Edelman v Badower & Ors
[2008] VSC 588
•15 December 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 4334 of 2006
| DAVID EDELMAN | Plaintiff |
| v | |
| JUSTIN WOOLF BADOWER & ORS | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 December 2008 | |
DATE OF JUDGMENT: | 15 December 2008 | |
CASE MAY BE CITED AS: | Edelman v Badower & Ors | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 588 | |
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REAL PROPERTY – Partition – Sale of land out of court – Reserve price – Competing valuation evidence – Property Law Act 1958, Part IX.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M I Borksy | Mark Fagenblat |
| No appearance for the First or Second Defendant | ||
| For the Third Defendant | P J Marzella | Russell Kennedy |
HIS HONOUR:
This is a proceeding in which the plaintiff seeks orders for partition[1] of a property at 4 Forest Avenue, Hepburn Springs which, at the time when the proceeding was commenced, was owned by four separate persons as tenants in common as to one‑quarter each. The situation that now obtains is that the plaintiff, who held one one‑quarter interest, now by acquisition holds three of those quarter interests. The third defendant, which is represented by the executor because the registered owner is deceased, holds the other one‑quarter interest.
[1]Under the now repealed Part IX of the Property Law Act 1958.
The land consists of about 4,000 square metres. It is located very near the newly redeveloped Hepburn Springs Bath House and Spa. It has been described in the reports of two town planners, Mr Milner and Mr Viney, and been the subject of valuation evidence by a local real estate agent, Mr Wynack, who has given evidence for the plaintiff, although Mr Wynack is not by profession a valuer, and by Mr Castran, a Melbourne real estate agent and valuer.
The parties agree that there should be partition and a sale but disagree as to two basic matters. One is the amount of a reserve price to be stipulated in the orders and the second is as to the timing of the sale. The second point is not merely as to whether a sale should be on 60 or 90 days or some other period of time as to settlement but rather whether there should first be an allowance for a planning application to be made for the use and development of the land for unit accommodation, it being accepted that the highest and best use of the land is for up to 10 or 11 units.
The plaintiff also introduced at the last moment a variation on what I just said and that was that a sale be ordered without the stipulation by me of a reserve price. I should say at the outset that in view of the history of this case, and the fact that the parties are unable to agree on these very central points and have engaged in such an expenditure of money upon the issues, I would not send them off without setting a reserve price, but I would also provide that the price that I stipulate may be hereafter varied as agreed by them in writing.
I should also say that the first order that the plaintiff seeks is a direct order that the plaintiff purchase the third defendant's one‑quarter share in the land for a price of $225,000 on a cash contract. So, a number of variables present themselves.
In terms of valuation, I have had it submitted to me that I should prefer, on the one hand, the evidence of Mr Wynack and, on the other hand, the evidence of Mr Castran, as best indicating the value of the land. It is axiomatic, of course, that I am not bound to accept the evidence of either of them.
The purpose of expert evidence is to assist the court in arriving at that conclusion which, in the light of all the relevant circumstances, is considered appropriate and correct and in that regard the evidence of an expert is like the evidence of any other witness. Being a matter of opinion and not a matter of fact, it is something for the judge to consider and the judge may take a view not in line with either expert but that which he or she considers appropriate and correct.
The evidence of the town planners is firstly that the land is not able to be subdivided under present planning laws, that the likelihood of an application for rezoning to allow subdivision is not good, and the parties did not rely on any such possibility.
What was accepted and taken into account by the valuation evidence was that the land could be the subject of an application for a unit development. In his report, Mr Wynack refers to 11 units; in his report, Mr Castran refers to 10 units. The difference is not significant for present purposes. The present point is that such a development is realistically to be considered, even if it be one that might have to go the full length of a hearing at the Victorian Civil and Administrative Tribunal. At the moment an application for such use has not been made.
It should also be said that the plaintiff owns an adjoining property which is currently being developed with the erection thereon of a number of units. For the purpose of that development, stormwater drainage was necessary to be laid in and, doubtless because of topography, the desired line of the drainage runs through part of the subject land and indeed the pipe work has been laid, although not yet with cover of an easement. Such an easement has been sought by application to the responsible authority and doubtless one way or another will come to be granted, that is to say, either by consent or acquisition.
It is said by the third defendant that that indicates, along with the ownership of the adjoining land and its development, a special interest in the plaintiff in acquiring the third defendant's interest in the subject land. As to that the plaintiff has not sworn an affidavit and thus has not been examined upon this trial and I do not know what is the nature and extent of the plaintiff's present interest in the purchase of the subject land, at least insofar as I have no evidence from him upon that matter.
Turning to the valuation evidence, Mr Wynack in his report stated his opinion that an 11 unit residential development is feasible and represents the highest and best use of the land, that opinion being supported by the report of one of the town planners, Mr Milner. Mr Wynack said that he had taken into account the development or proposed developments on the adjoining and other sites in close proximity to the subject land and the Hepburn Bath House and Spa and estimated that a fair market price for a unit site in a development of this location, and of the type he had proposed is $80,000. That represented a value of $880,000 which, for the purposes of the case he rounded to $900,000 which, in his opinion, represented the fair market value of the land as a whole, that is to say, taking into account the development possibility.
On the other hand, Mr Castran, also considering the development a possibility, expressed the opinion that the fair market value of the property as a whole but without a permit for further development along the lines mentioned, is $1,320,000. That valuation took into account existing use rights of the four dwellings.
In his oral evidence, Mr Castran explained that he arrived at the figure of $1,320,000 by multiplying by four the amount of $330,000 which the plaintiff recently paid for the purchase of one of the one‑quarter interests in the land, that being from the owner, as the parties have so regarded matters, of one of the units erected thereon which had three bedrooms. The sale occurred, as I recall it, on 2 July this year.
It is important to note that that sale occurred pursuant to a settlement reached at a mediation between the plaintiff and that particular defendant. At one point counsel for the plaintiff sought to, as I understood it, submit that there were factors in relation to that sale which meant that for valuation purposes it could not be taken as comparable as an ordinary sale between a purchaser and vendor of the type referred to in Spencer v Commonwealth[2].
[2](1907) 5 CLR 418.
The question arose as to where the evidence was as to the terms of that sale and why it should be taken as being in the category of a special circumstance sale or not. Counsel referred me to the contract of sale and in particular to a special condition which referred to certain of the terms of settlement but neither they nor the particulars of sale endorsed on the contract indicate anything other than a sale price of $330,000 being paid for the interest sold.
I do not otherwise know what the terms of settlement were and I really cannot speculate as to what they might be. All that I know is that there was a proceeding and the relevant defendant had a counterclaim, it was settled at mediation and the plaintiff discontinued the proceeding, as doubtless the counterclaim is to be taken as having been discontinued too, but otherwise the terms are not known to me.
The fact of the sale is consistent with the plaintiff wishing to secure the subject land for himself but beyond indicating that at that time, it is not really possible for me, in the absence of evidence from the plaintiff, to extrapolate that further as to his present intention. Nevertheless, it does indicate what a person with knowledge, and doubtless being willing, was prepared to pay to a vendor to acquire an interest in the land.
Mr Castran went on from that point to postulate what would be the fair value of the land if a permit for 10 single dwelling units of the nature suggested was obtained. He concluded that, in that circumstance, the value of the property would be $1,750,000, excluding GST, on the basis that the value per dwelling site would be $175,000. He considered that to be conservative having regard to the vacant land value in the Hepburn Springs area and he, like Mr Wynack, had considered sales of other properties in the area.
It was on the basis of that opinion that Mr Castran moved to consider how the property should best be sold as between the plaintiff and third defendant to achieve a maximum price, and it is what he said in that regard that has led to the issue as to the timing of the sale, for he went on to recommend that for this purpose, prior to any sale as between themselves the parties apply for a planning permit for group accommodation of 8 to 10 residences. The application could take up to 12 months but he believed it would produce a value‑added position to the subject land and believed that at that time the market would be more favourable for that type of property.
In my view the deferral of a resolution under orders of the court of the nature that is contemplated which, in terms of the steps to be taken and the sort of costs and expenses that might be involved have been set out in the affidavits, is something that I ought not impose. The difficulty with doing so is that one would be imposing on the parties a relatively long‑term regime as compared to an order for a sale, which regime could involve the court in a supervisory function and which could involve the parties in ongoing vexation as between themselves.
I think that the proper course as a matter of discretion, because I have power either way, is not to take that course but to order a sale on terms which I will come to.
Either party, under that regime, will be free to purchase if they wish and I could not speculate as to who that might be. I also am of the view that I ought leave the parties free in that regard and not order that the third defendant sell to the plaintiff as the plaintiff proposes by its preferred option. To do so would be to preclude the third defendant from the option of having the land for itself and using it or otherwise as might be desired. I think I should leave it to the parties to work the position out themselves, out of court. Either may buy, neither of them may buy; the market can work it out.
The question really is, in my view, the matter of a reserve price for, as I have indicated before, I am going to fix one. I think it is better to do so to set the parties on as clear a line of direction as possible. Doubtless it may be said of Mr Wynack that he has all the advantage of local knowledge and while he is not a valuer as Mr Castran is, it is to be remembered that in the medical area the High Court long ago said that the regular attending general practitioner may well be preferred to a specialist in evidence as to a plaintiff's condition. That is one thing.
On the other hand, Mr Castran is undoubtedly, his curriculum vitae and evidence indicate, an agent and valuer of wide and long experience with a broad perspective drawn from that experience of markets, not merely in the Daylesford area but in wider areas and with access to potential Melbourne purchasers. One could understand in this case having two agents involved in the marketing of this property which is probably fairly sensitive in its nature and one which would need to attract or come to the attention of persons who might have a genuine interest in acquisition.
I have to say that overall I found a greater degree of persuasion in the evidence of Mr Castran. To say that is not to say anything critical of Mr Wynack who I thought was an honest witness who sought to do his best, but one has to assess these things.
I should also say that I have had to take in a lot today. It is now 4.50pm. The case had a special fixture for hearing today on an estimate of duration of one day. It may well be that if I had had an appreciation of the nature and extent of the evidence and the issues it would not have been heard today but would have gone over until some time next year. Nevertheless, the trial having been had, it is preferable that I give an answer to the case now rather than reserve my judgment. The consequence is that in the time now available I cannot give a judgment of the depth that I might have given if I had reserved. However, if I did reserve judgment, I would not be able to give judgment until next year.
It seems to me that taking the approach that I do towards experts, which is one of a relative degree of cynicism because I have never known one that has not supported the case of the party calling him, that the evidence of Mr Wynack has I think erred on the low side and the evidence of Mr Castran may have erred on the high side but I prefer the tendency of it.
The evidence as to what the value might be at some time in the indeterminate future with the benefit of a permit for 10 single dwellings is, I consider at the present time, a matter profoundly affected by speculation and uncertainty. That is one of the reasons why I refrain from sending the parties off on that basis. I take the view that it is far better to cut the knot and do so decisively now rather than have some ongoing commercial relationship set on its trail by an order of the court. Directly, I am of the view that the issue really is what figure am I to take for a fair market value of the property? Doing the best I can and preferring the direction taken by Mr Castran, I find that the fair market value of the property at the present time, taking into account its development possibility that the witnesses have referred to, is a figure which I would round down to $1.3 million and, so concluding, I will hear counsel on the terms of the orders to be made.
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