Tenstat Chullora No. 2 Trust v Valuer General

[2000] NSWLEC 212

Reported Decision: 110 LGERA 227

Land and Environment Court

of New South Wales

CITATION:	Tenstat Chullora No. 2 Trust v Valuer General and Anor. [2000] NSWLEC 212
PARTIES:	APPLICANT: Tenstat Chullora No. 2 Trust RESPONDENTS: Valuer General & Anor.
FILE NUMBER(S):	30208 of 1999
CORAM:	Bignold J
KEY ISSUES:	Costs :- Costs in class 3 proceedings—Valuation appeal. Court’s Practice Direction that costs be not ordered save in exceptional cases
LEGISLATION CITED:	Valuation of Land Act 1916, s 33, s 34, s,35 s 38 Land and Environment Court Act 1979, s 69
CASES CITED:	Berk v Woollahra Municipal Council (1992) 78LGERA 180; Dobrel Pty Ltd v Valuer General No (2) (1993) 80 LGERA 26; MacDonald v Mosman Municipal Council (No 2) (2000) 107LGERA 211 13; Murray Publishers Pty Ltd v Valuer General (1994) 84LGERA
DATES OF HEARING:	4 October 2000
DATE OF JUDGMENT:	10/09/2000
LEGAL REPRESENTATIVES:	APPLICANT: Mr A Galasso SOLICITORS Aleco Vrisakis RESPONDENT: Mr P McEwen SC SOLICITORS Bruce and Stewart

JUDGMENT:

IN THE LAND AND Matter No . 30208 of 1999

ENVIRONMENT COURT OF Coram : Bignold J.

NEW SOUTH WALES 9 October 2000

TENSTAT CHULLORA NO. 2 TRUST

Applicant

v

THE VALUER GENERAL

First Respondent

MCWILLIAM'S WINES PTY LIMITED

Second Respondent

JUDGMENT

Bignold J:

A. INTRODUCTION

1. By its Notice of Motion filed 13 September 2000, the Second Respondent seeks an order that the Applicant pay its costs of the proceedings in which it was the successful party.

2. The proceedings which involved an appeal by the Applicant pursuant to the Valuation of Land Act 1916 s 38 were heard and disposed of by Commissioner Nott who, in his reserved judgment delivered on 25 August 2000, dismissed the Applicant’s objection under the Valuation of Land Act that the statutory valuation was too low, but upheld the Second Respondent’s objection that the statutory valuation was too high with the result that the Commissioner determined the land value of the relevant property in the sum of $5 million as had been contended for by the Second Respondent and accordingly altered the statutory valuation that had been made by the Valuer General in the sum of $5.25 million by reducing it to $5 million.

3. In seeking an order for costs, the Second Respondent acknowledges the existence since 1996 of the Court’s practice not to award costs in valuation appeals “unless the circumstances are exceptional”: vide par 10A of the Court’s current Practice Direction, and seeks to bring its claim within the ambit of “exceptional circumstances”.

4. The Applicant resists the costs claim by contending that no exceptional circumstances have been established.

5. The First Respondent has not participated in the hearing of the Motion.

B. THE BASES FOR THE SECOND RESPONDENT’S CLAIM FOR COSTS

6. The Second Respondent relies upon the following factors as demonstrating “exceptional circumstances” within the Court’s Practice Direction—
(i.) It was unusual for the Applicant, as the relevant land owner, to appeal a statutory valuation for rating and taxing purposes by contending that the valuation was too low.
(ii.) The fact that the land owner brought such an appeal indicated a commercial motive to exercise appellate rights under the Valuation of Land Act in order to secure a higher rental from the Second Respondent being the lessee of the relevant land.
(iii.) The case sought to be made out by the Applicant that the statutory valuation was too low to a very significant degree (the Applicant’s consultant valuer contended that the land value should be $8 million instead of the figure of $5.25 million as determined by the Valuer General) wholly failed.
(iv.) The present case was not within the spirit or rationale of the Court’s Practice Direction not to award costs in valuation appeals unless the circumstances were exceptional, as it had been expounded by the Chief Judge in Berk v Woollahra Municipal Council (1992) 78LGERA 180 “…based on a philosophy of encouraging parties to seek review rather than discouraging them by burdening them with the risk of an award of costs against them”.

7. The Applicant, in resisting the Motion, argued that these factors (whether considered collectively or individually) did not demonstrate “exceptional circumstances” within the Court’s Practice Direction.

8. As to factor (i), the Applicant submits that the Valuation of Land Act confers upon a land owner an unqualified right of objection to the Valuer General against a statutory valuation made by the Valuer General in respect of that person’s land (s 29 and s 33) and that one of the specified grounds for objection is that the value ascribed is “too low” (s 34(1)(a)) and that the Valuation of Land Act likewise confers upon an objector dissatisfied when the Valuer General’s decision on the objection, an unqualified right of appeal to this Court against that decision (s 38(1)). In these circumstances, it submits that it cannot reasonably be concluded that there is anything “unusual” in a landowner contending upon an appeal pursuant to the Valuation of Land Act s 38 that the statutory valuation is too low.

9. As to factor (ii), the Applicant contends that any suggested commercial motive behind the Applicant’s appeal is irrelevant to the question of costs, but that if the factor be relevant there is nothing exceptional in the landowner exercising its statutory entitlements by contending that a statutory valuation is too low. In any event, the statutory determination of the land value of the relevant land is not determinative of rent reserved under the lease of the subject land that is held by the Second Respondent: vide cl 36 of the Memorandum of Lease.

10. As to factor (iii), the Applicant submits that there is nothing in the reasons for judgment of Commissioner Nott to even suggest that the Applicant’s appeal was self-evidently hopeless, groundless, fanciful or otherwise doomed to failure. The Commissioner’s decision no doubt involved a rejection of the valuation evidence given on behalf of the Applicant by its Consultant Valuer. Equally clearly, the decision appears to have involved an acceptance of the valuation evidence given on behalf of the Second Respondent (although as will presently be shown, the Commissioner emphasised the Court’s role in determining the land value). Such an ultimate judicial disposition of the proceedings involved nothing exceptional; it simply reflected the conventional judicial process of preferring one expert witness over other competing experts.

11. However, having regard to the following passages (par 5-7) in his judgment, it may be the case that the Commissioner’s determination of the land value involved something more than his rejecting the valuation evidence of the Applicant’s valuer and his accepting the valuation evidence of the Second Respondent’s valuer.

Tenstat Chullora No. 2 Trust bears the onus of proof of establishing that the land value objected to is too low, and there is also an onus of proof on McWilliam’s Wines Pty Ltd to establish its contention that the land value determined by the first respondents is too high see Flack v Valuer-General (1952) 18 LGR (NSW) 157; s 101 of the Taxation Administration Act 1996 . The appeals involve a rehearing in the fullest sense, and the court may determine an appropriate land value in the light of all the evidence, and the court is not limited to choosing one of the three values contented for by the parties.

I have been particularly assisted by site inspections (in the company of representatives of the parties) of the subject land and of the comparable sales that the parties considered most relevant.

In the light of all the evidence and submissions, for the reasons given below, I have come to the conclusion that if the subject land were offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming the improvements thereon (other than land improvements) had not been made, it would realise a capital sum of $5,000,000 ($140/m2) as at 1 July 1998.

12. If this be the proper understanding of the Commissioner’s judgment, the fact that the Applicant failed to persuade the Court that the statutory value was too low exerts even less impact on the present consideration whether the Second Respondent has demonstrated “ exceptional circumstances ” in the proceedings, such as may justify an award of costs against the Applicant, than would a basis for judgment that merely reflected the Court’s preference for the expert opinion of the second Respondent’s valuer over the competing opinion of the Applicant’s valuer.

13. As to factor (iv), the Applicant submits that the meaning and scope of the Court’s Practice Direction is to be understood in the light of the history of the Court’s practice in exercising its statutory discretion on costs in valuation appeals. 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. In some cases (eg Dobrel Pty Ltd v Valuer General No (2) (1993) 80 LGERA 26) costs were awarded on the basis of the usual rule in litigation of costs following the event but in others (eg Murray Publishers Pty Ltd v Valuer General (1994) 84LGERA 13) costs were not awarded on the basis that the Court preferred to adopt the same practice in relation to costs in such proceedings as it had at all times adopted in planning and building appeals. It was against that somewhat uncertain and unsatisfactory background that the Court in 1996 deliberately decided to apply to certain types of proceedings in class 3 of the Court’s jurisdiction, including valuation appeals, its established practice in respect of planning and building appeals by introducing par 10A into its Practice Direction. Thankfully, since its introduction into the Court’s Practice Direction, the practice has eliminated the previous uncertainty as to the disposition of costs orders.

14. So appreciated, the Applicant submitted that it could not reasonably be held that the exercise by the Applicant of its statutory right of appeal against the Valuer General’s decision on its objection to the statutory valuation, was contrary to the spirit or rationale of the Court’s Practice Direction. On the contrary, the exercise of its right of appeal was entirely consistent with the spirit or rationale of the Practice Direction that the Applicant be encouraged to seek review of the statutory valuation without being burdened by the risk of a costs order being made against it.

C. ADJUDICATION ON THE SECOND RESPONDENT’S CLAIM FOR COSTS

15. In my judgment, the Second Respondent has not established any relevant “exceptional circumstances” within the meaning of the Court’s Practice Direction. In so concluding, I would generally accept the Applicant’s specific arguments advanced in response to the Second Respondent’s reliance upon each of the four factors that I have earlier recited. There is no need to elaborate upon these arguments which I have earlier summarised.

16. However, the conclusion that no relevant exceptional circumstances have been demonstrated is I think, considerably reinforced by a closer analysis of the precise nature of the proceedings that were determined by Commissioner Nott’s judgment and of the parties respective positions in those proceedings.

17. As I have earlier noted, the proceedings involved an appeal brought by the Applicant pursuant to the Valuation of Land Act s 38 against the Valuer General’s decision on the Applicant’s objection against the statutory valuation, being the land value of a parcel of land situate at Chullora, owned by the Applicant.

18. As originally constituted, the proceedings involved just two parties, the Applicant, being the statutory objector under the Valuation of Land Act, and the Valuer General.

19. However, on 5 November 1999, the Second Respondent became a party to the proceedings having been joined on its own Motion (which was not opposed by the original parties to the proceedings). The Motion for joinder had been supported by an affidavit sworn by the Company Secretary of the Second Respondent who deposed to the following facts—
(i.) the Company was the lessee for a term of 50 years from 1974 of the land, the subject of the proceedings;
(ii.) it would be directly and materially affected in its leasehold interest if the Applicant were wholly or partly successful in the proceedings;
(iii.) in terms of the lease in addition to its obligation to pay rent it was responsible to pay all statutory charges levied on the land or to indemnify the lessor in respect of the payment of those charges;
(iv.) in 1990, the lessor had instituted arbitration proceedings for a review of the rent reserved under the lease which proceedings had been settled by an agreement between the lessor and lessee as to the rent payable, such agreed rental (at the rate of some $40,000 per month) having been continuously paid since 1989.

20. In its capacity as a respondent, the Second Respondent had contended in the proceedings heard and determined by Commissioner Nott that the statutory valuation of $5.25 million “was too high”, contending that the statutory valuation should be $5 million.

21. In his reasons for judgment, the Commissioner treated the Second Respondent as if it were an appellant dissatisfied with the decision of the Valuer General on an objection against the statutory valuation. Thus, he said at par 4 and par 5 of his judgment:
4. Although McWilliam’s Wines Pty Ltd, is named as a second respondent in appeal 30208 of 1999, in reality the company is an appellant.
5. Tenstat Chullora No. 2 Trust bears the onus of proof of establishing that the land value objected to is too low, and there is also an onus of proof on McWilliam’s Wines Pty Ltd to establish its contention that the land value determined by the first Respondent is too high: see Flack v Valuer General (1952) 18LGR (NSW) 157; Taxation Administration Act 1996 s 101

………….

22. As I have earlier pointed out, in his formal orders, the Commissioner dismissed the objection of the Applicant and upheld the objection of the Second Respondent.

23. With great respect to the Commissioner, it was simply incorrect to regard the Second Respondent as an objector under the Valuation of Land Act, it being common ground that it had not objected to the statutory valuation. (It appears that it may have not received notice of the statutory valuation, apparently as a result of an oversight, but nonetheless, contrary to the requirements of the Valuation of Land Act s 29(2)(b)) that certain classes of lessee be notified of the statutory valuation.) It appears that the parties before the Commissioner presented their respective cases based upon the same fundamental misapprehension.

24. In these circumstances, whatever role and status the Second Respondent enjoyed in the proceedings, it was not in the capacity of a statutory objector under the Valuation of Land Act. Although this conclusion casts no doubt on the case it conducted at the hearing of contending that the statutory valuation was too high, inevitably there must be doubt as to the competence of the Commissioner’s decision to alter the statutory valuation by reducing it from $5.25 million to $5 million. This doubt arises from the express language of the Valuation of Land Act s 39 which states:

Without limiting the powers of the Court under the Land and Environment Court Act 1979 , the Court shall, if it upholds an objection and is satisfied that the valuation is erroneous, order the valuation to be altered.

25. Although the matter was not argued, the prima facie meaning of this provision is that the Court’s power to order the alteration of the statutory valuation depends upon two preconditions— (i) the upholding of the objection (being an objection duly made pursuant to the Valuation of Land Act ); and (ii) a finding that the statutory valuation is erroneous. Absent any relevant objection, the power would not appear to have been enlivened. (The only statutory objection under the Valuation of Land Act in the proceedings was the Applicant’s objection that the statutory valuation was too low. That objection which was dismissed did not enliven the power to alter the statutory valuation.)

26. A further consequence of this prima facie conclusion which is particularly relevant for present purposes, is that although it was open to the Second Respondent to contend at the hearing that the statutory valuation should be determined at a figure less than the statutory valuation, that case, if substantiated, could not ultimately be given effect to by reducing the statutory valuation made by the Valuer General, although the Court’s acceptance of the Second Respondent’s case would necessarily involve the rejection of the Applicant’s case that the statutory valuation was too low, thereby producing the result that the statutory valuation should remain undisturbed.

27. The foregoing analysis of the true nature of the proceedings that were determined by the Commissioner, including my analysis of the true result in those proceedings, inevitably means that the Second Respondent’s claim that the Applicant’s appeal was contrary to the spirit and rationale of the Court’s Practice Direction must be entirely rejected. Whereas the proceedings undoubtedly involved the Applicant in the exercise of its unqualified statutory entitlements under the Valuation of Land Act (i) to object to the statutory valuation; and (ii) to appeal to this Court against the Valuer General’s decision on the objection, they did not involve the Second Respondent in any relevant capacity or competence under the Valuation of Land Act, its participation being confined to that of a person who was joined as a further respondent to the proceedings on its own Motion.

28. Having gained participation via the route of joinder on its own motion rather than via the statutory processes as an objector under the Valuation of Land Act, it is simply not open to the Second Respondent to successfully contend that the Applicant, by bona fide exercising its unqualified statutory entitlements under the Valuation of Land Act, inevitably induced the Second Respondent to become embroiled in the litigation. Even more importantly, it is not open to the Second Respondent to seek to put a colour or complexion on the proceedings different from the obvious one, namely proceedings properly instituted and pursued under the Valuation of Land Act by the Applicant as the relevant land owner who had objected to the statutory valuation.

29. For all these reasons, the Second Respondent, not having established exceptional circumstances in support of its claim for costs, its Motion must be dismissed.

30. In consequence of dismissal, the Applicant seeks its costs of the Motion. In my judgment, the Applicant is entitled to its costs of resisting the Second Respondent’s Motion. The costs of the hearing of the Second Respondent’s costs Motion are not costs of the “valuation appeal” within the meaning of the Court’s Practice Direction, par 10A. Rather, they are separate costs incurred in the proceedings and the exercise of the Court’s statutory costs power conferred by the Land and Environment Court Act 1979 s 69, in respect of those costs, is not governed by the Practice Direction but is governed by established principles (more particularly, by the principle that costs follow the event). The Second Respondent, having failed in its costs Motion, should pay the Applicant’s costs of the Motion. In so concluding, I would respectfully adopt and apply what was recently said by Lloyd J in MacDonald v Mosman Municipal Council (No 2) (2000) 107LGERA 211 at 215/216 (being a case in class 1 of the Court’s jurisdiction where the successful party sought an order for costs against the unsuccessful party):

In my opinion, the successful party on a notice of motion for costs should not be visited with the costs of resisting the motion. This motion is not part of the planning or building appeal, which has concluded. As Pearlman J stated in Outdoor Australia Pty Ltd v Auburn Council , ((1996) 89 LGERA 365) the practice direction was made to encourage dissatisfied parties to seek review of planning and building decisions without the risk of costs if unsuccessful. The applicant’s motion for costs, however, involves an additional appearance and the incurring of additional (and generally unexpected) costs which are not part of the planning and building appeal.

D. CONCLUSIONS AND ORDERS

31. For all the foregoing reasons, the Second Respondent’s Motion must be dismissed with costs.

32. Accordingly, I make the following orders:
1. The Second Respondent’s Notice of Motion filed 13 September 2000 be dismissed.
2. The Second Respondent pay the Applicant’s costs of the Motion in the sum agreed, or failing agreement, as assessed.