Olefines Pty Ltd v Valuer-General of New South Wales

[2018] NSWCA 265

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWCA 265

Hearing dates:

25 September 2018

Decision date:

12 November 2018

Before:

Basten JA at [1];
Macfarlan JA at [30];
Leeming JA at [31]

Decision:

(1)   Appeal dismissed.

 (2)   Appellant to pay the respondent’s costs in this Court.

Catchwords:

STATUTORY INTERPRETATION – primacy of text –structure of legislation – construction of provision containing zeugma – no wider context or extrinsic factors to be considered – Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193; [2005] HCA 58 applied

 

VALUATION – land value – Valuation of Land Act 1916 (NSW), 6A – construction of, and relationship between, s 6A(1) and s 6A(2) – utility of references to separate “s 6A(1)” and “s 6A(2)” valuations

  VALUATION – land value – where actual use of land prohibited by zoning but permitted as existing use – contaminated land – whether trial judge erred by disregarding costs of remediation – whether trial judge erred by disregarding location in “blast zone” – whether error to add uplift to amount derived from sales of land of comparable value to account for existing use rights

Legislation Cited:

Environmental Planning and Assessment Act 1979 (NSW), s 4.65; Div 4.11, Pt 4
Land and Environment Court Act 1979 (NSW), s 57
Valuation of Land Act 1916 (NSW), s 6A

State Environmental Planning Policy (Three Ports) 2013
Uniform Civil Procedure Rules 2005 (NSW), r 51.53

Cases Cited:

Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365; 156 LGERA 186
Hossain v Minister for Immigration and Border Protection [2018] HCA 34; 92 ALJR 780
Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673
Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82
Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193; [2005] HCA 58
Sydney Water Corporation v Marrickville Council [2014] NSWCA 438
Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7
Valuer-General of New South Wales v Fivex Pty Ltd [2015] NSWCA 53; 206 LGERA 450
Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51

Category:

Principal judgment

Parties:

Olefines Pty Ltd (Appellant)
Valuer-General of New South Wales (Respondent)

Representation:

Counsel:
A Galasso SC/ L Waterson (Appellant)
S Duggan SC/R White (Respondent)

  Solicitors:
King & Wood Mallesons (Appellant)
Crown Solicitor’s Office (Respondent)

File Number(s):

2018/90335

 Decision under appeal 

Court or tribunal:

Land and Environment Court

Jurisdiction:

Class 3

Citation:

[2018] NSWLEC 18

Date of Decision:

22 February 2018

Before:

Molesworth AJ

File Number(s):

2016/153839; 2016/153841; 2016/153950; 2016/254571; 2016/254579; 2016/254588

Judgment

1. BASTEN JA: The appellant, Olefines Pty Ltd, is the owner of two parcels of land in the Botany Industrial Park on the north shore of Botany Bay. It has challenged the valuations of each parcel upon which land tax was assessed for the 2014, 2015 and 2016 tax years. There were six appeals, each appeal relating to one parcel of land and one tax year. The appeals, heard in the Class 3 jurisdiction of the Land and Environment Court, were rejected on 22 February 2018 by the primary judge, Molesworth AJ. [1]

   1. Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWLEC 18.

2. On 22 May 2018 the appellant lodged an appeal to this Court challenging each of the six decisions. The appeal, brought pursuant to s 57(1) of the Land and Environment Court Act 1979 (NSW), is limited to an appeal against an order or decision of the Court on a question of law. The appellant identified three broadly stated errors on the part of the trial judge, each said to involve a misconstruction of s 6A of the Valuation of Land Act 1916 (NSW), which governed the valuation exercise.

Factual background

3. Given the nature of the appeal, the factual background may be stated briefly. The Botany Industrial Park is an area of some 73 hectares. It is a secure site used for plastic and chemical manufacturing. The appellant owns lot 103 and lot 5. The larger of the two sites (lot 103) covers some 32.4 hectares comprising two non-contiguous portions of land, one being of large irregular shape and comprising the bulk of lot 103; the remainder is a small triangular block separated from the main area of lot 103 by lot 5 and a railway line. Lot 5 comprises 3.16 hectares. The main plant on lot 103 processes ethane and LPG to produce approximately 250kT of ethylene per year for the manufacture of polyethylene by other manufacturers. Lot 5, as described by the trial judge, is “the site of a utilities plant that services the [Botany Industrial Park] by providing, inter alia, steam and cooling water.”[2]

   2. Judgment at [4].

4. Both lots are zoned “General Industrial (IN1)” under the State Environmental Planning Policy (Three Ports) 2013. The actual use of the appellant’s land was prohibited under that zoning, but would be permitted by a “Heavy Industrial (IN3)” zoning. The continuation of the current use of the land is authorised as an “existing use” under what is now Div 4.11 of Pt 4 of the Environmental Planning and Assessment Act 1979 (NSW).

5. Both sites are subject to further potential constraints on use. First, it was common ground that the soil of each parcel was “significantly contaminated land” within the terms of the Contaminated Land Management Act 1997 (NSW). Secondly, given the nearby hazardous industries, approximately 70% of lot 5 was the subject of a “blast zone” being an area assessed to be subject to an acute risk of explosion in a nearby plant. The “individual fatality risk” with respect to lot 5 appears to have been calculated as 1/100,000 per year. (Unsurprisingly, the risk affecting the petrochemical plants themselves was higher.) The quantitative risk assessment on which the figures were based was said to have been carried out in order to comply with a condition of the consent for the subdivision (in 1999) of the Botany Industrial Park.

Issues on appeal

6. The notice of appeal identified three grounds, each of which articulated a legal basis for the errors alleged to have occurred in the court below together with the consequences of those errors for the conclusions reached. The detail was of considerable assistance in understanding the nature of the case put forward by the appellant, but is only usefully considered in the context of s 6A, which is addressed below. Accordingly, the detail need not be repeated here.

7. Critical to the appellant’s complaints was the assessment of the values of each parcel of the land without regard to the cost of remediating the contaminated soil and, in relation to lot 5, the location of a large portion of the lot within an area of acute fire and explosion risk.

8. The significance of the alleged errors may be understood by reference to the figures set out by the trial judge for the land values for each of the three tax years. [3] The values relied upon by the respondent for lot 103 were (in round terms) $70 million (2013 and 2014) and $86.9 million (2015). The appellant contended that the value should have been (again in round figures) $18.5 million, $21.4 million and $23.8 million respectively.

   3.    Judgment at [5] and [7].

9. With respect to lot 5, the issued land values were $9.9 million, $10.3 million and $12.8 million for the respective years. The appellant contended that lot 5 had a land value of $0 in each year. With respect to both lots, major reductions were said to be necessary to take account of remediation costs. With respect to lot 5, the land was said to be valueless because a substantial proportion was effectively “sterilised” by the “blast zone” effect and the cost of remediation exceeded any residual value of the land.

Statutory scheme

10. The questions of law raised by the appeal turn on the correct construction of s 6A of the Valuation of Land Act. The relevant subsections read as follows: [4]

6A   Land value

(1)   The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.

(2)   Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that:

(a)   the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and

(b)   such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,

but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.

4.    Section 6A(3) and (4) relate to water rights and do not assist with the construction of subs (1) and (2).

11. Leeming JA noted in Valuer-General of New South Wales v Fivex Pty Ltd [5] that s 6A, like the critical provision in the Copyright Act 1968 (Cth) in issue in Stevens v Kabushiki Kaisha Sony Computer Entertainment,[6] is one for which “[n]o particular theory or ‘rule’ of statutory interpretation, including that of ‘purposive’ construction, can obviate the need for close attention to the text and structure of [the relevant legislation].” Further, Spigelman CJ observed in Commonwealth Custodial Services Ltd v Valuer General [7] that even the mischief rule, which identifies the reason for the insertion of s 6A(2), provides little assistance in identifying the scope and operation of the section.

    5. [2015] NSWCA 53; 206 LGERA 450 at [26].

    6. (2005) 224 CLR 193; [2005] HCA 58 at [30] (Gleeson CJ, Gummow, Hayne and Heydon JJ).

    7. [2007] NSWCA 365; 156 LGERA 186 at [16].

12. The respective parties retained separate valuers; each undertook separate valuations said to be “section 6A(1) valuations” and “section 6A(2) valuations”. Those shorthand expressions were unhelpful. As was explained in Fivex, the provisions are not merely linked, but have a specific relationship resulting from subs (2) which commences with the phrase “[n]otwithstanding anything in subsection (1)”. [8] Fivex recognised a theoretical possibility that there may be cases in which the assumptions contained in subs (2) have no operation. That possibility did not need to be explored in Fivex, nor is it necessary to resolve if and when it may arise in the present circumstances. However, given the dual bases of valuation adopted by the valuers in the present case it is convenient to note why there may be some uncertainty as to the scope of subs (2).

    8. Fivex at [29].

13. Paragraph (2)(a) envisages two situations, namely (i) the land being used for a particular purpose at the relevant date, and (ii) the existence of a purpose for which the land “could be used” at that date. Those possibilities would appear to cover alternative bases of valuation. However, pars (a) and (b) are conjunctive; par (b) may limit the operation of the provision with respect to non-current uses. It refers to improvements, existing or yet to be made, which are necessary to “continue” the relevant use. It may be that that language effectively restricts the operation of subs (2) to continuing actual use. The alternative construction is that the improvements include those required for a non-current use for which the land could be used.

14. The reason why two different forms of valuation are seen to operate arises from the proviso to subs (2) which refers to “any other purpose for which the land may be used”, in which case the assumption in subs (1) that the improvements had not been made will operate. The reference to “any other purpose” in the proviso suggests that the reference to continuing uses in par (b) did have the effect of excluding other available purposes. If that reading were correct, one possible explanation for the inclusion in par (a) of purposes for which the land “could be used” might be to refer to purposes available pursuant to a development consent which had not lapsed but which had not been put into full use at the date a prohibition on such use became effective. [9]

    9. See now Environmental Planning and Assessment Act, s 4.65 (formerly s 106).

15. I agree with the further explication of s 6A given by Leeming JA.

Valuation of appellant’s land

16. It has long been the custom (now anachronistic in an age where close controls protect the environment and amenity) to refer to the valuation under provisions such as s 6A as being based on “the highest and best use of the land”. That phrase actually refers to the most financially rewarding use permitted within the boundaries of applicable legal regulation.

17. The appellant’s land could have been valued on the basis of the existing uses to which the two parcels were put, or it could have been valued on the basis of the relevant zoning, namely General Industrial. Section 6A did not prescribe the relevant choice. The choice depended upon the valuation exercise undertaken in accordance with the section. It is true that the outcome might well be affected by the correct application of the statute. For example, if the land were to be valued as zoned, the current use could not be continued and any new use might require a consent, a condition of which would likely be that the owner remediate the land, at considerable cost. It might also be necessary to take into account the continuing use of neighbouring land in the Botany Industrial Park for petrochemical manufacturing.

18. On the other hand, if the current use were to form the basis of valuation, subs (2) prescribes assumptions which would need to be made in carrying out that exercise. First, pursuant to par (a), it must be assumed that the land could continue to be used for its current use which was lawful as an existing use, despite the zoning. Secondly, the improvements presently on the land, which were clearly necessary in order to enable the land to continue to be so used, could continue to operate, pursuant to the legal entitlement permitting continuation of the existing use. On that basis, the existing use right, which would not cease with a change in ownership, would continue to be an available use of the land without the need for remediation. Accordingly, any valuation of the land subject to existing use rights must assume that the present improvements could continue. On that basis, a valuation based on the assumptions as to existing use rights contained in subs (2) could properly disregard the cost of remediation. The trial judge was not in error in adopting that approach.

19. Similarly, lot 5 was not “sterilised” so as to be unavailable for use because it was subject to risks associated with possible fires or explosions in the adjoining petrochemical complex. Indeed, because the present use of lot 5 was to service the surrounding manufacturing operations, with their inherent risks, its continued operation assumed the continued existence of the risks which, as already noted, were even higher with respect to the actual sites of the manufacturing operations.

20. It follows that, subject to considering a specific complaint in relation to the manner in which the trial judge addressed the issues, no relevant error of law has been established.

Challenge to 10% uplift

21. To deal with a separate issue raised by the appellant it is necessary to indicate some further aspects of the valuation evidence. First, although there were great disparities in the resulting valuations, there was much common ground between the respective valuers. In particular, there was agreement that the land value should be established by adopting an amount per square metre derived from sales of comparable land. There was agreement as to three such sales and as to the starting value per square metre derived from those sales. The ultimate differences in the respective valuations depended upon the adjustments which needed to be made in applying that figure to the appellant’s land.

22. The respondent’s valuer, Mr Ferdinands, included an uplift of 10% in the value per square metre. That was because, although the comparable sales each involved land zoned general industrial (IN1), being the same zoning as the appellant’s land, Mr Ferdinands considered that the existing use for heavy industry provided a greater degree of flexibility and therefore warranted a 10% uplift. The appellant submitted that even if the respondent were correct on the other issues, and the valuation of the land based on existing use did not need to take into account the likely costs of remediation, it was, nevertheless, incorrect to provide an uplift from the comparable sales figures based on increased flexibility without, at least for that purpose, taking into account the cost of remediation.

23. The respondent put forward three answers to this challenge. First, the appellant was said to have mischaracterised the task which Mr Ferdinands undertook. He did not notionally treat the appellant’s land as capable of general industrial use without considering the need for remediation; rather, he took the value of land zoned for general industrial use and allowed an uplift to take account of the additional existing use rights. Secondly, the respondent contended that the nature and extent of allowances and adjustments to comparable sales figures gave rise to no question of law. Thirdly, the variation of 10%, even if incorrectly allowed, was immaterial. The result of the rejection of the appeal to the Land and Environment Court was the affirmation of the issued land value of a little under $87 million for lot 103 in 2015. Mr Ferdinands had assessed a land value of $101 million for that year. That value would still have exceeded the issued land value, even if reduced by removal of the 10% uplift.

24. Each of the respondent’s submissions should be accepted. As to the first response, the primary judge expressed his conclusion in the following terms:

“[149]   The Court accepts Mr Ferdinands’ evidence of a conservative upwards adjustment of 10% to account for the potential to use Lot 103 and Lot 5 for a greater variety of uses than the comparable lands (that is to say, the lots can be used for a permissible IN 1 use or the relevant existing use). Importantly, the Court adopts the Respondent’s description of the material benefits arising from the location of Lot 103, in particular that it is ‘highly desirable’ because ‘[i]t is a large site surrounded by similar uses, close to port facilities and with limited need to transport hazardous materials long distance[s] by road’.”

It is apparent from this statement that the judge was not accepting (and the valuer was not opining) that the increased value flowed from the capability of the land to be used for general industrial purposes; rather, it flowed from the capability of use for other purposes.

25. As to the second point, both parties drew the Court’s attention to the reasoning of Leeming JA in Sydney Water Corporation v Marrickville Council [10] concerning error of law. That reasoning does not assist the appellant. On an appeal limited to a question of law, the judge will not err in adopting the approach accepted by a particular valuer unless it can be shown that the valuer failed to undertake the task required by the statute. The statutory provision has, in substance, two elements. The first involves the nature of the valuation exercise. With respect to land that exercise requires assessment of “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”: s 6A(1). That provision adopts the criterion established in 1907 by Spencer v The Commonwealth. [11] The second element involves the identification of the subject matter which must be valued, namely the land as described in s 6A(2) of the Act. The present ground is directed to the first exercise, namely the assessment of value. As Dixon CJ stated in Turner v Minister of Public Instruction:[12]

“No doubt at the foundation of the present case lies the criterion of value for which Spencer v The Commonwealth has been so frequently cited. But it by no means follows that the modes of reasoning employed in applying the criterion are matter[s] of law.”

Dixon CJ further observed: [13]

“But what matters for present purposes is first that valuation cannot be made to depend entirely on a logical process or formula and second that in any case questions of logical reasoning about considerations of fact are not to be confused with questions of law.”

10. [2014] NSWCA 438 at [30]-[34].

11. (1907) 5 CLR 418; [1907] HCA 82.

12. (1956) 95 CLR 245 at 267; [1956] HCA 7.

13.    Turner at 268.

26. Whether the hypothetical purchaser of the particular land would be prepared to pay a small premium in circumstances where the land had existing use rights is a question of judgment for a valuer. Neither the inclusion of such an element, nor its rejection, involves a question of law. It is precisely such matters which form the factual basis of the expert opinion evidence on which the Court relied.

27. The respondent’s third contention should also be accepted. The appellant’s response was that one could not assume that “if the primary judge did not fall into legal error by accepting the respondent’s 10% premium adjustment, he would not have made any other adjustment to account for the existing use of the appellant’s lands.” Assuming, contrary to the last conclusion, that there was an error and that it involved an error of law, this Court will not intervene unless there has been some substantial wrong or miscarriage of justice. [14] That means that the Court will not intervene even where an error of law has been demonstrated unless satisfied that the error could have affected the result.

    14. Uniform Civil Procedure Rules 2005 (NSW), r 51.53(1).

28. That criterion may operate differentially as between a jury trial, an appeal by way of rehearing, and an appeal limited to a question of law. In the analogous area of judicial review, it is said that the error must be a “material breach”. [15] In the present case, in the absence of some other error of law, there is no basis for suggesting that this particular error, had there been one, could conceivably have affected the outcome.

    15. Hossain v Minister for Immigration and Border Protection [2018] HCA 34; 92 ALJR 780 at [31] (Kiefel CJ, Gageler and Keane JJ) citing Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51 at [23] (Gageler and Keane JJ).

Conclusions

29. The appellant has failed to demonstrate a material error of law with respect to the determination of any of the six appeals before the Land and Environment Court. Accordingly, the appeal to this Court must be dismissed; the appellant must pay the respondent’s costs in this Court.

30. MACFARLAN JA: I agree with Basten JA.

31. LEEMING JA: I agree with Basten JA, for the reason he gives, that the appeal should be dismissed with costs. In deference to the submissions on the construction of s 6A of the Valuation of Land Act, which were of high quality, I wish to add the following.

32. The stark difference between the parties’ valuations was driven by the different ways in which each brought to bear the potential cost of remediation in order to determine a land value in accordance with s 6A. The essential problem is the unwieldy complexity of subsections (1) and (2), each of which points in different directions. The present appeal calls for a closer examination of s 6A, in light of the nuanced submissions based on “may” (which Olefines emphasised) and “continued” (which the Valuer-General emphasised).

33. It is convenient to reproduce those subsections below, employing different typefaces to emphasise the syntactic structure.

6A    Land value

(1)   The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.

(2)   Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that:

(a)   the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and

(b)   such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,

but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.

34. Subsections (3) and (4) have no application to this appeal, and do not bear upon subsections (1) and (2). “Land improvements” may also be disregarded for present purposes.

35. As Basten JA observes, this is legislation where primacy is to be given to the statutory text, which is both intricate and counterfactual. The following matters relevant to the present appeal emerge from the text.

36. First, the point of both subsections is easily stated. It is, as stated in the opening words of subsection (1), to determine “land value”. The determination of “land value” requires the making of assumptions. Almost all of both subsections is directed to articulating those assumptions, all of which are qualified and some of which are contingent.

37. The assumptions commence with a statement of a hypothetical sale on reasonable terms and conditions. Although not so styled, they too involve an assumption. But the assumptions which presently matter are those following the words “assuming” in subsection (1) and “it shall be assumed” in subsection (2) emboldened above. The basic structure of the two subsections is that land value is the price realised by a hypothetical sale on certain assumptions. Most of the words in the subsections are devoted to the assumptions.

38. I have laboured over this because, contrary to the approaches adopted by both valuers, if anything is clear there is no discrete “s 6A(1) valuation” and a separate “s 6A(2) valuation”. There is a single task of identifying the price of a hypothetical sale, subject to certain assumptions. The assumptions are complex and qualified and contingent, but there remains a single statutory valuation. This is confirmed by the words in subsection (2) “in determining land value”. It may be convenient in complex cases, such as the present, separately to assess the price which may be realised on different assumptions. However, it is as well to bear in mind that there is a single statutory task which will only ever yield one answer.

39. Secondly, the opening words “notwithstanding anything in subsection (1)” in subsection (2) make it plain that in the event of conflict or inconsistency, subsection (2) prevails. Those words are necessary because of the very different approach taken by subsection (2). Subsection (1) values the land as if improvements had not been made. Contrary to this, subsection (2) values the land on the basis that certain improvements may be continued or made, albeit in limited circumstances, and subject to a proviso. In the absence of the opening words of subsection (2), there would be an unresolved inconsistency between the assumptions required by each subsection.

40. Thirdly, the structure of subsection (2) following the introductory words is the mandatory assumptions in paragraph (a) and paragraph (b), subject to a proviso that the making of those assumptions did not prevent regard being had to any other purpose. The emphasis in this case is on the meaning of the assumptions, rather than the proviso.

41. Fourthly, the structure of paragraphs (a) and (b) is quite intricate. Paragraph (a) requires assumptions to be made about the use of land, while paragraph (b) requires assumptions to be made about improvements on the land. However, the two paragraphs are closely linked.

42. For one thing, there is a series of what was described during argument of the appeal as “pairings”. Paragraph (a) has two disjunctive pairings: “may be used” or “may continue to be used” and for any purpose for which “it was being used” or “for which it could be used”. The first limb of the first pairing “may be used” corresponds with the second limb of the second pairing “for which it could be used”. The second limb of the first pairing “may continue to be used” corresponds with the first limb of the second pairing “for which it was being used”. I have denoted those links with italicised and underlined text when reproducing the subsections above. Those pairings emphasise the importance of the words “for any purpose”, to which both elements of each pairing relate. Putting to one side (for it does not presently matter) what is connoted by the first pairing of “may be used” and “could be used”, the words “continue to be used” and “was being used” necessarily refer to an assumption as to an actual use.

43. In order to avoid unnecessary prolixity, the drafting employs a form of zeugma, whereby the words “for any purpose” apply to each clause involving the actual or possible use of the land. In expanded form, this paragraph would read:

[it shall be assumed that]

“the land may be used for any purpose for which it could be used,

or

the land may continue to be used for any purpose for which it was being used, at the date to which the valuation relates ...”

44. For another thing, only by close attention to the intricate structure of paragraph (a) is the force of paragraph (b) revealed. I regard this paragraph as grammatically complex. It is useful to focus on the easily overlooked words “such” and “so”. The concluding words “in order to enable the land to continue to be so used” achieve two purposes. First, those words delimit the class of improvements referred to earlier in the paragraph; they do so by defining the reason why they are required. Secondly, and importantly, the reference to “continue to be so used” is necessarily a reference to the range of uses referred to in the previous paragraph. The words “so used” must have an antecedent, namely, a use to which reference has previously been made. There is no reference to use earlier in paragraph (b). Hence the reference is to the four paired actual or possible uses of land in paragraph (a).

45. In other words, although the language is quite compressed, for each of the disjunctive pairings of land uses in paragraph (a) which are required to be assumed, paragraph (b) requires also an assumption to be made in relation to the improvements which are required in order to enable that use to continue.

46. The point of paragraph (b) is to require the making of an assumption as to improvements. However, the words “such improvements” which commence paragraph (b) are defining. The words cannot refer backwards to improvements to which reference has earlier been made, because there is no such reference. Rather, paragraph (b) specifies the improvements which are to be assumed for the purposes of determining the land value. It is those improvements (and only those improvements) as may be required in order to enable any of the actual or possible land uses in paragraph (a) which are to be assumed.

47. It follows that the class of improvements required to be assumed by paragraph (b) is limited to improvements which may be continued or made in order to achieve a purpose. The disjunctive “continued or made” correlates with the pairing of “continue to be used” and “may be used” in paragraph (a) and naturally refers either to an actual improvement continuing, or an improvement being made on the land.

48. The above analysis conforms with what Handley JA in Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673 at [26]; [2001] NSWCA 78 that the verb “continued” in paragraph (b) refers at least in part to improvements in the real world. The same point was made in Valuer-General of NSW v Fivex Pty Ltd (2015) 206 LGERA 450; [2015] NSWCA 53 at [46].

49. Now it is true that there is a textual difficulty in construing the opening words of subs (2) which command that that subsection prevails over subs (1), and the assumption that the (actual) improvements will continue on the land, with the requirement in subs (1) to calculate the unimproved value of the land as if improvements had not been made. However, I regard the key to the resolution of the inconsistency, at least so far as is sufficient for this appeal, to be that the improvements are assumed to be present merely for the purpose of permitting an unimproved land value to be calculated having regard to the purpose for which they were erected and for which they are required. That is one means by which the apparent conflict between the subsections may be resolved, and it is supported by the elaborate structure of the subsections.

50. But it is not necessary to go that far in order to determine grounds 1 and 2 of this appeal. Olefines’ submission that there was legal error in failing to have regard to the cost of remediation was not without subtlety:

“[W]e posit what we would submit is the proper approach to 6A(1) and 6A(2) and that is ... that on its proper construction 6A(2)(b) which is the paragraph concerned with the improvements, did not negative or contradict the assumption in 6A(1) that the improvements had not been made. That under that assumption it was to be assumed that the appellants’ improvements were removed or stripped from the lands with the effect that the appellants’ lands were in a state in which the appellants’ improvements did not exist and were not physically present on the lands, that is a notionally vacant state. And that on its proper construction, 6A(2)(b) required the making of an assumption that there was an entitlement at the relevant date to erect upon the appellants’ lands and their notionally vacant state, improvements of the same nature as the pre-existing improvements in order to enable the lands to be used for the purposes for which they were being used. And that in making those assumptions – when making that assumption, both contamination and the blast zone were relevant to land values.”

51. However, and contrary to Olefines’ submission, it will be seen from the foregoing that there is nothing in s 6A which requires notionally one to remove the actual improvements on the land, then remediate the land (and pay for the cost of doing so) so as to be able then lawfully to construct those same improvements on the land. Rather, in this respect subsection (2) overrides subsection (1); the existing land use is assumed to continue, and the existing buildings and structures which are required in order to enable that use are assumed to remain in place.

52. Senior counsel for Olefines further submitted:

“GALASSO: Yes. The error in the primary judge’s approach is the construction that ‘may be continued’.

BASTEN JA: Not ‘will be.’

GALASSO: Yes. And that’s the difference. Subtle, but fundamental, that 6A(2)(b) is about an entitlement, but it does not undo the fundamental assumption in 6A(1), and that is what’s being transacted is vacant land.”

53. Once again, I cannot accept the submission. As was noted in Maurici and Fivex, in part the words “may be continued” in paragraph (b) assume that actual improvements in the real world remain in place, insofar as they are required in order to enable the land to be used for the purpose in accordance with paragraph (a).

54. For those reasons, which supplement those given by Basten JA, there was no appellable error within the limited scope of appeals on questions of law from the decision of the primary judge.

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Endnotes

Decision last updated: 12 November 2018