Aldi Foods Pty Ltd v Brimbank City Council
[2013] VSC 294
•7 June 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION & PLANNING LIST
S CI 2012 3923
| ALDI FOODS PTY LTD (ACN 086 210 139) | Appellant |
| v | |
| BRIMBANK CITY COUNCIL | Respondent |
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JUDGE: | Emerton J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 December 2012 | |
DATE OF JUDGMENT: | 7 June 2013 | |
CASE MAY BE CITED AS: | Aldi Foods Pty Ltd v Brimbank City Council | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 294 | |
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LAND VALUATION AND COMPENSATION – Appeal from the Victorian Civil and Administrative Tribunal – Two site valuations before tribunal – Tribunal preferred one valuation over the other – Whether tribunal analysed land values on a ‘like for like’ basis – Whether tribunal erred in failing to make any or adequate adjustments – Whether tribunal failed to accord procedural fairness in carrying out its own analysis of comparable sales – ISPT Pty Ltd v Melbourne City Council (2008) 20 VR 447 – Secretary of the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 – Victorian Civil and Administrative Tribunal Act1998 (Vic) s 148 – Valuation of Land Act1960 (Vic) s 5A – Application for leave to appeal granted but appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr I Percy | Kelly Hazel Quill |
| For the Respondent | Dr C Parkinson | Maddocks |
HER HONOUR:
Introduction
The appellant (‘Aldi’) is the registered owner of a property at 47-69 Swann Drive, Derrimut (the ‘subject land’) on which it operates a major goods distribution centre. On 27 August 2010, the Brimbank City Council issued a rates and valuation notice to Aldi which assessed the statutory site value of the subject land as at 1 January 2010 (the ‘valuation date’) to be $20,700,000 (or $68/m²). This was supported by a valuation given by Mr Brendan Sheales of Westlink Consulting.
Aldi sought review of the Council valuation by the Victorian Civil and Administrative Tribunal. It relied upon the expert evidence of Mr Shaun O’Sullivan of M3Property (Vic) Pty Ltd, who prepared a valuation report for the subject land. Mr O’Sullivan’s report, dated 30 March 2012, concluded that the market value of the subject land at the valuation date was $13,000,600 (or $45/m²).
On 13 June 2012, the Tribunal made orders affirming the decision of the Council and confirming the site value of the subject land at the valuation date as $20,700,000.
Aldi now seeks leave under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (the ‘VCAT Act’) to appeal that decision. Given the subject-matter of the proposed appeal, it was convenient for Aldi’s application for leave to appeal to be heard at the same time as the appeal.
Aldi’s central contention is that the Tribunal, having found that there was a downturn in the market for industrial land in the western region of between 10% to 15% following the Global Financial Crisis (‘GFC’) in 2008, failed to bring this to account in determining the site value of the subject land. In addition, Aldi contends that the Tribunal misinterpreted the evidence of comparable sales presented by the parties and failed to afford it procedural fairness when it carried out an analysis of a particular sale and resale, which analysis Aldi says was clearly wrong.
The Tribunal’s decision
The Tribunal published detailed reasons for its decision to leave the site value of the subject land unchanged and confirm the Council’s valuation of $20,700,000. The Tribunal preferred the expert opinion of Mr Sheales to that of Mr O’Sullivan, whose analysis it described as ‘misleading’, at least in part.[1]
[1]Aldi Foods Pty Ltd v Brimbank City Council (Land Valuation) [2012] VCAT 794 (13 June 2013) (‘Reasons’) [128].
The Tribunal identified the primary reason for the difference in the assessments of land value to lie in the application of sales evidence and the fact that each valuer held a different view of the likely purchaser for large industrial sites at the relevant date. Each party’s view of the local industrial market as at the valuation date was tied to its view of the likely purchaser of the subject land. The Tribunal observed that Mr Sheales was not as ‘fixated’ on the GFC as Mr O’Sullivan, because Mr Sheales identified more than one type of buyer for the subject land.[2]
[2]Reasons [81].
After setting out the expert evidence given by Mr O’Sullivan and Mr Sheales respectively, the Tribunal carried out its own analysis of the evidence, noting the different views of market conditions and the impact of the GFC.
The Tribunal considered the statistical information that Mr O’Sullivan used to support his hypothesis of a decline in land values as a result of the GFC and concluded that such statistical evidence served only as a market indicator; none of it supported the significant downturn in the market of between 14% and 69% over a four year period contended for by Mr O’Sullivan.[3]
[3]Reasons [95]. According to the Tribunal, these statistics indicated that the biggest change in en globo land values within the north-west region was at the lower end of the market, where values fell from $50/m² to $30/m² between February 2009 and March 2010. However, there was no explanation of what was included in the north-west region, nor any indication as to what a purchaser could expect to obtain for $30/m² and $70/m². The Tribunal did not consider that the subject land would be at the low end of this range, given the readily accessible network of sea and road linkages, and the general amenity of the development.
The Tribunal then went on to consider the sales evidence, noting that there were some sales that deserved particular attention. These were: 20 Palmers Road, Truganina; 469-491 and 499-525 Frankston-Dandenong Road, Lyndhurst (the ‘Lyndhurst land’) which sold in 2006 and again in 2010; 361-399 Kororoit Creek Road, Altona; 720 Kororoit Creek Road, Altona; 165-211 Robinsons Road, Ravenall; and 210 Maidstone Street, Altona. Having regard to the evidence of Mr O’Sullivan and Mr Sheales, the Tribunal formed a view as to what the sales indicated about the value of the subject land at the valuation date.
Precisely how the Tribunal carried out this task is the subject of the first ground of appeal.
The Tribunal’s analysis of the Lyndhurst land requires special attention. Although both valuers referred to the 2010 sale of the Lyndhurst land, Mr O’Sullivan placed significant weight on its sale in 2006 and resale in 2010, to demonstrate a 35% downward movement in the market over the four year period. The Tribunal did not accept this evidence, observing that the circumstances, terms and conditions of each of the sales was not provided, and that it could not be certain that the analysis of each sale was carried out on the same basis.
In fact, the Tribunal carried out its own analysis of the sale and resale of the Lyndhurst land, which it said showed a smaller difference in value in June 2006 and October 2010 than that contended for by Mr O’Sullivan. It concluded that the analysis of these sales, based on the known data, indicated that the purchase price on each occasion might have been more similar than Mr O’Sullivan claimed and that identifying the real difference between the two sales was dependant on knowing to what extent the first purchaser was informed about the property and various other circumstances, along with the terms and conditions of each sale.[4] The Tribunal found Mr O’Sullivan’s analysis of the sales of the Lyndhurst land as a measure of market change to be ‘unreliable’.[5]
[4]The Tribunal’s reference to knowing to what extent the first purchaser was informed about the property relates to an earlier comment that at the time of the 2006 sale, the zoning of the land was pending ‘Industrial 1’, but it was subject to a planning scheme amendment and there was some level of uncertainty in respect of the planning change.
[5]Reasons [110].
Overall, the Tribunal concluded that:
(a)While there was a downward change in the industrial market of the western region around the valuation date, its own interpretation of the statistical evidence did not support the wide and dramatic downward change for which Mr O’Sullivan contended and a downward change of between 10% to 15% was more likely for en globo parcels;
(b)As to Mr O’Sullivan’s use of pairs of sales to show a downward change in the market, the lack of accurate information meant that the results were far from convincing and flew in the face of other statistics that he relied upon;[6]
(d)Reliance by Mr O’Sullivan on the sale of a near completed 64 lot subdivision site in Kororoit Creek Road and its comparison with another sale fronting the same road[7] was also problematic in that the data used to adjust the sale price to an en globo value was given as estimated and neither qualified nor supported, and the circumstances of the sale were not disclosed;[8]
(e)In contending that the prospective purchaser for the subject property was a developer who would subdivide the land, Mr O’Sullivan appeared to ignore the immediate development capabilities of the subject site, its extensive street frontage and it being in a desirable estate;[9]
(f)If all or any of the principal sales were omitted from the evidence, Mr Sheales could fall back on an assortment of other sales of en globo parcels that showed support for his site value.[10]
[6]Reasons [125]. See also Reasons [126] where the tribunal found that not including all the information when making an analytical comparison amounted to ‘constructing a smoke screen’ in an endeavour to hide the true reality. It observed that even its own analysis of the sale and resale of the Lyndhurst land was subject to the provision of further information and that the other pairs of sales relied on by Mr O’Sullivan were in respect of land that differed in size and did not, in any event, show a reduction in value of the size contended for.
[7]Further to the west and on the north side of Kororoit Creek Road.
[8]Reasons [128].
[9]Reasons [130].
[10]Reasons [129].
Comparing the expert evidence of the valuers, the Tribunal concluded that Mr O’Sullivan relied heavily on statistical data that it found was not well interpreted and on comparisons of ‘pairs of sales’ that it found were disparate, to produce a ‘downward trending outcome’ that not even the statistics in his report supported. By contrast, the Tribunal found that Mr Sheales provided a more objective view of the market and discussed a wider range of local sales that, when compared to the subject site and its attributes, produced a more logical and convincing case for the site value that he proposed.[11]
[11]Reasons [131].
The Tribunal therefore accepted the expert opinion of Mr Sheales and confirmed the Council’s valuation.
Grounds of Appeal
In its amended draft Notice of Appeal,[12] Aldi raised no less than 13 grounds of appeal against the Tribunal’s decision. Those grounds were summarised in the affidavit of Matthew Houlihan[13] as follows:
(a)failing to make any adjustment to the site value of the subject land to take into account the effects of the downturn in the industrial market caused by the GFC on comparable property values, having found that there was a downward change in the industrial market of the western region of Melbourne at the valuation date of between 10% and 15%;
(b)misinterpreting and misapplying the evidence in determining the extent of the downturn in the market for industrial land in the western region of Melbourne in the period from January 2008 to January 2010;
(c)failing to make its own inquiries about the extent of the said downturn in the period from January 2008 to January 2010, having noted in its decision that more information was required;
(d)failing, in relation to the determination of site value, to take into account every relevant matter or thing as required by s 5A of the Valuation of Land Act1960 (Vic) (the ‘VL Act’) when considering comparable sales relied on by the parties;
(e)failing to afford Aldi procedural fairness by allowing the Council to rely on the Westlink report and the evidence of Mr Sheales in circumstances where there had been a failure to comply with the Tribunal’s order for the filing of expert reports; and
(f)failing to afford Aldi procedural fairness by undertaking its own analysis of a comparative exercise undertaken by Mr O’Sullivan without first giving Aldi any opportunity to adduce further relevant evidence or make submissions on that analysis.
[12]Filed 19 November 2012.
[13]Sworn on 18 July 2012.
It will be observed that some of these grounds do not raise questions of law and others misconceive the functions and powers of the Tribunal. In the event, a number of grounds were not pursued and Aldi relied on the following two proposed grounds of appeal:
(a) The Tribunal did not arrive at a valuation for the subject land in accordance with the requirements of the VL Act because comparable sales were not analysed on a ‘like for like’ basis;
(b) The Tribunal denied Aldi procedural fairness because it embarked on its own inquiry into the sales of the Lyndhurst land, mistakenly reached a conclusion adverse to Aldi’s interests and failed to give Aldi the opportunity to correct the error that it made.
The first of these grounds is made up of two parts:
(a) The Tribunal’s failure to adjust for the GFC downturn that it found to be in the order of 10% to 15%;
(b) More generally, the Tribunal’s failure to analyse sales by making adjustments having regard to the time at which sales took place and their degree of comparability.[14]
[14] The problems with comparable sales were originally set out in paragraph 6 of the proposed amended Notice of Appeal as follows:
Ground 1: Failure to analyse sales on a ‘like for like’ basis
In confirming the Council’s valuation, the Tribunal relied on the evidence of comparable sales identified by the expert valuers. However, Aldi submits that the Tribunal failed to make adjustments to the comparable sales for time and other matters and, in failing to make adjustments, failed to analyse sales on a ‘like for like’ basis and thereby failed to comply with the requirements of s 5A of the VL Act.
Section 5A of the VL Act provides:
5A Determining value of land
(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.
(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.
(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account—
(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;
(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;
(c) the shape size topography soil quality situation and aspect of the land;
(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;
(e) the extent condition and suitability of any improvements on the land; and
(f) the actual and potential capacity of the land to yield a monetary return.
Aldi submits that the Tribunal impermissibly ignored the requirements of s 5A by failing to make any adjustment to the site value of the subject land having regard to the downturn in the industrial land market on comparable property values in western Melbourne prior to the valuation date, primarily as a result of the GFC. The Tribunal, while finding that there had been a downturn in values of between 10% and 15% because of the GFC, then made no adjustment to the comparable sales.
According to Aldi, Mr O’Sullivan went to some lengths to analyse and make adjustments, including carrying out analyses of pairs of sales of the same land. By contrast, Mr Sheales relied on ten comparable sales which covered the period from February 2008 to July 2011, but in only one of those sales did he carry out any true analysis and he made only one adjustment. Aldi submits that the so-called ‘analysed rate’ in Mr Sheales’ appendix of comparable sales was simply a function of land area and sale price and that, in cross-examination, Mr Sheales conceded that some adjustments should have been made and that two of his principal sales made at the peak of the market required adjustments of up to 15%.
In the final analysis, so Aldi submits, few sales were relied upon by the Council as truly comparable sales. Moreover, no adjustment was undertaken to make them comparable. Aldi contends that the Tribunal erred in failing to recognise that Mr Sheales disavowed reliance on practically all of his comparable sales, save for a limited purpose.
Counsel for Aldi produced a table of Mr Sheales’ key comparable sales and took the Court through the sales one by one to explain what he said were the problems with Mr Sheales’ analysis. He identified 165 Robinsons Road and 678 Boundary Road as two key comparable sales relied upon by Mr Sheales, who conceded in cross-examination that an adjustment of up to 15% was warranted for both sales. However, the Tribunal made no adjustments to those sales and simply referred to the Boundary Road property as one of four relied on by Mr Sheales that it said lent support to the adopted rate of $68.68/m² contended for by the Council.
For its part, the Council questioned the premise that an adjustment of 10% to 15% was required and submitted that Mr Sheales’ approach meant that no such adjustment needed to be made. Having identified the highest and best use for the subject land to be for a distribution centre like the one operated by Aldi, Mr Sheales’ valuation methodology was to undertake a direct comparison on a unit per square metre rate as the best indicator of the value of the land and not to fixate upon general market movements. Mr Sheales accepted that there was a GFC and that it was a contributing factor to movements in the industrial property market in Melbourne at the valuation date. His evidence was that, in general, sales of industrial property between 2008 and early 2011 showed pluses and minuses, with an average reduction of 7.72%.[15] However, he could not clearly identify a marked reduction in lot values for individual industrial sales and, while he accepted that the GFC had an influence, he considered that it was not a factor that could usefully be isolated in the present circumstances.[16]
[15]Transcript of Proceedings, Aldi Foods Pty Ltd v Brimbank City Council (Land Valuation) (Victorian Civil and Administrative Tribunal, Senior Member Rickards and Member Hancock, 13 April 2013) 111 (‘Transcript’).
[16]Transcript 114; Transcript 113; Transcript 115.
The Council submits that even if it was necessary to make adjustments to comparable sales of 10% to 15% for the GFC, Mr Sheales’ valuation would stand. Only two of Mr Sheales’ six key sales occurred in the market peak: 165 Robinsons Road and 678 Boundary Road. While Mr Sheales analysed Robinson’s Road at $64/m², Mr O’Sullivan’s analysis was $72/m², and the Tribunal found it to be an inferior site compared to the subject land.[17] As a result, a 10% to 15% reduction would still support Mr Sheales’ value for the subject land. As to 678 Boundary Road, Mr Sheales told the Tribunal that if the price were adjusted down by 10% to 15% as proposed by Aldi, the rate of $55/m² or $60/m² (instead of $65/m²) would still support his value for the subject land because of the subject land’s markedly superior location.
[17]The Tribunal accepted that it was an inferior site, observing that it was removed from the greater industrial precinct, although it had extensive exposure to the Deer Park bypass. The unique extensive frontage possessed by the subject land provided a significant benefit in its development.
The Council therefore submits that, even if Aldi is correct and the Tribunal was required to take 10% to 15% off the Robinsons Road and Boundary Road sales because they occurred at the peak of the market, it would have made no difference in this case.
I accept this submission for the reason given by the Council.
However, Aldi complains more generally that, insofar as the Tribunal purported to prefer and to rely upon the expert opinion of Mr Sheales, such reliance constituted an error of law in that Mr Sheales did not properly analyse and compare the relevant sales. Aldi invited the Court to descend into the detail of the competing valuations and the evidence given by the valuers, to argue, in essence, that the Tribunal should not have preferred Mr Sheales’ evidence to that of Mr O’Sullivan or, conversely, that it should have preferred Mr O’Sullivan’s evidence to that of Mr Sheales.
In my view, it would be highly unusual for the Tribunal’s preference for the evidence of one expert valuer over another to give rise to an error of law.
It is not the Court’s function to decide whether the Tribunal reached the ‘correct or preferable’ decision[18] when it determined the value of the subject land at the relevant date based on Mr Sheales’ valuation. It is well established that an appeal under s 148 of the VCAT Act is in the nature of a proceeding for judicial review. Although s 148 uses the word ‘appeal’, the Court is asked to exercise original, not appellate jurisdiction.[19] The Court must determine whether the Tribunal made errors of law that vitiated its order. As a result, s 148 does not confer a general appellate function on the Court[20] and does not provide for a rehearing on the merits.[21] There is no appeal on questions of fact.[22]
[18]Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577, 589.
[19]Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (2001) 207 CLR 72, 79; Osland v Secretary to the Department of Justice (No 2) (2010) 241 CLR 320, 331; 351.
[20]Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6, [9].
[21]Spilkin v Rosenberg [2011] VSCA 128, [42].
[22]Kacinskas v McMahon [2011] VSC 458, [11].
In ISPT Pty Ltd v Melbourne City Council,[23] the Court of Appeal considered how each of a specialist tribunal and a judge sitting in a valuation court might approach the task of reviewing a decision of the rating authority under the VL Act. It held that both the evaluation of the theoretical basis of an expert’s evidence and the probative force of the evidence founding the expert’s opinion were proper inquiries for the valuation court, directed to the foundations of the opinion evidence.[24] Furthermore, a judge sitting on a land valuation matter (or a non-expert or legal member of the Tribunal) is entitled to accept part of the evidence of one expert valuer and part of the evidence of another valuer and make appropriate adjustments in arriving at the true valuation.[25] As Batt J said in 101 Collins Street Pty Ltd v City of Melbourne:[26]
Whilst I cannot piece together a valuation of my own, it appears to me that I am entitled, by reference to evidence of one valuer, to adjust on a number of aspects the valuation of another valuer, provided I make allowance for the fact that one variable in a component consisting of several variables may in fact have been balanced in the latter valuer’s valuation by one or more of the other variables.[27]
[23](2008) 20 VR 447 (‘ISPT’).
[24]ISPT 455. At 453, the Court referred with approval to the passage in the judgment of Wells J, serving as the judicial head of the Land and Valuation Division of the Supreme Court of South Australia, in Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541, 544-5, in which his Honour stated that while it was not the judge’s function to bring a third set of opinions into the arena, a judge may have proper and rational grounds for preferring one expert to another and may, by consideration of the whole of the evidence, expert and non-expert, be able to conclude that one opinion is more likely to be sound than the other. He or she may, having been persuaded by the evidence of one expert, find that there is a fatal flaw in the reasoning of the other. It may appear that, having regard to the whole of the evidence, certain facts and assumptions, and therefore opinions based on those assumptions, are not well founded.
[25]ISPT 454.
[26](Unreported, Supreme Court of Victoria, Batt J, 2 April 1996).
[27]Ibid 83.
Making adjustments in valuation matters is essentially an exercise in conjecture. In Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority,[28] Handley JA commented that the need to make adjustments in order to arrive at the true valuation did not preclude the court from making adjustments which could be nothing more than the ‘best guess’ that could be made. Referring to the valuation process more generally, in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co,[29] Lord Hobhouse famously said:
In all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. [30]
[28](1991) 24 NSWLR 156, 168. See also 101 Collins Street Pty Ltd v City of Melbourne, (Unreported, Supreme Court of Victoria, Batt J, 2 April 1996) 83; Challenger Property Asset Management Pty Ltd v Stonnington City Council [2011] VSC 184.
[29][1901] AC 373.
[30]Ibid 391. Quoted in Spencer v Commonwealth (1907) 5 CLR 418, 442.
In this case, it is not clear whether the Tribunal qualified as an expert tribunal. However, it is tolerably clear that the Tribunal did not purport to bring a third set of opinions into the arena, but evaluated the expert evidence, and considered whether adjustments might need to be made to the comparable sales relied upon by the valuers, having regard to the comparability factors identified by them.
The Tribunal expressly identified the need to apply s 5A of the VL Act. It had regard to the fact that adjustments might need be made to comparable sales in order to make them truly comparable. It considered the evidence of the valuers on the question of adjustments, particularly the evidence of Mr O’Sullivan concerning the need to make downward adjustments to reflect the fall in property prices as a result of the GFC. It was unpersuaded by that evidence, although it did recognise that a smaller fall in values might have occurred as a result of the GFC.
The Tribunal considered the methodology and comparable sales of each of Mr Sheales and Mr O’Sullivan. Having regard to the features and location of the subject land, it found that its highest and best use was as proposed by Mr Sheales. It was open to the Tribunal on the evidence to do so.[31] When considering the adjustments that might need to be made, the Tribunal analysed and made findings about the reliability of statistical data relied upon by Mr O’Sullivan and his use of ‘pairs of sales’ to show a decline in the market over time. It then considered the comparable sales, and made (or not did not make) adjustments as it considered appropriate.
[31]See ISPT Pty Ltd v Melbourne City Council (2008) 20 VR 447, 465 where the Court of Appeal described the question of law that arose in that case as a result of the Tribunal’s decision as to the highest and best use of the land to be simply whether it was open to the Tribunal on the evidence before it. That question was to be decided on the evidence and inferences most favourable to the respondents.
The Tribunal’s conclusions will not be affected by error of law if they were open to the Tribunal on the evidence before it.[32] It was open to the Tribunal not to make adjustments at all or to make some adjustments, albeit not the adjustments for which Aldi contended, based on the evidence of the valuers.
[32]ISPT 477.
As to its rejection of Mr O’Sullivan’s evidence and its preference for the evidence of Mr Sheales, the Tribunal concluded:
The difference between the two Valuers’ approaches was that Mr O’Sullivan relied heavily on statistical data that was not well interpreted and comparisons of “pairs of sales” that were disparate, to produce a most unbelievable downward trending outcome that not even the statistics in his report supported, while Mr Sheales provided a more objective view of the market and discussed a wider range of local sales that when compared to the subject site and its attributes produced a more logical and so a more convincing case for the Site Value that he is defending.[33]
[33]Reasons [131].
It was open to the Tribunal to reach such a conclusion. As the Court of Appeal said in ISPT:
It was for the applicant to persuade the tribunal of the reliability of [its expert’s] evidence and it did not. The tribunal gave rational reasons for rejecting the evidence and it is not open on this appeal to re-open a judgment which went essentially to questions of weight and persuasiveness.[34]
[34]ISPT 471.
Aldi did not persuade the Tribunal of the reliability of Mr O’Sullivan’s evidence. Moreover, it now asks the Court to re-open a judgment which went essentially to questions of weight and persuasiveness.
In my view, the Tribunal gave rational reasons for rejecting Mr O’Sullivan’s evidence and preferring that of Mr Sheales. It analysed the statistical evidence of a fall in values put forward by Mr O’Sullivan and concluded that that evidence did not support a fall of the magnitude for which he contended. Indeed, the Tribunal concluded that the GFC did not have an even effect across all industrial land in Melbourne. No complaint is made about that analysis, so far as I can tell. The Tribunal also analysed Mr O’Sullivan’s ‘pairs of sales’, and explained why it was not persuaded that the comparisons could be relied upon to show a large fall in values, given uncertainties attending the development of the land, a lack of relevant information or the fact that the pairs were in respect of land that differed in size.[35]
[35]Reasons [125].
Furthermore, even though the Tribunal recorded Mr Sheales’ view that that there was a fall in the value of industrial land following the GFC in the order of 7.7% and his concession that there were examples of change in the order of 10-15%, it was a matter for the Tribunal, based on the expert evidence before it, to decide whether adjustments needed to be made in respect of individual sales. There was no requirement, as seems to be contended by Aldi, for the Tribunal to go about applying a ‘GFC adjustment’ to comparable sales as a matter of course.[36]
[36]Reasons [81].
Although its first question of law is directed to the Tribunal’s application of s 5A of the VL Act and what Aldi describes as the Tribunal’s ‘methodology’, Aldi makes specific complaint about the Tribunal’s treatment of particular sales and its rejection of the evidence given by Mr O’Sullivan about these sales. Counsel for Aldi referred in particular to the Tribunal’s findings concerning the 2010 Lyndhurst sale and the sales of 361-399 Kororoit Creek Road and 165-211 Robinson’s Road (as comparable sales).
It is not the Court’s role to adjudicate on the merits of the Tribunal’s findings in respect of individual sales. However, a careful reading of the Tribunal’s reasons shows its assessment of sales to have been influenced by its analysis of the statistical material in Mr Sullivan’s report, in particular, its findings that the biggest change in en globo land values was at the lower end of the market,[37] that land values in the western region were inferior to land values in the south-east, but that the latter were subject to greater fluctuations in price than the western region.[38] The Tribunal analysed the data relating to changes in value in the north-west (data for the west was not provided) and in the south-east for lot sales and sales of en globo land, to conclude:
The Tribunal is of the view that such statistical evidence serves as market indicators only and there is quite some variation across the three agents’ figures, but none which reinforced a significant downturn in the market ranging between 14% and 69% over a four-year period as contended by Mr O’Sullivan. There was only one change of 40% at the low end of the Englobo range for March 2010 in the statistics presented by Savilles for the north-western region, but in the same period there was no change in the upper end and so while it indicates stability at the upper end of this industrial region, more information is required for it to be more reflective of the western region alone.[39]
[37]Reasons [89].
[38]Reasons [91].
[39]Reasons [95]. The Tribunal noted that each agent reported downward trends in the industrial market, none of the reports expressed the dramatic downturn contended for by Aldi: Reasons [96].
There has been no challenge to this analysis or, indeed, to the conclusion.
Having regard to the foregoing, the Tribunal had a rational basis for its rejection of Mr O’Sullivan’s evidence concerning the sales in question.
(a) In respect of the 2010 Lyndhurst sale, the Tribunal made it plain in its analysis of Mr O’Sullivan’s statistical data that that evidence did not support a comparison being made between the south-east and the west for en globo sites.
(b) As to 361-399 Kororoit Creek Road, the Tribunal recorded Mr Sheales’ evidence that the site was in a secondary location and that there was a great deal of subjectivity in relation to how the partly completed development work should be completed. It did not accept Mr O’Sullivan’s analysis of $21/m², describing Mr O’Sullivan’s use of this sale to show a 69% change in the market as ‘cavalier’, given there was no dramatic change in the industrial market in either the south-eastern or western region in any of the data that he relied upon.[40] It said:
To say that this sale showed a 69% change in the market, in part due to its partner sale having been ‘sold above the market’, when there were too many other variables to be applied to its sale price, is misleading and in this regard, the Tribunal prefers Mr Sheales’ cautious reflection of it.[41]
(c) As to 165-211 Robinson’s Road, the Tribunal did not accept Mr O’Sullivan’s proposition that it was superior to the subject land because of its zoning and proximity to the Deer Park by-pass. The Tribunal found it was ‘removed from the greater industrial precinct’ and that the ‘unique extensive frontage’ possessed by the subject property provided a significant benefit in its development.[42] This amounts to a finding that the subject land was superior and that the discount applied by Mr O’Sullivan was simply not appropriate.
[40]Reasons [115].
[41]Reasons [128].
[42]Reasons [118].
These might not have been the conclusions reached by a third or fourth expert valuer. However, I am not persuaded that these findings were not open to be made by the Tribunal or that the Tribunal had no rational basis for rejecting Mr O’Sullivan’s evidence.
The argument that the Tribunal failed to recognise that Mr Sheales disavowed reliance on nearly all his comparable sales is not made out. Mr Sheales did not disavow reliance on 165 Robinsons Road or 678 Boundary Road. In respect of Boundary Road, Mr Sheales said that he ‘wouldn’t necessarily argue’ if someone were to say a purchaser might have paid a little bit less than his analysed rate, ‘maybe 10, 15 percent reduction’, that is, $55 - $60/m². In cross-examination, Mr Sheales said that he did not consider there was a need for a major adjustment at all. However, he accepted the fact that the number of sales had slowed and that an adjustment might be warranted. He also acknowledged that sales in early 2008 probably commanded a premium.
However, even if adjusted down by 10% to 15%, these sales continued to support Mr Sheales’ value for the subject land because of the subject land’s superior location.
Furthermore, the Tribunal found that if all or any of the principal sales were omitted from the evidence, Mr Sheales could fall back on an assortment of other sales of en globo parcels that showed support for his site value.
Mr Sheales’ valuation was also supported by the hypothetical subdivision analysis that he carried out which, as the Tribunal noted,[43] produced a value of $20,000,000.
[43]Reasons [74].
Bearing in mind that valuation is not an exact science but an estimation[44] and that the task is ultimately evaluative,[45] the Tribunal approached its task reasonably and rationally. No error of law is manifest in the way in which it carried out this task, even if reasonable minds may differ as to whether it reached the ‘correct or preferable’ decision.
[44]FCT v St Helen’s Farm (ACT) Pty Ltd[1981] HCA 4 ; 146 CLR 337, 374.
[45]Roads and Traffic Authority v Hurstville City Council [2001] NSWCA 11, [50].
Ground 1 is not made out.
Ground 2: Breach of procedural fairness
Aldi submits that it was denied procedural fairness when the Tribunal rejected Mr O’Sullivan’s analysis of the sale and resale of the Lyndhurst land after undertaking its own analysis without first giving Aldi any opportunity to adduce further relevant evidence or make submissions about the Tribunal’s analysis.
Aldi contends that the Tribunal erred in its analysis of the 2006 sale in a number of respects and that its errors led it to make a false comparison. As a result, the Tribunal misdirected itself as to the extent of the downturn in value of the Lyndhurst land between 2006 and 2010, and fell into further error by failing to fairly and properly bring to account the evidence of the downturn when determining the true site value of the subject land.
According to Aldi, the Tribunal rejected its evidence based on the resale comparison of the Lyndhurst land, notwithstanding that the evidence of Mr O’Sullivan was admitted without objection, criticism or comment,[46] and substituted its own erroneous analysis of the 2006 sale, which was revealed for the first time in its reasons. The Tribunal did not afford the parties an opportunity to assist the Tribunal to undertake the correct analysis of the 2006 sale or to make submissions as to the implications of comparing it with the 2010 sale. With the benefit of an accurate analysis of the resale comparison, the Tribunal may have come to the conclusion that the relevant downturn was closer to the downturn contended for by Aldi.
[46]Neither the Tribunal nor the Council put any questions to Mr O’Sullivan about the resale comparison.
Aldi also takes issue with the fact that the Tribunal concluded that the information about the sales was insufficient, not having made any inquiries of Mr O’Sullivan during the course of the hearing. According to Aldi, if, during its deliberations and before delivering its reasons, the Tribunal came to the view that it did not have all relevant information, it should have asked the parties for the missing information rather than proceeding to undertake its own analysis of the 2006 sale. Aldi also takes issue with the finding that the information about the sales was insufficient: it says that the relevant evidence was simply that in 2006, a purchaser paid $25.8 million at public auction and when the same land was resold in October 2010, the purchaser paid $17 million.
For its part, the Council submits that the relevant facts for the Court in assessing whether there has been a breach of the rules of procedural fairness are that Aldi’s professional valuer omitted relevant facts about the sales, and that after the hearing the Tribunal analysed the sales based upon the information before it and it rejected the comparability of the sales in its final decision, without asking for further information. The Council submits that it is the function of the Tribunal to test each party’s valuation evidence and that the Tribunal was not obliged to seek further evidence in these circumstances.
In my view, the proposition that Aldi was denied procedural fairness because the Tribunal undertook its own analysis of the difference between 2006 and 2010 Lyndhurst sales without asking for clarification or further information is misconceived. The Tribunal carried out an exercise of the kind undertaken by Mr O’Sullivan using only the information that was in evidence. It did not search out new information that the parties were denied the opportunity to test or to make submissions about. The task itself was unremarkable, in that a comparison of the 2006 and 2010 sales of the Lyndhurst land was what Aldi itself contended ought to be done to investigate the fall in land values resulting from the GFC.
I accept, however, that the Tribunal made a mistake in the way that it carried out the comparison between the 2006 and the 2010 sales. The Tribunal appears to have factored in costs represented by the need for fill, for the construction of a retarding basin and for the payment of development contributions for one sale but not for the other. This led to it comparing the sales on different bases and, potentially, drawing the wrong conclusion about the extent of the difference in the value of the Lyndhurst land over the period in question.
Nonetheless, I do not accept that the Tribunal’s failure to alert the parties as to what it proposed to do in its reasons resulted in a breach of the hearing rule. Procedural fairness does not normally require a tribunal to disclose its thinking processes or its proposed conclusions.[47] Although it has been held that parties should be notified of surprising conclusions, or conclusions that could not be easily anticipated,[48] an erroneous conclusion based on facts that were fully exposed during the course of the hearing is not a ‘surprising’ conclusion (even though it might not have been anticipated that the Tribunal would make a mistake of the kind that was made). The exercise that was carried out by the Tribunal was unexceptional given that Aldi sought to support its valuation by reference to a series of ‘pairs’ of sales comprising sales before and after the GFC. That the Tribunal embarked on its own analysis of one or more of these sales using no more than the information put in evidence could hardly have taken Aldi by surprise.
[47]Minister for Immigration and Citizenship v SZKTI (2009) 238 CLR 489, 505.
[48]Mark Aronson and Matthew Groves, Judicial Review of Administrative Action (Lawbook Co., 5th ed, 2013) 543 referring to Habib v Director-General of Security (2009) 175 FCR 411.
The rules of natural justice and procedural fairness are ‘neither standardized nor immutable’[49] and their content may vary, requiring adjustment according to the circumstances of the particular case.[50] An evaluation of the realities rather than the legalities of the situation is required when dealing with the question of what fairness demands in the circumstances.[51] In this case, the Tribunal purported to do no more than had been done by Mr O’Sullivan, but made a mistake in the way that it carried out this exercise. In my view, the circumstances in which the Tribunal carried out the exercise, and the use that the Tribunal sought to make of the result of the exercise, did not require the Tribunal to give Aldi an opportunity to be heard prior to the Tribunal delivering its reasons. Had the Tribunal not made the mistake, there would have been no cause at all for complaint by Aldi. The fact that the Tribunal made a mistake does not give rise to a breach of procedural fairness.
[49]Public Service Board (NSW) v Osmond (1986) 159 CLR 656, 676 (Deane J) cited in MH6 v Mental Health Review Board (2009) 25 VR 382, 391 [29].
[50]Heatley v Tasmanian Racing and Gaming Commission (1977) 137 CLR 487, 514; Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1, 16 [48].
[51]MH6 v Mental Health Review Board (2009) 25 VR 382, 391 [30].
There are a number of reasons why the Tribunal’s erroneous analysis of the sales of the Lyndhurst land could be of little or no consequence to its decision and was not have a vitiating error. All that the Tribunal really concluded was that in the absence of further information about the sales, they could not be relied upon to show the drop in values contended for. Furthermore, even if Aldi’s submission is correct that the value of the Lyndhurst land fell by 35% between 2006 and 2010, it is only one property, it is in a different region and the period over which the reduction in value allegedly occurred (2006 to 2010) means the same reduction cannot meaningfully be applied to any of the comparable sales relied upon by Mr Sheales, whose earliest key sale was in February 2008. Even if the Tribunal had been persuaded that the comparison showed a drop of 35% between 2006 and 2010, this would not have assisted it to better define the extent of the downturn having regard to the dates of the comparable sales, which occurred later in time. The Tribunal concluded, by reference to the statistical information proffered by Aldi (rather than the ‘pairs of sales’), that it was likely that a downward change of 10% to 15% had occurred.
The Tribunal’s erroneous analysis of the sale and resale of the Lyndhurst land did not and could not have materially affected its decision.
Ground 2 is not made out.
Conclusion
Aldi requires leave to appeal.
The criteria for the grant of leave to appeal were considered in Secretary of the Department of Premier and Cabinet v Hulls.[52] Relevantly, the applicant must identify a question of law arising out of the Tribunal’s decision, but need not establish that the Tribunal erred. Rather, the applicant must establish that the there is a real or significant argument to be put that error exists. The public or general importance of a question may also be a relevant consideration. However, whether leave should be granted must always depend on the justice of the particular case.
[52][1999] 3 VR 331 as reaffirmed in Myers v Medical Practitioners Board of Victoria (2007) 18 VR 48, 55-6.
In this case, leave will be granted, as there was a real or significant argument to be put that error existed. However, the appeal, which was heard at the same time, must be dismissed, as Aldi’s grounds of appeal are not made out.
(a) GST was included for the property at 128 Swann Drive, Derrimut, which unfairly inflated the price and resultant ‘analysed rate’ per square metre;
(b) the Respondent’s expert Mr Sheales, in relying on the sales of 440 Dohertys Road, Truganina and 373 Boundary Road, Truganina, was unaware that they were sales made to related parties and the Tribunal made no adjustment to reflect the fact that they were not at arm’s length market sales or that less evidentiary weight should be placed on them;
(c) the Respondent’s expert, Mr Sheales, provided no reasoning or evidence in support of the ‘adjusted’ sale price of $20,150,000 relied on the property at 361-399 Kororoit Creek Road, Altona, or the value of improvements carried out thereon to substantiate his analysed rate of $62.38 per square metre compared with the analysis undertaken by Mr O’Sullivan on behalf of the Appellant for his analysed rate of $21 per square metre;
(d) in undertaking his determination of the site value of the subject land Mr Sheales made no adjustment to reflect his concession of downturn in the market for industrial property in the western region of Melbourne over a four year period from 2006 to 2010;
(e) Mr Sheales’ report referred to the 2010 sale of the Lyndhurst land but did not refer to the 2006 sale or opine on the drop in market price of the property between 2006 and 2010;
(f) The Tribunal found that if certain sales were omitted from the evidence, Mr Sheales could fall back on an assortment of other sales of Englobal [sic] parcels … that showed support for his site value. Mr Sheales conceded that some of his comparable sales had limited or no comparability to the subject land. Of the three remaining en globo parcels relied on by the Council, two of the sales were related party sales of which Mr Sheales was unaware (as referred to in sub-paragraph (b) above) and the remaining sale at 678 Boundary Road, Truganina occurred in July 2008, which was close to the height of the property market.
The proposed amended Notice of Appeal contains the further ground that the Tribunal erred by misinterpreting and misapplying Aldi’s evidence in respect of the sale at 20 Palmers Road, Truganina, in that it incorrectly concluded that Mr O’Sullivan calculated the nett developable area of the land to be 8.28 hectares without indicating how the balance of the land would be developed. In fact, the Tribunal ignored the evidence of Mr O’Sullivan regarding the lack of a public acquisition overlay and the corresponding compensatory rights to conclude that the purchase price would have been influenced by the nett developable area.
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