Jenkyn v The Valuer General

[2000] NSWLEC 280

Land and Environment Court

of New South Wales

CITATION:	Jenkyn v The Valuer General [2000] NSWLEC 280
PARTIES:	APPLICATION: Jenkyn RESONDENT: The Valuer General
FILE NUMBER(S):	30062; 30063; 30064 of 2000
CORAM:	Bignold J
KEY ISSUES:	Costs :- costs in valuation appeal - effect on land value of heritage restrictions - consent orders reducing amount of statutory valuation - whether exceptional circumstances established.
LEGISLATION CITED:	Valuation of Land Act 1916
CASES CITED:	Leichhardt Municipal Council v Seatainer Terminals (1981) 48 LGRA 409; Maurici v Chief Commissioner of State Revenue (No 3) (2000) 107 LGERA 222; Secretary of State for Foreign Affairs v Charlesworth Pilling and Co (1901) AC 373; Tenstat Chullora No 2 Trust v Valuer General (2000) 110 LGERA 227
DATES OF HEARING:	1 December 2000
DATE OF JUDGMENT:	12/22/2000
LEGAL REPRESENTATIVES:	APPLICANT: Mr Jenkyn, Barrister (also agent for other Applicants) SOLICITORS N/A RESPONDENT: Mr P Kelso, Solicitor SOLICITORS Kelso Taylor

JUDGMENT:

IN THE LAND AND Matter No . 30062, 30063 of 2000

ENVIRONMENT COURT OF Coram : Bignold J.

NEW SOUTH WALES 22 December 2000

JENKYN

Applicant

v

THE VALUER GENERAL

Respondent

JUDGMENT

Bignold J:

A. INTRODUCTION

1. By their Notices of Motion filed in each set of three related class 3 proceedings, each Applicant seeks an order for costs in the proceedings. The Motions which are opposed by the Valuer General have, by consent, been heard together.

2. Each of the proceedings involved an appeal pursuant to the Valuation of Land Act 1916, s 38 against the Valuer-General’s decision on an objection to the Valuer-General’s determination of the “land value” of a residential property situate in the Municipality of Hunters Hill as at the base date of 1 July 1999.

3. Each of the proceedings was commenced on 6 June 2000 and each of the proceedings was concluded (without any hearing on the merits of the case) by consent orders made on 20 November 2000.

4. In each case, the consent orders significantly reduced the amount of the statutory valuation that had been determined by the Valuer-General and reserved the question of costs for the Court’s later determination.

5. Since Mr Jenkyn, Barrister, appears for himself in his proceeding and also as agent for the other Applicants in their proceedings and since the issues raised in each of the cases were common, it will facilitate matters if the judgment were to concentrate on the facts of his case. This accords with the manner in which the three Notices of Motion were presented and argued.

6. The relevant facts of Mr Jenkyn’s case must now be noted. For convenience, I shall deal with them in three stages—(i) Pre-litigation facts; (ii) Litigation History; (iii) Facts established at the Hearing.

B. RELEVANT FACTS PRIOR TO LITIGATION

7. On 28 September 1999 the Valuer-General determined the land value of the Applicant’s properly known as No 30 Woolwich Rd, Hunters Hill as at base date 1 July 1999 in the sum of $935,000 and subsequently notified the Applicant of that valuation.

8. On 24 February 2000 the Applicant objected to that determination. The objection was contained in a detailed written submission (some four pages in length supported by a considerable body of written materials). The central thrust of the objection was that the valuation should be significantly reduced on account of the severe restrictions on the use of the property by virtue of it having been listed as a heritage item by the Hunters Hill Local Environmental Plan (the LEP).

9. In support of that submission, the Applicant relied upon the advice of a property consultant specialising in the Hunters Hill area whose written advice had noted “the view has been taken by the Office of State Revenue NSW Treasury in relation to heritage listed properties in Hunters Hill of offering approximately 1/3 reduction in land valuation”.

10. On 7 April 2000, the Valuer-General notified the Applicant that he had upheld his objection and in consequence, the land value (as at the base date of 1 July 1999) had been reduced from $935,000 to $790,000. (It was later revealed that the reduced figure should have been $750,000 due to arithmetic miscalculation.)

11. The Valuer General’s letter notifying his decision on the objection included the following statement (upon which the Applicant places fundamental reliance in justification of his appealing the Valuer General’s decision and of his prosecuting the appeal):

The only Heritage Restriction that can be recognised for Council land values is that imposed by a Permanent Conservation Order made pursuant to the Heritage Act, 1977. These Orders are made in regard to individual properties, and the Valuer-General determines a heritage value which is used for Council rating instead of the land value. Heritage restrictions imposed by Council’s Local Environmental Plan, or other planning policies, must be ignored for the purpose of determining the land value used by Council. However, such restrictions may attract a concession in the assessment of land tax. If you are liable for land tax, you should contact the Office of State Revenue to apply for the determination of a Heritage Restricted value.

12. By letter dated 2 June 2000 , the Applicant responded to the Valuer-General’s decision on the objection by seeking particulars of how the valuations of $935,000 and $790,000 respectively, in respect of his property had been arrived at “ and where you were in error in your valuation of $935,000 ”. The letter then specifically responded to the advice concerning “ heritage restrictions ” which had been included in the Valuer-General’s letter of 7 April 2000 (I have just recited the relevant passages from the Valuer General’s letter) by suggesting error by the Valuer found in (a) “ not properly taking into account the heritage restrictions that apply to our land ” and (b) “ failing to value vacant land on the basis that th e surrounding land, and improvements exist and the local planning instrument is a reality ”.

13. Furthermore, the Applicant asserted that the Valuer-General had “not correctly interpreted s 6A of the Valuation of Land Act”.

14. Finally, the letter advised that the Applicant “shall be lodging an appeal to the Land and Environment Court in relation to your review of our objection”.

15. On 6 June 2000, the Applicant commenced the present proceedings.

C. THE LITIGATION HISTORY

16. The litigation history did not ultimately follow the conventional path taken by most appeals pursuant to the Valuation of Land Act, s 38 against the decisions of the Valuer General on objections to his statutory valuations. The usual course is for such appeals to be given an early hearing date without any pleadings and simply relying upon compliance with the Rules of Court for the service and filing of expert reports 14 days before the fixed hearing date: Pt 13 Rule 16(a).

17. In fact, in accordance with the usual procedures, a hearing on 7 November 2000 was fixed for the appeal.

18. However, the Applicant, by Notice Motion brought the matter before Duty Judge on 20 July 2000, seeking an order that the proceeding be heard by a judge because “it involves questions of law”.

19. The Applicant’s Motion was adjourned to 27 July 2000 before the List Judge who on that occasion gave directions for the filing of points of claim and points of defence.

20. On that same occasion, the Applicant filed in Court a document raising the following three questions of law:

1. Whether in determining land value pursuant to section 6A of the Valuation of Land Act 1916, consideration should be given to heritage restrictions imposed by a Local Government Authority’s Local Environmental Plan and Development Control Plan upon:
a) the land itself, and
b) the land together with improvements on that land.
2. Whether in determining land value pursuant to section 6A(1) and (2) of the Valuation of Land Act 1916, it should be assumed that the land together with its improvements may continue to be used for its existing purpose as affected by heritage restrictions that apply to both the land itself and the improvements on that land.
3. In circumstances where either:
a) the relevant property to be valued is subject to heritage restrictions including being listed as an item of environmental heritage under a Local Environmental Plan, or
b) the relevant property to be valued is subject to heritage restrictions,

the appropriate method of land valuation is to take comparable sales of similar improved heritage affected properties and deduct from that value an appropriate value for the existing improvements on the relevant property.

21. The proceeding again came before the List Judge on 4 September 2000 when he vacated the hearing date that had been fixed for 7 November 2000 and gave a number of directions for the filing of expert valuation reports and for the valuers to confer, pursuant to the Court’s Practice Direction on Expert Witnesses, to prepare a joint statement for the Court pursuant to that Practice Direction.

22. The matter again came before the List Judge on 6 November 2000 for mention and was adjourned for mention before the Duty Judge on 20 November 2000.

23. On 20 November 2000, the proceedings were concluded (save for the reserved question of costs) by consent orders.

D. ADDITIONAL FACTS ESTABLISHED AT THE HEARING OF THE NOTICE OF MOTION

24. The only additional facts to emerge at the hearing of the Applicant’s Costs Motion can be briefly noted as follows.

25. On 31 July 2000 (just four days after the List Judge had given directions for the filing of points of claim and points of defence) the Solicitor for the Valuer-General wrote to the Applicant in the following terms:

In each matter and notwithstanding anything that may have been indicated by our client previously, our client does not assert the heritage restrictions imposed by a local environmental plan and/or a development control plan are irrelevant in determining land value. Our client accepts the principle laid down in Royal Sydney Golf Club v FCT (1955) 91 CLR 610 that statutory restrictions as these must be considered in determining what price would be obtained on a notional sale, as required by s 6A (1) of the Valuation of Land Act. The question of what weight should be given to those restrictions is a matter to be determined in each particular case.

It follows, in our submission that the first of the questions of law raised for consideration by the court is not in contention and we therefore suggest that it be withdrawn.

26. Included in the Applicant’s Points of Claim are the following passages which elicited the following responses in the Respondent’s Points of Defence—

Claim

20. In determining land value pursuant to section 6A of the Valuation of Land Act 1916, consideration should be given to heritage restrictions imposed by a Local Government Authority’s Local Environmental Plan and Development Control Plan upon the land itself, and the land together with improvements on that land.

Defence

The respondent admits paragraph 20 to the Points of Claim, save that it denies that in determining land value consideration would be given to the effect of heritage restrictions on existing improvements on the land because of the assumption required to be made by section 6A(1) of the Valuation of Land Act.


Claim

21. In determining land value pursuant to section 6A(1) and (2) of the Valuation of Land Act 1916, it shall be assumed that the land together with its improvements may continue to be used for its existing residential purpose as affected by heritage restrictions that apply to both the land itself and the improvements on that land.

Defence

The respondent admits paragraph 21 of the Points of Claim, but says that, in terms of Section 6A(2) of the Valuation of Land Act, the assumption stated in that paragraph does not prevent regard being had, in determining land value to any other purpose for which the property might be used on the assumption that the improvements had not been made


Claim

22. In the circumstances of this case, where the relevant property to be valued is subject to heritage restrictions, the appropriate method of land valuation pursuant to section 6A of the Valuation of Land Act 1916 is to take comparable sales of similar improved heritage affected properties and deduct from that value an appropriate value for the existing improvements on the relevant property.

Defence

The respondent denies that the method of valuation stated in paragraph 22 of the Points of Claim is an appropriate, or permissible, method to be used in determining the land value of the subject property.


Claim

23. In the case of 30 Woolwich Road the land value is $400,000 arrived at by deducting $500,000 as an appropriate sum for the improvements from the sum of $900,000, a reasonable sale price for the land and improvements.

Defence

The respondent denies both the method of arriving at a land value stated in paragraph 23 of the Points of Claim, and the land value thus derived.

27. The parties filed their respective expert’s valuations—Mr Croker, District Valuer of the Valuer General valuing the Applicant’s property in the sum of $750,000 (ie the corrected figure reflecting the Valuer General’s decision on the Applicant’s objection to his original statutory valuation) and Mr Large Consultant Valuer valuing the same property in the sum of $600,000 .

28. In the Expert Valuers’ Joint Report to the Court, agreement is reached as to the land value of the Applicant’s property in the sum of $675,000. The Report contains the following statement:

In negotiations Mr Croker and Mr Large have agreed to all elements of adjustment to arrive at the reassessed figures. A discount of 25% in assessing the land value of the subject properties has been accepted as the agreed discount for the heritage restrictions.

There remains disagreement between Mr Croker and Mr Large in relation to the analyses of improved comparable sales in arriving at land values. Mr Large considers that improved sales, particularly of heritage listed and affected properties where improvements are included should also be analysed to arrive at a land value in these cases. There also remains disagreement on whether heritage restrictions that apply to the improvements on the properties should be considered. Mr Large contends that they should and Mr Croker contends that they should not.

29. Mr Croker, in his affidavit sworn 27 November 2000, stated the following:

3. It is a well-known principle of valuation, exemplified by the decision in Royal Sydney Golf Club that public planning affectations, including those related to heritage, must be taken into account in determining land value as affecting the highest and best use that can be made of the relevant land. Based on my experience, this principle is well known and understood by every qualified valuer.

4. The initial valuation of the applicant’s land, to which the applicant objected by his letter dated 24 February 2000, took into account the heritage restrictions affecting the subject land and adjoining lands. The third paragraph of the letter from the respondent to the applicant dated 7 April 2000 which is annexure B to the applicant’s affidavit sworn 13 November 2000 was an attempt by the respondent to explain why the valuer is required to ignore the heritage restrictions as they apply to improvements on the land in determining land value, in contrast to the position where a conservation order under the Heritage Act is in place, or to the position with respect to land tax.

30. Intensive cross-examination of Mr Croker did not undermine his affidavit evidence. He said that he had been involved in the consideration of the Applicant’s objection to the original statutory valuation on the sum of $935,000. In that consideration, he had spoken to the Valuer in the State Valuation Office who had prepared that valuation on behalf of the Valuer General and although he (Mr Croker) was satisfied that he had had regard to the heritage restrictions operating under the LEP in respect of the Applicant’s property, Mr Croker considered that the objections raised warranted a greater reduction in the valuation on account of the relevant heritage restrictions. Mr Croker stated that the valuation task of determining the land value of land upon which was erected a heritage building was an intrinsically difficult task because in the nature of things, there could be no sales evidence of heritage properties as vacant land (because by definition, it was the existence upon the land of a heritage listed building which gave the land the status as a heritage property).

31. Mr Croker did concede that the advice concerning “heritage restrictions” in the Valuer General’s letter to the Applicant dated 7 April 2000 was “badly worded” inasmuch as it did not achieve its aim of clarifying the difference between (i) the land value under the Valuation of Land Act of a property containing a heritage listed building; and (ii) the land value of the same property under the Land Tax Management Act 1956, which contains in s 60 specific provision for giving effect to heritage restrictions.

E. THE COMPETING ARGUMENTS

32. The parties’ competing arguments accept as the fundamental foundation for the exercise of the Court’s discretion in relation to costs, the Court’s Practice Direction Par 10A which relevantly states:

The practice of the Court is that no order for costs is made in valuation appeals…..in class 3 of the Court’s jurisdiction, unless the circumstances are exceptional .

33. As I recently pointed out in Tenstat Chullora No 2 Trust v Valuer General (2000) 110 LGERA 227 at 230/231 prior to the introduction in 1996 of par 10A into the Court’s Practice Direction, the decided cases involving valuation objections or appeals revealed divergent approaches taken by different judges of the Court to the question of costs, but its introduction had thankfully eliminated the previous uncertainty as to the disposition of costs orders.

34. In the present case, it is accepted by each of the Applicants that it is necessary for them to establish exceptional circumstances if they are to obtain a costs order against the Respondent in the proceedings.

35. In his very helpful address, Mr Jenkyn has collected the various decisions in this Court in which costs orders have been made conformably to the Court’s Practice Direction on costs in building and development appeals (par 10).. The decided cases provide helpful illustrations of circumstances which have been held to be “exceptional” for the purposes of the Court’s Practice Direction. The circumstances have not been exhaustively defined. Nor have they been closed, although there has been developed, over the years, defined categories or classes of “exceptional” circumstances that have been recognised in the decided cases.

36. I note in passing that since Par 10A was introduced into the Court’s Practice Direction in 1996, I know of no case (nor was I referred to any case) in which costs have been awarded in a valuation appeal.

37. In support of his claim to costs, Mr Jenkyn has placed principal reliance upon three matters—
(i.) the consent orders determining the land value in the sum of $675,000 establish that the amended statutory valuation of $790,000 (or $750,000) was erroneous;
(ii.) the error in the statutory valuation (which can be traced back to the Valuer-General’s advice on the effect of heritage restrictions contained in his letter dated 7 April 2000 to the Applicant) was an error of fundamental valuation principle in the determination of the land value of a property affected by heritage restrictions in force under the LEP; and
(iii.) in order to expose that error, the Applicant had been compelled to commence the present proceedings and to vigorously and assiduously prosecute them to their conclusion which was achieved by the making of the consent orders.

38. In my judgment, the Applicant has not made good these submissions.

39. As to the first matter relied upon by the Applicant, whereas it is a truism that the Court’s power under the Valuation of Land Act, s 39 to order the alteration of the statutory valuation depends upon the fulfilment of two pre-conditions, namely—
(i.) the upholding of the objection made under the Act; and
(ii.) a finding that the statutory valuation was erroneous (see Tenstat at p 232),

there is nothing pejorative or condemnatory in a finding that the statutory valuation was “erroneous”, having regard to the intrinsic and true nature of all valuations: see Secretary of State for Foreign Affairs v Charlesworth Pilling and Co (1901) AC 373 at 391; Leichhardt Municipal Council v Seatainer Terminals (1981) 48 LGRA 409 at 436.

40. As was recently held by Lloyd J in Maurici v Chief Commissioner of State Revenue(No 3) (2000) 107 LGERA 222 at 237, a significant reduction by virtue of the Court upholding an appeal against the statutory valuation, is not an “exceptional circumstance”, within the meaning of the Court’s Practice Direction.

41. As to the second matter relied upon by the Applicant, I have not been satisfied on the evidence, that any such error of fundamental valuation principle has been made. On the contrary, the combined force of the (i) evidence of Mr Croker (which I accept), (ii) the contents of his valuation report (Exhibit A) filed in the proceedings and (iii) the contents of the experts’ Joint Report to the Court, entirely satisfy me that no such error was made by the Valuer General either in his decision on the Applicant’s objection to the original statutory valuation or in his case preparation for the hearing of the Applicant’s appeal (which was not ultimately required following the parties’ agreement to settle the case). Indeed, I am left with more than a faint suspicion that it is the Applicant and his expert valuer who may not have fully appreciated the distinction between the Valuation of Land Act, s 6A and the Land Tax Management Act 1956, s 60, as these two provisions respectively operate in the case of the determination of the land value of a property upon which is erected a heritage listed building. In a nutshell, the Applicant and his valuer appear to have assumed that the Valuation of Land Act, s 6A(2) achieves the same practical result in the determination of the land value of a property affected by heritage restrictions as is achieved by the Land Tax Management Act, s 60. In my opinion, this is an incorrect assumption.

42. As to the third matter relied upon by the Applicant, my findings in relation to the matter just discussed are also relevant at this point, and lead me to the conclusion that whatever may have motivated the Applicant to bring the proceedings, the result achieved in the proceedings has not exposed any fundamental error of valuation principle committed by the Valuer General.

43. The most that can be made of the result in the proceedings (by virtue of the making of the consent orders) is that the Applicant has been successful in having the statutory valuation of his property reduced from $750,000 to $675,000. But neither this result itself, nor the means of achieving the result by prosecuting the appeal in the manner and to the extent that the Applicant did, establishes “exceptional circumstances” within the meaning of the Court’s Practice Direction cf. Maurici at 237.

44. In so concluding, I have given close attention to the question whether what the Respondent concedes to be the “badly worded” advice contained in the Valuer-General’s letter dated 7 April 2000 to the Applicant, has materially misled the Applicant or otherwise induced him to commence the proceedings and to prosecute them unnecessarily thereby incurring considerable costs and expenses.

45. Ultimately, I have concluded that the Valuer-General’s advice, though deficient in its attempted exposition of the differences between (i) land value determined under the Valuation of Land Act, s 6A; and (ii) land value determined under s 60 of the Land Tax Management Act (cf “heritage” valuations made under s 123 of the Heritage Act 1977) did not necessitate the commencement and prosecution of the Applicant’s proceedings.

46. It is to be noted that the need for such an exposition arose directly from the Applicant’s objection which itself had injected into the debate, perhaps unwittingly, the effect of the Land Tax Management Act, s 60 (which has no application in the present case).

47. Rather, the Applicant by appealing freely chose to exercise his statutory rights under the Valuation of Land Act, s 38, just as he freely chose to prosecute the proceedings after the Solicitors for the Valuer General had informed him on 31 July 2000 (not long after the commencement of the proceedings and before the costs that were subsequently incurred, were required to be spent) that the amended statutory valuation had reflected the impact upon land value of the heritage restrictions under the LEP applying to his property.

48. For all the foregoing reasons, I have not been satisfied by the Applicant’s case that there are exceptional circumstances that warrant an order for costs in accordance with the Court’s Practice Direction Par 10A.

49. Accordingly, each of the Applicant’s Motions must be dismissed.

50. The Respondent seeks his costs on each Motion. Conformably to my decision in Tenstat and the decision of Lloyd J in Maurici, the Respondent having successfully resisted the Applicant’s Motions, is entitled to his costs on the Motion.

F. ORDERS

51. Accordingly, I make the following orders:
1. Each Applicant’s Notice of Motion seeking costs is dismissed.
2. Each Applicant shall pay the Respondent’s costs on the Motion in the sum agreed, or failing agreement, as assessed.