Pyntoe Pty Ltd and Gilles v Valuer-General of NSW; Gilles v Valuer-General of NSW

[2011] NSWLEC 1207

Land and Environment Court

New South Wales

Medium Neutral Citation:	Pyntoe Pty Ltd & Gilles v Valuer-General of NSW; Gilles v Valuer-General of NSW [2011] NSWLEC 1207
Hearing dates:	1 and 4 April 2011
Decision date:	05 April 2011
Jurisdiction:	Class 3
Before:	Moore SC
Decision:	In both matters, the appeals will be upheld and revised valuations ordered for the base date of 1 July 2009 when the parties bring in settle Short Minutes of Orders after checking the calculations given in these reasons for decision.
Catchwords:	Statutory valuation; development potential calculation
Legislation Cited:	Valuation of Land Act 1916 Environmental Planning and Assessment Act 1979 Matraville Town Centre Development Control Plan 2006
Cases Cited:	Gilles v Valuer General (2008) NSWLEC 1508 Maurici v Chief Commissioner of State Revenue [2003] HCA 8; 212 CLR 111; 195 ALR 236; 77 ALJR 727 Segal & Anor v Waverley Council [2005] NSWCA 310; (2005) 64 NSWLR 177
Category:	Principal judgment
Parties:	In Matter No 30662 of 2010: Pyntoe Pty Ltd & J J Gilles (Applicants) Valuer-General of NSW (Respondent) In Matter No 30782 of 2010: J J & G M Gilles (Applicants) Valuer-General of NSW (Respondent
Representation:	- (Applicants - both matters) Ms M Carpenter (Respondent) Ms P Becker Giles Payne & Co (Applicants - both matters) Crown Solicitors Office (Respondent)
File Number(s):	30662 and 30782 of 2010
Publication restriction:	None

EXTEMPORE Judgment

1. These appeals are statutory valuation appeals relating properties at 488 and 506 Bunnerong Road, Matraville. They concern the Valuer General's valuation of each parcel of land as at the base date of 1 July 2009.

1. Mr Hyam, a consultant expert valuer who gave evidence for the applicant, set out his final contended valuation on alternative bases based on how I interpreted the planning information that was in contention in the proceedings, a matter to which I will return later, but it is appropriate to note that one is based on what I may describe as the Miller development yield calculations and the other is based on what I may describe as the Juradowich development yield calculations. It is convenient to set out the various values that have been contended for in these proceedings in tabular form.

488 Bunnerong Road	506 Bunnerong Road
Statutory valuation - $866,000	Statutory valuation - $777,000
Miller yield basis - $508,000	Miller yield basis - $420,000
Juradowich yield basis - $650,000	Juradowich yield basis - $686,000

1. Mr Glitsos, an expert valuer who gave evidence on behalf of the Valuer General, did not adopt the two alternative stages said by Mr Hyam to be necessary for the valuation (these being of moving to a planning assessment of the yield for the sites and then making a derived value calculation).

1. Mr Glitsos derived land values as at the base date for 488 Bunnerong Road of $1,365,460 and for 506 Bunnerong Road of $1,503,460. Mr Glitsos's valuations are significantly in excess of the statutory valuations that are the subject of the appeal. Ms Carpenter, counsel for the Valuer General, expressly disavowed pressing for any higher value although it would be open to the Court to have imposed such a value had it been requested to do so and had there been some proper basis for so doing.

1. The appeal comes pursuant to the relevant provisions of the Valuation of Land Act 1916 (the Act) and the powers of the Court on appeal are set out in s 40 of the Act. The first subsection provides three options to which the Court may turn. They are to confirm or revoke the decision; to make a decision in place of the decision; or to remit the matter to the Valuer General for determination in accordance with my findings or decision.

1. It is clear from the way the appeal has proceeded, and indeed in my view is the efficient dealing with the matters, that whatever valuation conclusions I should come to should be the confirmed outcomes as the valuations as at the statutory valuation date.

1. Importantly, a matter to which I shall return, s 40(2) of the Act provides that on appeal the appellant has the onus of proving the appellant's case. That is the position in these proceedings, so, as a two-step analysis, I propose to proceed to take the applicant's case at its highest and see if that discharges the onus before turning to the countervailing matters raised by the Valuer General to overcome that position should it arise.

1. Each of 488 and 506 has the same zoning of 3B Local Business, one that permits mixed-use development on the site, a matter to which I will return. Each of them has rear lane access from Baird Lane, thus facilitating parking, including basement parking to which I will return, on their sites as part of their development potential. The significant difference between them, a matter that arises in the context of the planning evidence, is the frontages of the sites to Bunnerong Road. It is also appropriate to set out in tabular form several relevant matters concerning the properties.

488 Bunnerong Road	506 Bunnerong Road
Site area - 417.3 sq m	Site area - 417.3 sq m
Frontage - 13.11 m	Frontage - 10.67

1. The two properties have been the subject at least in part to an earlier decision by Miller AC in Gilles v Valuer General (2008) NSWLEC 1508. This decision concerned the base date of 1 July 2006 and, as a rationale for the decision, dealt the appeal upon the basis that the valuation should be assessed in the context of the relevant planning controls.

1. I note, first, that the High Court's decision in Maurici v Chief Commissioner of State Revenue [2003] HCA 8; 212 CLR 111; 195 ALR 236; 77 ALJR 727 c oncluded that the most desirable method to use for valuation appeals of this type is the comparative sales process and that a sufficient sale would be a single sale provided it was appropriate and relevant to the site. The High Court also indicated that it was appropriate to use vacant land sales if they were available for that purpose, a position that does not apply here. The High Court however also observed that if the only sales that might be relevantly comparable were ones that could be in effect disaggregated so that they reflected vacant land, it was appropriate to do so.

1. In his decision in 2008, Miller AC said, in para 19 headed 'Basis of analysis of comparable sales':

"It will be seen that the potential of each property is not dependent on the site area. For instance, the land area of 488 Bunnerong Road is approximately twice that of 462 Bunnerong Road, but the development potential is quadrupled. In my opinion, the only appropriate method of comparison between the comparable sales and the subject properties is on the basis of a residual apartment equivalent actually achieved on the comparable sale sites and capable of being achieved in a prospective development."

1. That decision reflected squarely a fundamental difference between the parties in these proceedings - Mr Hyam having adopted what amounts to a two-step valuation process, that is of taking relevant comparable sales or, as it resulted, a single sale, doing an analysis of that in a conventional valuation fashion, and then turning to take the second step of applying the analysis methodology adopted by Miller AC in his 2008 decision. Mr Glitsos, on the other hand, undertook only the first step and rejected the necessity for the second.

1. I am of the view that the decision of the Court of Appeal in Segal & Anor v Waverley Council [2005] NSWCA 310; (2005) 64 NSWLR 177 means that in merit appeals or merit assessments such as these, just as in the case of merit assessments under s 97 of the Environmental Planning and Assessment Act 1979 , requires me (if I am to disregard a conclusion of a colleague reached in generally comparable or identical circumstances), to have sound and cogent reasons for so doing if the matter that is the subject of the proposed departure is one that has been put by at least one (if not both) of the parties to the proceedings as a centrally contested matter.

1. I am satisfied in these proceedings the question of consistency with the analysis of Miller AC has been put, by Mr Hyam's evidence and Mr Glitsos's disagreement with it, as a centrally contested element of the differences between the parties. I am also satisfied that I have not been given any proper basis why I should discard the reasoning process adopted by Miller AC in 2008.

1. As a consequence, I accept that the two-step process advocated by Mr Hyam is the appropriate one that it is necessary for me to follow. Mr Hyam provided an analysis of the statements of development yield to be derived from the Acting Commissioner's decision and also an analysis of the development yield to be extracted from the statement of evidence of Mr Juradowich, an expert planner who gave a statement of evidence on behalf of the respondent (and who was not required for cross-examination). It is therefore appropriate that I turn to and have regard to the relevant planning controls for the area and thus the planning context in which I need consider this development appeal.

1. It is first appropriate to note that the sites and all other relevant areas in the strip shopping centre where the sites are located are governed by the same Local Environmental Plan but particularly are governed by the provisions of the Matraville Development Control Plan and the development yield that comes from it - a development yield which, as noted by the Acting Commissioner, provides a development yield significantly in excess of that which is provided for in the LEP. The DCP does so by the use of a different formula, that is one that is based on building envelopes rather than that which is adopted simply by a consideration of the raw method of a floor space ratio calculation.

1. It is appropriate at this time to set out precisely a number of the comments that are made by Mr Juradowich in his statement of evidence, and I quote from p 4 of his statement of evidence under the heading '3.2 Matraville Town Centre Development Control Plan 2006.'

"Matraville Town Centre Development Control Plan 2006 adopted by council in April 2006 sets out the detailed development controls applicable to the development in the Matraville Town Centre. The nature and extent of development is primarily controlled by way of building envelopes controls that are detailed in s 3.3 of the DCP."

He notes that he appends a copy of that section to his statement of evidence.

"Building envelopes are prescribed by way of a combination of height, number of storeys, depth and setback controls. The extent of development potential is heavily dependent on the width of development sites with incentives given for amalgamation of sites of less than seven metres in width" - sites with a frontage of less than seven metres I note are not applicable to either of the sites here - are limited to a maximum building height of three storeys. Sites of a width of seven metres or greater may develop up to four storeys and those sites of at least twelve metres of width which provide basement car parking may achieve an additional storey."

1. He then continues to describe the DCP s 3.3 where he says,

"Section 3.3 of the DCP includes development summary tables that outline maximum development envelopes for development scenarios on site width. Clause 3.3.1 describes building footprints which for the subject lands establish two building envelopes, one fronting Bunnerong Road and one fronting Baird Lane, separated above ground floor level by a roof, a courtyard garden terrace at least twelve metres deep located centrally within the site on the roof of the ground floor level. Parking is permitted below this courtyard and in basement levels."

1. I am satisfied that Mr Juradowich's analysis of the development potential of the two sites here contained, one of them having a wider frontage and thus being able to attract an additional storey, together with his hypothesis concerning basement car parking, are the appropriate ones to apply. I have reached that conclusion compared to the more limited development potential acknowledged as being appropriate by Miller AC for several reasons.

1. The first is that Mr Juradowich, an experienced town planner, has undertaken a detailed analysis of what might be achieved within the building envelopes and particularly has made an allowance for the possibility of excavated basement car parking, thus yielding a higher relevant development yield potential than that adopted by the Acting Commissioner. As a consequence of that, for the second stage of the analysis that I am required to undertake, I prefer and adopt the development potential set out by Mr Juradowich. These are helpfully summarised in Exhibit F, a statement prepared by Mr Hyam being as follows:

488 Bunnerong Road	506 Bunnerong Road
Three two-bedroom units	Three two-bedroom units
Three one-bedroom units	Three one-bedroom units
Four studio units	Four studio units
Two retail sites	Two retail sites
Appropriate off-street parking	Appropriate off-street parking

1. The outcome of that is that I then need to turn to comparable sales at the commencement of my analysis.

1. First, I turn to setting out the reasons why in the course of the site inspection I suggested to the parties that several sales that had initially been relied upon were not relevant. They comprised sales at 315 Bunnerong Road, in excess of some two kilometres to the north of the site in an island development, and that at 554 Bunnerong Road, somewhat to the south and separated from the main portion of the ribbon shopping centre by Perry Street. Neither of those in my view was truly comparable.

1. In the final analysis, both valuers agreed, in the witness box, that the sale and re-sale of 508 Bunnerong Road in April 2008 and November 2009 respectively provided the appropriate sale contexts for a comparative analysis by adjustment for the two sites that are subject of these appeals. I am satisfied consistent with what the High Court has said in Maurici that it is an appropriate basis to do so.

1. I was helpfully provided by Ms Carpenter with a copy of a plan (Exhibit 6) that shows the relationship between the three relevant sites. A copy of that plan is reproduced below.

1. The above plan shows that 488 Bunnerong Road is a little to the north of 508 Bunnerong Road. It is opposite Daunt Avenue intersection with Bunnerong Road, and importantly it is in the vicinity of a proposed Woolworths supermarket. Whether that is to be a full service supermarket or some lesser species of supermarket is not in my view a matter of particular import in these proceedings. It simply means that it is a more attractive location than 508 Bunnerong Road. 508 and 506 Bunnerong Road are adjacent.

1. Mr Hyam took the sale of 508 Bunnerong Road and made a number of adjustments to it. He proposed downward adjustments from the 2009 sale price of $1.38 million for 508 Bunnerong Road of twenty per cent for the development approval, nine per cent for time and nine per cent for area, and then added back in a demolition cost of $50,000 giving an analysed value of $905,000. He then proceeded to move to step two. Mr Glitsos, on the other hand, indicated that he did not make any allowance for the development consent and suggested that the time and area adjustments should be 3.3% and 5% respectively with a demolition allowance of $100,000.

1. I am satisfied that Mr Hyam's calculations are generally to be preferred but that in some respects his analysis and adjustment factors are too generous. I have reached this conclusion for several reasons. The first is that a strict application of the totality of his calculations to the period between the initial sale in April 2008 and the second sale in November 2009 leaves an unexplained discrepancy of $44,000, something which I do not believe is appropriate to set aside merely as a statistical aberration (given that Mr Hyam is an expert in this area of considerable experience, having written one of the standard texts in the area, and who was provided in the witness box with appropriate time to consider and reflect upon the particular adjustment factors upon which he relied).

1. As a consequence, I am satisfied that these adjustment factors are too generous and that the appropriate factors to adopt would be 15% for the development application and 4% for time, being an adjustment of a total not of 38% but of 28% as a consequence. I also adopt Mr Hyam's allowance for demolition, because I am satisfied that a larger allowance for demolition as proposed by Mr Glitsos would be significantly out of kilter with the known cost of demolition of the property at 469 Bunnerong Road, slightly to the north of the Daunt Street intersection, which was a cost of $25,000 to demolish a brick residence on the site whilst the demolition of the structures that are on the relevant sites here may be more complex because of adjacent properties and the need to ensure that support remained for them. As a result, I am not persuaded that that cost is likely to be increased by a factor of four. Mr Hyam has allowed a factor of two and I consider that that is appropriate.

1. Rather than endeavouring to turn to the analysis of the development yield and working out what might be the increase in value for each of the subsets within that development yield, I have simply taken the position that looking at the adjustment that Mr Hyam has proposed together with my corrections to it would require an upward adjustment of ten point eight per cent to his initial figure and that will be reflected, as will be obvious when we reach it, in the orders that I propose for 506 Bunnerong Road.

1. I now turn to apply the same process to 588 Bunnerong Road.

1. I am satisfied that the time and development approval percentage adjustments that were made to 508 Bunnerong Road need similarly obviously to be carried forward to 488 Bunnerong Road. Mr Hyam also proposed an adjustment for location reflecting the closeness to Daunt Avenue and to the Woolworths supermarket. I accept that that is appropriate.

1. Mr Hyam also proposed a further adjustment of 9% based on the width of the frontage, that being something that he says should be taken into account on the development appeal basis. I do not accept that this is appropriate because it is already comprehended in the calculations that arise from the application of Mr Juradowich's development yield formula, and in my opinion to permit it as an adjustment earlier would constitute double dipping.

1. Similarly, I note that 488 Bunnerong Road also has a frontage of a width that attracts bonus development potential consistent with that that is attracted by 508 Bunnerong Road. When I do that I arrive at a position where the total adjustments should be 24% in lieu of that adopted by Mr Hyam and that there should be a similar demolition allowance of $50,000.

1. Prima facie, having taken through those calculations, it would seem to me that, at least at the first instance, the applicant has discharged the onus of engaging my consideration as to whether there should be a variation to the statutory values as the numbers that are derived from Mr Hyam's evidence will result in substituting $760,000 for $777,000, and substituting $761,000 for $866,000 - thus crossing that statutory burden threshold.

1. It is therefore finally necessary for me to turn to the fact that Mr Glitsos has also undertaken in each of his statements of evidence an analysis of what would be the appropriate value on a basis of the yield by Mr Juradowich. He has adopted the calculations contained therein but applied his analysed values for that purpose. I have carefully considered whether I should set aside the conclusions that I have reached following Mr Hyam's process of reasoning by adopting those that are put by Mr Glitsos concerning the valuations on that basis. I note, for example, that with respect to 488 Bunnerong Road, Mr Glitsos applying the various rates that he has adopted for each of the classifications of development yield would reach a value on that basis of $1.25 million.

1. Having accepted the appropriate adjustment factors that Mr Hyam has set out as being the basis upon which the sale of 508 Bunnerong Road should be analysed, it is clear to me that Mr Glitsos's analysis on a Juradowich basis is a little akin to the story of Paddy approaching Seamus at the intersection in Ireland where there were no signposts, and asking "How do I get to Dublin from here?" and being given the reply, "If I was going to Dublin, I wouldn't start from here."

1. I am satisfied that Mr Glitsos's application of the Juradowich formulae starts from an inappropriate and unacceptable starting base and therefore warrants being set aside. As a consequence, I have resolved to adopt what I have calculated to be the outcome of the Hyam adjustments as I have indicated it is appropriate for them to be varied.

1. As a consequence the orders of the Court will be that, in matter 30782 of 2010, the appeal will upheld and in lieu of the statutory valuation of $777,000 as at the base date of 1 July 2009, a valuation of $760,000 will be substituted and in matter 30662 of 2010, the appeal will be upheld; and in lieu of the statutory valuation of $866,000 as at the base date of 1 July 2009, a valuation of $761,000 will be substituted.

1. However, in deriving these proposed orders, I have set out what I consider to be the proper calculation basis for deriving figures but I am not confident, given the fact that I had to reconstruct the formulae in the spreadsheet that those precise numbers are accurate, and indeed in the first matter, Matter No 30782, given the closeness of the derived answer to the statutory valuation, it may be that if I have applied an incorrect mathematical approach in the process of doing the calculation, not in describing the foundation upon which it should occur, it is possible that that appeal should be dismissed.

1. I expect that the parties will confer on the mathematics of the outcome and I leave it on this basis, that I am going to grant leave to re-list the matter to deal with mathematical matters if it is necessary to correct them under the slip rule. If it is not necessary to do so and the parties agree on the terms of the outcome based on the calculations that I have proposed, then the parties can file an agreed set of Short Minutes of Orders for me to make in each of the proceedings.

1. If re-listing before me (and that can be done on one day's notice at 9 o'clock in the morning) does not occur or if there is no agreed set of calculations filed by the close of business on Thursday 14 April, I will make orders in chambers in the terms that I have announced.

Tim Moore

Senior Commissioner

Decision last updated: 21 July 2011