothard’s methodology. On the other hand, ADC could pay “under protest” the rent calculated on the basis of Mr Gothard’s valuation and challenge the validity of that valuation in Court, as it has done. These choices were not choices between rights given to it by the terms of the Lease: they were choices given to it by the processes of the law. 66    Finally, ADC had made it clear as soon as Mr Gothard’s valuation was handed down that it did not agree with that valuation and would reserve its position. Its payment of rent “under protest” was not, therefore, an unequivocal election to accept the validity of Mr Gothard’s valuation. 67    For these reasons, I conclude that ADC was not barred by election from bringing these proceedings.


Orders

68    The Plaintiff’s Summons will be dismissed. I will hear the parties as to costs.
– oOo –

Last Modified: 09/03/2004