Valuer-General Victoria v Wsti Properties 490 SKR Pty Ltd

[2025] HCATrans 016

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M96 of 2024

B e t w e e n -
VALUER‑GENERAL VICTORIA
Appellant
and
WSTI PROPERTIES 490 SKR PTY LTD
Respondent

GAGELER CJ
GORDON J
STEWARD J
GLEESON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 7 MARCH 2025, AT 9.59 AM

MR D.J. BATT, KC: May it please the Court, I appear with MR G.C. KOZMINSKY and MR J.T. WALLER for the appellant. (instructed by Maddocks Lawyers)

MR S.S. GOUBRAN, KC: If the Court pleases, I appear MR P.E. ANNABELL for the respondent. (instructed by MinterEllison)

GAGELER CJ: Thank you, Mr Goubran. Mr Batt.

MR BATT: If the Court please, we will take your Honours straight to the part of the Court of Appeal judgment containing the error the subject of this appeal. Their Honours’ reasons commence at core appeal book page 63. We would take your Honours, please, to pages 92 and following where your Honours should find paragraphs 143 and following.

Your Honours will see here the dispositive passage in the Court of Appeal’s reasons. We note, your Honours, with all respect to the court below, that the interpretation adopted between paragraphs 143 and 149 was reached without any submissions on the matter and without notice to the parties. With respect to their Honours, in our submission, the interpretation adopted plainly was erroneous.

As your Honours would have appreciated from the written materials, it is our contention that, contrary to the interpretation adopted here, whether the effect of work done or material used, in the language of the statutory phrase, “increases the value of the land” is to be determined at the time of the instant valuation, not at the time that the work was performed – in the case before the Court, being 1897. On the basis of that interpretation for which we contend, the building and the land in question, which we call Landene, was not an improvement.

Now, your Honours, if I can take you with those prefatory observations, more particularly to the passages to which I have alluded, and pick it up at paragraph 143 on page 92. Your Honours will see that the court, by the language used in 143, makes plain that:

the answer –

as they term it, to the matter, and in particular, to the question of:

whether Landene is an improvement –

lay – unsurprisingly, one might interpolate – in the provisions of the Victorian Act. Then, at paragraph 144 – although we will take your Honours, of course, in due course, to the full terms of the lengthy statutory definition – just for convenience, here, your Honours will see the most particularly pertinent element of that definition set out, with italics on the part of the definition of which the Court of Appeal focused.

Your Honours will see that having – I will not read that; we will come back to it. Your Honours will see that the Court of Appeal immediately stated, by way of an unanalysed conclusion that:

This formulation distinguishes ‘the work done or material used’, which must increase the value of the land, and the ‘benefit’ to the land, which must be ‘unexhausted at the time of the valuation’.

In our respectful submission, that distinction of itself, drawn a priori by the court, was unsound and, in effect, embedded from the outset the conclusion of a temporal nature that their Honours came to express and adopt.

GAGELER CJ: To be fair, it is linguistically‑based, it is not a priori.

MR BATT: Yes, your Honour. It treats the words of the statute, but in a way that – as we will elaborate – alters their meaning, takes the operation and bifurcates it and leads, in the way in which it is expressed, to the outcome of that the Court of Appeal adopted.

GLEESON J: But an “improvement”, as defined, has to satisfy two criteria: one about increasing value, and then a second one about benefit not being exhausted.

MR BATT: That is so, your Honour. The nub of the question really is, in doing that, are there two separate times that fall to be applied as to those two component parts? The Court of Appeal said: yes, look at the increase in value at the date of construction – here, 130 years ago – look at benefit unexhausted at the time of valuation. It is the essence of our contention that that is quite wrong, for reasons we will elaborate – rather, it was a compound phrase which operates at the one time, there being only one time expressed in the phrase, which is the time of valuation.

GAGELER CJ: That is sort of the whole case, is it not?

MR BATT: Yes, yes, your Honour, that is it.

GAGELER CJ: Two elements or one. If it is a compound phrase, are they just different ways of saying the same thing?

MR BATT: Yes, your Honour. There are a number of ways to come at, but that is it, and it is a short point for this Court to grapple with. There does lie much underneath it. Your Honours know from the materials that we have a number of aspects that we draw upon to support the construction for which we contend, as your Honours would expect – text, context, powerful indications from legislative history, considerations of operation and outcome. But they all coalesce into the conclusion that, when the legislature used, as part of a long definition, one single phrase referring to one time, it was not talking about two different times.

STEWARD J: Can I ask you a question, Mr Batt. Do you say that site value is necessarily a hypothetical valuation, if the assumption is engaged, that is?

MR BATT: Your Honour, can I express it slightly differently?

STEWARD J: Yes.

MR BATT: It is a statutory concept. It rests, as we will come to, materially on notions of Spencer market value. But, as the definition mandates, there are requisite statutory assumptions to be made, and so the resultant figure in any given case of site value need not be thought necessarily to equate to market value of unimproved land.

STEWARD J: Just so that I understand your case, your case is that if the assumption has no work here, because Landene is not an improvement, it follows that the correct site value is equal to the capital improved value.

MR BATT: Yes, your Honour.

STEWARD J: And because the return value for site value was lower than that, it must necessarily be sufficient.

MR BATT: Yes, your Honour, because the gravamen of the case as commenced two levels below was the objection that the adopted site value was too high.

STEWARD J: And the capital improved value was not challenged?

MR BATT: Correct, your Honour.

STEWARD J: I understand.

MR BATT: So, if there is a return value of 7.2 million of capital improved value, not the subject of challenge, the return value of site value was about a million dollars less, and so it is that comparator of being not too high that would drive the disposition of the appeal. Really, if I may say, your Honour, as soon as it is recognised that the date as at which the increase in value is to be assessed is the valuation date, then it is a short and easy path to the outcome I have referred ‑ ‑ ‑

STEWARD J: One other area, though, that I would not mind some assistance on, when you get to it – Mr Goubran says that if you include Landene in the valuation, you must include the heritage value under section 5A(3)(b). I take it that your argument is that if you exclude Landene, the heritage value is no longer relevant in the way that word is used in 5A(3)?

MR BATT: Your Honour, whilst I will come back to it, can I seek to assist immediately, and just in doing that, take one step back. As your Honours would likely have to mind, in Maurici’s Case and other authorities thereafter, including Trust Company in the New South Wales Court of Appeal, a three‑step process was identified.

First, identify improvements by applying the instant definition. Secondly, notionally remove them. That then identifies the land to be valued. Having identified the land to be valued, one comes to questions of value. It is at that point, your Honour Justice Steward, that section 5A has its operation – at the risk of pre-empting myself in that regard, my ‑ ‑ ‑

STEWARD J: So, step 3, there is no heritage value because it is no longer relevant?

MR BATT: It is a little tricky. May I go back, your Honour?

STEWARD J: Yes.

MR BATT: The first step, of course, as I have said, is whether Landene, being the land on which the building is situate, is an improvement. That turns upon whether, by comparison between the value of the land with the building and the value of the land notionally without the building, the improved state increased value. We say one conducts that comparison as at the date of valuation, unsurprisingly.

Here, there was a site‑specific heritage overlay. We can give your Honours the references in due course. It operated by reference to the presence of the building. In effect, it said the building cannot be demolished, removed or affected without special permits.

When one conducts the step 1 comparison to assess whether the building adds value between the land with the building and land notionally without, in the latter – when one is considering the value without – although the heritage overlay still is there as a matter of planning controls, it has no work to do, and that was common ground below.

GORDON J: Has no work to do in the context of these calculations?

MR BATT: Yes, your Honour, because in the notional scenario under consideration at that point, there is no building there, therefore development is effectively unconstrained, therefore, as is obvious – the Court of Appeal said, at paragraph 110, as is “self‑evident” – the value in that vacant state is greater than the value with the building.

The building depresses value because it triggers the constraints in the heritage overlay which so reduce its development potential for the site. The site, of course, your Honours, is in the main boulevard of Melbourne, St Kilda Road. The building and the land are surrounded by developed sites. The zoning encourages development. The key to value is operative heritage constraint that reduces or prevents development of the site.

So, when, at step 1, one considers – in order to determine whether Landene is or is not an improvement that is to be disregarded or kept in view for valuation purposes – when, at that stage, one conducts the notional comparison, one immediately concludes that, obviously, in the notional scenario where the building is not present, the value of the site is greater. Therefore, Landene does not add value; therefore, it is not an improvement; therefore, when one comes to stage 3, one has not notionally removed it and valuing the site with Landene present.

Now, your Honour, that then, with somewhat of an excursus, brings me back to where I say took your Honour to be focusing. The valuation task at stage 3 is, therefore: what is the value of this land – as we would put the interpretative question that has been dealt with it at the antecedent stages – what is the value of this land with the building upon it?

GLEESON J: So, you consider Landene to be a worsement?

MR BATT: Yes, indeed, your Honour. Although that word may not find its place prominently in the dictionaries, it is – if I may, with respect to your Honour Justice Gleeson – a helpful notion to have to mind. It is elaborated in the authorities – including in Commonwealth Custodial, paragraph 69, and following. Landene is not an improvement, both in common parlance and upon the statutory definition that Victoria has, it is a worsement – it lowers value. May I just say something about the numbers in play in this matter?

GORDON J: Before you get there, can I just come back to this step 3? What you just said, as I understood it, was that you value the land with the building on it.

MR BATT: Yes, your Honour.

GORDON J: With or without the overlay?

MR BATT: The overlay is present and effective, and that is part of the operation of section 5A.

STEWARD J: Can I ask a question? You may not be able to answer this. When the capital improved value is ascertained, did the return valuer include or have regard to the overlay? There may be no finding about this.

MR BATT: Yes, your Honour, one can infer that, because – as we will come to when we treat more particularly the question of disposition of the appeal, once our interpretation is, as we hope it will be, accepted – when we come to disposition, we will identify to your Honour that, amongst other things, the respondent’s own valuer gave evidence before the tribunal that the market value of the site without the building and the triggering of the heritage constraints that it engaged was above $15 million.

GLEESON J: So, what are we arguing about?

MR BATT: So, one can work backwards to the $7 million ‑ ‑ ‑

STEWARD J: In any event, it may not matter, because you say there is no challenge to the capital improved value ‑ ‑ ‑

MR BATT: That is so, your Honour.

STEWARD J: ‑ ‑ ‑ and that is a valuation of the land with Landene, the whole lot.

MR BATT: Yes, your Honour. I am sorry, Justice Gleeson, but if I just finish addressing Justice Steward. As your Honour, I think, drew out earlier, the endpoint of our analysis is, properly applying the definition that is to be addressed at stage 1, having concluded that Landene is not an improvement, the valuation proceeds at stage 3 with Landene present, the heritage constraints apply, the site value is the same as the CIV, because CIV is the value with improvements.

STEWARD J: Yes.

MR BATT: I am sorry, Justice Gleeson.

GLEESON J: I am just curious to hear the numbers, now.

MR BATT: Yes, the reason that I, in a case about interpretation, depart to the numbers is because there is an unusual element to the way in which the valuation figures have developed in this stage, and perhaps it may assist the Court if I identify it, because it elucidates both the rationale for our client’s pursuit of the interpretative point, and supports the interpretive contentions we make.

What I am alluding to is this: the tribunal adopted an approach which, at stage 1 – that is to say, at the stage where one is inquiring, is the building on the land an improvement that is to be notionally disregarded –said, first, I will work out the highest and best use of the land with the building, and then I will conduct that approach. The tribunal, as a result of that, applied a test which, for both of the two comparators in that first inquiry, injected the heritage constraints as operative. That is to be seen most particularly if I just give your Honours the reference in paragraph 162 at core appeal book 38 of the tribunal’s reasons.

Now, as a result of doing that, the tribunal found that Landene was an improvement. It disregarded it; but in disregarding it, it still kept the heritage constraints as applicable. It, therefore, adopted the respondent’s expert evidence with adjustments the tribunal itself made and adopted a site value a little below $3 million. That is a very low site value even in circumstances where the building has been treated as an improvement and notionally disregarded, but it was driven by the tribunal’s aberrant approach, which kept the heritage constraints operative, even having notionally disregarded the building.

The Court of Appeal upheld the first ground of appeal to it, in effect, and as your Honours will see in terms, at paragraph 158 of the appellate reasons, core appeal book 94, rejected in terms the tribunal’s approach to the first‑step inquiry which at first adopted a fixed “highest and best use” for both of the comparators. The reason I go through that is to identify for the Court that in this particular case, because of the tribunal’s aberrant approach at the first step, even though the building was disregarded as being an improvement, the heritage controls are still treated as applicable and a low site value number was adopted.

STEWARD J: Do they give a reason for that?

MR BATT: Extensive passages in the reasons addressed it, your Honours. With respect, they are not always easy to fathom, but it was the nub of the issue before the tribunal. What I seek to get to is this. That was a particular case and the way in which the matter proceeded in the Court of Appeal did not lead to the court addressing those numbers.

But in the norm, the position would be quite different. What I mean is this. It is the Valuer‑General’s contention, driven by policy concerns for the proper operation of the Act, to ensure that – to pick up Justice Gleeson’s language – “worsements” are not treated as improvements.

Consider, perhaps, an example. There is land valuable in its position in another capital city of this State in a prime location with an old building which, due to a site‑specific or building‑specific heritage register entry, cannot be touched. The building is used perhaps for concerts. The site, absent that building, is worth a very large amount because it can be developed into a high office tower. Plainly, the presence of a building depresses value. It is a worsement when it comes to unimproved site value.

If the definition of “improvement” is treated, as the Court of Appeal did, such as to pose the inquiry to work out if this building is an improvement, I look at it when it was constructed, did it add value then, then although now in the modern metropolis it plainly depresses value, the answer will stand to be – subject to particular facts of a given case – this building did add value when constructed in 1855. It is an improvement. I will disregard it. Having disregarded it, I have a prime development site. Site value: 80 million. That is to say, worsements will be disregarded. Site value will be increased, compared to capital improved value, land tax will apply accordingly, and that is a distortion of the system.

On any view of the notion of improvement, whether common sense, dictionary‑based or statutory, as we focus on here, improvements are structures the works of humankind that enhance value at the relevant time, not items which depress its value – that it to say, depress the underlying land value. Site value relates to unimproved land value. Land tax is levied on that value.

In other words, your Honours, although the facts of the present case driven by the tribunal’s approach and the numbers that it adopted take one to lower values, and the result of the appellant’s interpretation would be to compel adoption of a CIV of $7.2 million as equating to site value and dismissal of the objection allowing the appeal, in the norm, it is the result – ironically, perhaps – of the respondent’s contention that an owner of a property with worsements upon it will have attributed to the use of land a higher value than the CIV, a higher value than the actual market value of the improved property, and will pay tax accordingly. That is why, if it matters, the appellant Valuer‑General Victoria pursues the interpretive issue.

GAGELER CJ: In a nutshell, what is your answer to paragraph 154 of the Court of Appeal’s reasoning?

MR BATT: I do apologise, Chief Justice, I did not hear you.

GAGELER CJ: What is your answer to paragraph 154 of the Court of Appeal’s reasoning?

MR BATT: Yes, your Honour. With respect, it is not at all right that the adopted construction is the only sensible one or a sensible one. The supposedly anomalous outcome essayed there is one which addresses itself to changes in highest and best use. It is not an example which bites on the interpretative issue before this Court. Your Honours, we address this, in terms, in our written submissions in chief – just to give your Honour the Chief Justice the reference – at paragraphs 59 to 61, on page 14. I do want to say more, Chief Justice, about the actual outcomes that stand to follow from the Court of Appeal’s reasons which, in our respectful submission, are the considerations of a practical nature that should drive the interpretative conclusion.

GORDON J: What are they?

MR BATT: Your Honours, they are, in short – and I have perhaps alluded to some of them in what I have said so far – that the Court of Appeal’s interpretation stands to deliver irrational and unworkable outcomes. The unworkable outcomes are that the essence of the interpretation is, look to the date of construction of the instant structures or works – they may not be structures but, for example, irrigation, levelling, draining – look to that date and assess whether, at that time, the effecting of the works increased the value of the land.

GLEESON J: But you would actually be assuming it rather than determining it.

MR BATT: It depends, your Honour. There will be some cases when it is just plain. I look at a land at a beachside town, it is in a residential zone, it has a nice house on it, plainly the house has added value. But each occasion will be fact‑specific, and the facts must be assessed, and the facts change from time to time. So, when one has works constructed a long time ago – it is difficult to determine what was done and how – the assessment of comparative value that stage 1 requires stands to be either impossible, or difficult, or unreliable.

Secondly, your Honour Justice Gordon, where works have been undertaken on a given structure at more than one time, it is perfectly workable to say: at the present date of valuation, do those resultant structures increase value? But how does one apply a test that says, look at whether the structure increased value when it was made.

GORDON J: So, you mean to say, you would have to look at each of modification?

MR BATT: If one does that an has an answer, the value increased in 1910; the further works – because of the Great Depression – made it a negative to have the building on land in the 1930s; by the 1950s, the improvements – it is a question that seeks one answer, yes or no, but it presupposes a given point in time that can be suitably be adopted, and that is not so with works dealt with over time. Even if an agent inquiry can be done in practical terms, it stands to be an unreliable assessment. Of course, this is all in the context of municipal ‑ ‑ ‑

GORDON J: And costly.

MR BATT: I am sorry?

GORDON J: And costly.

MR BATT: Costly, and further to that, your Honour, I was about to say, this is in the context of annual municipal valuations of all land in Victoria – section 11 of the Valuation of Land Act read with 13DC. The poor valuer has to go and unravel the position as of 100 years ago, 80 years ago, whatever it may be, so administratively onerous. Then, your Honour, because one is looking to the fixed point in time of construction, it follows that unless a structure added value when it was built, it cannot be seen to be an improvement no matter what has occurred since, even if it is now very valuable.

Equally, if it did add value then, it will be seen as an improvement provided there is still some unexhausted benefit at the valuation date, even if it is – to use Justice Gleeson’s language – a worsement, which seems counterintuitive at best, especially as land tax is imposed upon adopted site values.

JAGOT J: One issue with 154 of the Court of Appeal’s reasoning is to reconcile it with the fundamental aspect of site value, which is focused on the amount that would be realised at the time of valuation. That necessarily means that it is – the improvement has not been made. It is always a highest and best use analysis, is it not, because that is what the market does – you always assume a highest and best use.

MR BATT: Quite so, Justice Jagot. The term “improvements” ‑ ‑ ‑

JAGOT J: Assuming the building is not there, I mean. You must, because it is only if the building – you cannot demolish it, you are stuck with it, or the costs – if it is there, notionally the costs of demolition might increase your development costs, but otherwise you take the land as it is and for what it is realised, it is inherent within that.

MR BATT: If we may say so, indeed. Whilst the definition of improvements is really just one statutory input into the supervening definition of ‑ ‑ ‑

JAGOT J: It is just a thing you disregard. The real issue is site value.

MR BATT: That is what I was going to say, your Honour. One looks at improvements to work out site value and that imposes a Spencer market value test.

JAGOT J: Yes, otherwise you are moving away completely from any concept of might, in any ordinary circumstances, be expected to realise at the time of the valuation, and the fact is if you suddenly get a rezoning that allows a residential site for housing to be a site for, you know, multi‑storey residential flat buildings and apartments, that is the reality. The underlying site value is dramatically changed if you have a house on it. I mean, that is not anomalous at all, in my view. I do not understand how that is anomalous. That is what the Act is intended to capture.

MR BATT: We so submit, your Honour, noting, of course, that when I address myself to questions relating to identification of improvements, I am directing attention to the first stage in the inquiry, but ‑ ‑ ‑

JAGOT J: Yes, but it is only functional, I mean, in the definition of site value. It is just an integer.

MR BATT: Yes.

JAGOT J: Once you work out if it is an improvement or not, it is just an integer in site value.

MR BATT: And indeed, your Honour, that is one of the points I will come to when one looks at the text of the definition more properly, and then the surrounding provisions of the Act, including that definition, which speaks, of course, to the time of valuation. If you are looking at the site value at the valuation date, which you are for municipal purposes and land tax purposes, you would want to work out your improvements at the same date.

JAGOT J: Of course. But 154 just seems to be the tail wagging the dog, I have to say, because it is very caught up on the notion of: you have a building which might have some value left in it. Well, so be it.

MR BATT: Yes, your Honour, we agree. In these regards, if we could also make reference to section 2(2) of the Valuation of Land Act, which we may return to, but it is perhaps pertinent, in light of your Honour’s remarks. It is to be found in the book of authorities, page 25 in volume 1, part A. If your Honours have that – page 25, volume 1 – subsection 2(2) reads:

In estimating the value of improvements –

so that what follows is for this purpose:

on any land for the purpose of ascertaining the site value . . . the value of the improvements is the sum by which the improvements . . . are estimated to increase its value if offered for sale on such reasonable –

market terms, et cetera. Now, as your Honours will immediately appreciate, it is ‑ ‑ ‑

GORDON J: That is Spencer.

MR BATT: The second half of the verbiage is Spencer, your Honour, yes. And the Spencer language is found in the definitions of “site value” and “capital improved value” too. So, it is a package of provisions, and so what one ‑ ‑ ‑

JAGOT J: That must be at the time, at the time of valuation.

MR BATT: At the time, indeed.

JAGOT J: It has to be.

MR BATT: Yes, and that is really what I wanted to draw out.

JAGOT J: You cannot work out: it would have got £200 pounds back in 1912. I mean, that is just ludicrous.

MR BATT: Yes, your Honour. May we say, this is the only case – and by that, I mean to refer to the Court of Appeal’s judgment – it is the only judgment that we have been able to find in any jurisdiction where it has either been held or contemplated that one assesses whether an item is an improvement by looking at its enhancement or otherwise in value at the time the works were constructed as compared to the date of the valuation.

Every other decided case either presupposes or holds that the relevant date is the time of valuation. Now, we accept that some cases are treating the word in what I might call a general law notion, without a statutory definition; others involve a particular definition and, of course, turn on that definition. But, nevertheless, in either sphere of authority, this is a unique treatment of the questions.

Although one might perhaps characterise the issue as one of timing, when one traces through the definition, as I should have done by now and will soon do, one sees that the timing point is not a discrete integer of its own confined operation, temporally. Because of the view that the Court of Appeal took on the compound phrase and the timing that they attributed to what they called the first part of it, the entire operation of the phrase became affected, and we say distorted, because it led the Court of Appeal, having identified two separate elements – increasing value and unexhausted benefit – to treat unexhausted benefit in the particular fashion which we say is infected by the overall approach, and quite wrong as well. So, the outcome has come to be of the nature that I sought to encapsulate when Justice Gordon asked me about them.

If I could just say a little more about their Honour’s reasons in the pivotal passages. Our learned friends, we rather take from their oral outline, want to look to the earlier parts of the judgment as being the ones that matter, but, with respect, it is absolutely plain that it is paragraphs 143 to 149 which are the gravamen of the appellate decision, as their Honours make clear by the language they used from 143.

I have made some remarks on paragraph 144. What one then sees, and, of course, none of this was argued or addressed, no authorities or extrinsic materials or other considerations were able to be put or were put before the court – their Honours then say, having recited in 144 the key statutory language and identified a supposed distinction, they then say:

The definition . . . therefore speaks of two points in time.

That is the conclusion reached ab initio. They then say this, in 146:

First, it refers to the time the work is actually done or the material is used.

With respect, it does not so refer, not by any language; and, also, if one has regard to the italicised verbiage in 144 which quotes the key phrase in the definition, one sees that although the italics start a little later, the language is:

in so far only as the effect of the work done or material used increases the value . . . and the benefit is unexhausted at the time of the valuation’.

Your Honours will appreciate that in paragraph 146, the Court of Appeal eliminates the notion of the effect of the works and addresses itself to just simply the work. They then say, in the second sentence, the definition “imposes”, for the first time:

the qualification that at that time, the work or material –

not the effect:

must increase the value of the land.

Then, by way of counterpoint, they continue:

Secondly, it refers to the time of valuation. It imposes the qualification that the benefit must be ‘unexhausted’ at that time.

And distinguishing between value increase and unexhausted benefit, we say wrongly, they go on to say:

This –

that is to say, unexhausted benefit:

This is not a requirement that the improvement increase the market value of the land at the date of valuation. It is simply a requirement that there be a continuing benefit to the land –

Having pronounced that interpretation, their Honours apply it in paragraph 147 to Landene, and, speaking perhaps about evidence, but in a commonsense fashion, as one can do in, perhaps, a clear enough case, they say that:

The construction of Landene in 1897 –

of the building was:

‘work . . . done . . . At that date, the effect of Landene was to increase the value of the Land. More particularly –

stated in the next sentence. Then, moving to what they have erected as second of two phases of inquiry, their Honours say:

the benefit . . . was unexhausted at the time of the 2020 and 2021 –

the valuation dates:

in that Landene continued to serve a variety of economic purposes, including the provision of accommodation and as a gallery –

That really is what I was alluding to when I submitted a few minutes ago that in the way the Court of Appeal approaches the definition, the notion of unexhausted benefit, rather than being the inverse of a value increase, is treated as some form of amorphous or innominate notion of utility, we say, quite wrongly.

It is apparently plausere to submit, from what I have traversed to date and also from paragraphs 147 and 149 that, correctly, the Court of Appeal treats the increase in value as monetary, or one might call it a market value enhancement, and that is quite right. It cannot be said, as perhaps we apprehend the respondent will seek to submit, that value enhancement or increase is a question of use or some non-monetary enhancement. Conversely, it is also clear from paragraphs 146, 147 and 149 that the notion of benefit is treated in the manner I have just remarked upon.

Your Honours will see in the latter part of paragraph 149 that the Court of Appeal identifies a “critical question”, on their interpretation, as being:

whether the benefit to the Land conveyed at that time –

when the works were first undertaken:

is ‘unexhausted’ at the –

valuation date:

not whether if the works –

were done:

today, they would increase the value of the Land.

We say that is quite wrong. And then finally, your Honours, I should move on more quickly, but paragraph 155 – I am sorry, I withdraw that. Can I move to the various respects upon which we draw in aid of our ultimate submission that the appellate interpretation below was erroneous.

It runs, with all respect, counter to considerations of text, context, legislative history and extrinsic materials, decided authority and in the outcomes it produces. And we will move to say, as concisely as possible, some remarks on each of those, noting, of course, that in the main, none of what we will cover was considered by the appellate court and, if we may say, in large part they are not considerations to which our learned friends’ written materials have responded.

Textual considerations are important – indeed, of course, fundamental – but we can seek to deal with them relatively quickly. Can I take your Honours now, please, in that vein, to the full terms of the statutory definition of “improvements”, which your Honours will find in volume 1 of the authorities at page 17.

GAGELER CJ: We are working from separate prints. We will find it, do not worry.

MR BATT: I though that may be so. Luckily, in volume 1, I can give your Honours confidently the page – volume 1, part A, page 17. We seek to identify these aspects of the lengthy definition as powerfully supporting the interpretation for which we contend.

First, the definition of “improvements” commences at the outset by enunciating, in terms, the purpose for which it is enacted. The purpose of the definition or the concept in the Act is to ascertain the site value. Immediately, we know that a harmonious interpretation of this definition to accord and complement what we will see in a moment in the “site value” definition must be taken, and if we may add, in that regard – I am sorry, your Honours, I will come back to that. Then, your Honours will see that the lengthy definition consists of a series of discrete components, and I will seek to identify them. Firstly:

improvements . . . means all work actually done or material used on . . . the land –

So, that is a factual element – an initial element – relating to physical works at the instant location. The next element follows after the word “but”, so we now have a limiting phrase or a carve‑out. It relates not to the works, per se, but to their effect:

but in so far only as the effect of the work done or material used increases the value of the land and the benefit is unexhausted at the time of the valuation –

That is the key phrase for our purposes, but, of course, not to be seen in isolation. Then, one has a third element:

but, except as provided in (2AA) –

a section relating to ports and wharves, but except as there provided, the term:

does not include –

subsections (a) and (b). Then, just to keep the mind clear, it has added:

unless those improvements –

we say a reference to (b) only:

can be shown –

et cetera. So, one has some four or five discrete phases, as it were, of the statutory notion. In our submission, that structure militates in favour of an approach under which the words from lines 5 to 9 – “but in so far only as” down to “the time of valuation”, are treated as one compound notion, not broken up further.

STEWARD J: Mr Batt, I know you make the submission that it is one compound phrase, having regard to legislative history, but it would not hurt your case, necessarily, if there were two tests – both of which had to be satisfied – namely, you might read the first test as requiring, as the date of the valuation, that the thing – I will use a neutral word, “thing” – increases the value of the land, and, you say, not here. The second part of the test might be: “and the benefit”, and that might be reference to the utility of the thing is unexhausted. So, you might say here, I accept there is an art gallery there, and it is of utility, but the reality of the matter is, on my case, the first part of the test is failed because it decreases the value of the land.

MR BATT: Your Honour, can I agree entirely, but add an important rider?

STEWARD J: Yes.

MR BATT: We do say – I am sorry if I was not clear – we do say that there are two components to be addressed there. There is, clearly, a reference on the requirement of value increase and benefit unexhaustion. I was not precise enough, I am sorry, your Honour. The critical point, interpretatively and for the disposition of this appeal, is the temporal aspect of the value increase component. What we are seeking to convey is that that single clause ‑ ‑ ‑

STEWARD J: Is directed at one date?

MR BATT: Yes.

STEWARD J: I understand.

MR BATT: Which is the time referred to and not some other imputed time.

STEWARD J: I understand that.

MR BATT: And as soon as that is accepted and the inquiry as to value increase is the date of valuation, not 1897, then, in the facts of the matter, the appeal is to be allowed.

GAGELER CJ: What is the temporal focus of the preceding phrase:

means all work actually done or material used on and for the benefit of the land –

MR BATT: Your Honour, that is simply a requirement that one can point to some – what used to be called “work of man” that has been undertaken on the land, as to which one then applies the remainder of the definition.

GAGELER CJ: So, it is still at the time of valuation.

MR BATT: There has to have been work done or material used at any point in time at or before the date of valuation. So, for example, the building of a beach house in 1950, the erection of fencing a week before the valuation date, the levelling of land, the clearing of scrub in 1860, all those things are work actually done “on and for the benefit of the land”, and then one looks at whether they enhance value at the date of valuation.

STEWARD J: It is also directed at ensuring that you do not include natural improvements to the land, such as an historically valuable tree, or something like that. That word is directed at things that people do.

MR BATT: Yes, and perhaps that is the purpose of the word “actually”.

STEWARD J: Yes.

MR BATT: So, if the, as it were, operations of nature have altered the land at some anterior point before valuation, that is not captured. One looks to see what humans have done to alter the land from its natural state, and then one says, have those works or materials enhanced value?

GORDON J: Your argument, in short, is: the definition of “improvements”, read with “site value”, requires you to undertake a valuation at a particular point in time; that valuation is to take into account whether or not there are improvements, as I understand you put it; for the purpose of ascertaining the site value of land, one is to exclude all works actually done which are sitting on that land at that point in time, to the extent that they increase value.

MR BATT: Yes, your Honour, subject to the carve‑outs that follow in the remainder of the definition.

GORDON J: Subject to the – we are dealing with the chapeau at the moment. Subject to the exclusions.

MR BATT: Yes. And as long as there is an unexhausted benefit.

GORDON J: That is part of the analysis of them being an improvement ‑ ‑ ‑

MR BATT: Yes, your Honour.

GORDON J: ‑ ‑ ‑ the increases in the value, which is unexhausted.

MR BATT: At the end of the day ‑ ‑ ‑

GORDON J: That is it?

MR BATT: It is quite simple: have people done things on this land that have enhanced their value?

GORDON J: So, one takes a snapshot, one looks at the land and says: what is on it? What has actually been put on it? And, at the date of the valuation, which is works actually carried out, do they increase the value of the land and is the benefit unexhausted?

MR BATT: Yes, your Honour. And whilst this may not be a legally valid approach to interpretation, it is neither a surprising nor a counterintuitive interpretation.

GLEESON J: It sounds valid to me.

GORDON J: You say it is consistent with the purpose of the Act, which is to undertake a valuation for the purposes of rates and land tax, in accordance with the scheme of the Act?

MR BATT: Yes. I perhaps have to hesitate slightly, because the Land Tax Act is a separate Act, but it is the ‑ ‑ ‑

GORDON J: I understand, but it is a similar ‑ ‑ ‑

MR BATT: For over a hundred years, the key use of the notion of site or unimproved value has been the levying of land tax.

STEWARD J: So, to use an example, if you had a building built in the 1920s which is now absolutely riddled with asbestos and could not be used for any beneficial purpose, in that example, the building would not have been an improvement as at the date of the valuation?

MR BATT: Yes, at the date – on the approach which we contend, it would not increase value.

STEWARD J: It might have added value originally, but now, none.

MR BATT: Yes. And so, in ascertaining value for site value purposes, one takes into account the depressive effect of it, rather than imagining it away as a so‑called improvement, when it is truly a worsement, and arriving, therefore, at some astronomically high site value and the owner getting a bill in the mail for land tax of a not inconsiderable amount. So, the obverse, your Honour Justice Steward, is that on the Court of Appeal’s interpretation, if it was a building when, constructed 90 years ago, added a modest amount of value, then one stands to get the other result.

STEWARD J: So, the Jam Factory in Chapel Street might have not been worth much when it was a jam factory, but is worth a lot more now.

MR BATT: I sought to give – I am sorry, I have not followed your Honour. I sought to give an example where the Court of Appeal’s approach would deliver a different result, whereby worsements are disregarded.

Perhaps I should move more quickly on matters of text, but we do point to and rely upon the use of the word “increases” in line 5, using the present tense; likewise, one sees “is unexhausted”, and we contrast that with the language using the past tense in the first element of the definition of “work done or material used”, so one is directed to the present time in terms by the language in lines 5 and 6.

Our learned friends say that is neutral. With respect, that is a proposition that only has to be expressed to be discounted. As is perhaps evident as well, as a matter of language, the Court of Appeal’s interpretation leads, as referring to two separate times, language which in its own terms does advert to matters of timing but only refers to a single time. That too, we submit, is difficult, textually, to support.

If we move, then, to other statutory considerations that we say buttress and support powerfully those textual considerations in the actual definition – and I think we have largely touched on these, but we will just enumerate them briefly. One, of course, has to read the provisions as working together, particularly the definitions of “site value” and “capital improved value” in section 2(2), to which I have already taken the Court. That was stated in terms by the Chief Justice of this Court over 100 years ago in Morrison, which I will not take the Court to, but the reference is part C, volume 3, page 55 of that part.

STEWARD J: Could you give a Commonwealth Law Report page?

MR BATT: Yes, I am sorry, your Honour. The citation is Morrison v The Federal Commissioner of Land Tax (1914) 17 CLR 498, and the page in question is 505.

STEWARD J: Thank you.

MR BATT: So, one has to read the definitions that work together in a way that enables them to work together and harmoniously. In that vein, we refer firstly to the “site value” definition, which is in volume 1, part A at page 22.

GLEESON J: Mr Batt, do we have the decisions that are under review?

MR BATT: I am sorry, your Honour?

GLEESON J: Do we have the decisions that are under review?

MR BATT: Whilst I will check, your Honour, I do not believe that the valuations which triggered the initial objection are themselves available to this Court or are before this Court. The way in which, under the Act, it then progressed was that the landowners sought to have those valuations or the valuations that lay behind the rate notice varied. The valuer decided in one case not to vary; in the other, the valuer did not decide within the prescribed time, there was a deemed disallowance, and it was that disallowance that led to the objection.

The valuation materials that led to those valuations I do not think are before this Court. If there is anything I have omitted, I will seek to inform the Court after the break. So, looking at the “site value” definition, page 22:

the sum which the land, if it were held –

in a certain tenure – so, that is one statutory assumption, but subject to it:

the sum which the land . . . might in ordinary circumstances be expected to realise at the time of the valuation –

that is the key part, and the rest is the Spencer test, and then the statutory mandate to assume:

that the improvements (if any) had not been made.

So, the notion of “improvements” plugs in to “site value”, and that inquiry is, in terms, one as at the date of valuation. I have already taken the Court to section 2(2), which speaks to those matters and, again, expresses the time of valuation as the time of relevance.

And then, if we just refer the Court to “capital improved value”, which your Honours will find in the same volume at page 14, really, in substance, it is the same as “site value” but without the mandate to disregard improvements; it is the Spencer market value, in effect, of the land with improvements “at the time of valuation”, so they all operate together.

Structurally, it is, in our submission, a premise of the Act that “capital improved value” will be a higher figure than “site value”. I know that is, in a sense, a trite proposition, because one has the improvements in play. It is a consequence of the decision under appeal that that legislative premise may be subverted, turned on its head. Section 2(2) itself, in terms, conveys a legislative premise that improvements will add value – it talks about ascertaining the value that improvements add; it does not contemplate negative value.

Finally, and briefly, if I just allude to sections 13DF and 13L. I will just take your Honours to the first of them, as they are relevantly identical. Section 13DF is found at page 61 of volume 1, and, for the record, 13L is found at page 76. If your Honours have page 61, your Honours will see that there is a provision concerning supplementary valuations. When something has arisen since a valuation that needs to be reflected in an additional or amending valuation:

(a)for the purposes of the Local Government Act 1989; or
(b)for the purposes of the Fire Services Property Levy Act 2012 –

Subsection (2) sets out when:

A supplementary valuation may be made –

And if your Honours turn overleaf, you will find, firstly, at page 62, subparagraph (h):

if by reason of the destruction or removal of buildings or other improvements . . . the capital improved value, net annual value or site value of that land has been materially decreased –

Conversely, on page 63, paragraph (j):

if by reason of the erection or construction or construction of buildings or other improvements . . . the capital improved value . . . or site value of that land has been materially increased –

we allude to them to make the submission that they, themselves, do necessarily have as a legislative premise that improvements will, when constructed, add value and, when removed, decrease value.

JAGOT J: Also (2)(b), which seems to be contrary to 154 of the – subsection 13DF(2)(b) is saying it is relevant if there is a material planning alteration because, obviously, it can lower or higher, increase, decrease the ‑ ‑ ‑

MR BATT: Often, the thing that an owner is most concerned about, your Honour, will be a material planning control change.

JAGOT J: Exactly. Well, that is built in – my point, I guess, is how can it be anomalous if it is built in?

MR BATT: Yes, your Honour, we embrace that. So, that is what we wanted to say about aspects of the Act beyond the definition of “improvements” itself. Could we come, then, as briefly as possible ‑ ‑ ‑

GAGELER CJ: There was something about L, was there not?

GORDON J: Section 13L.

MR BATT: Section 13L, your Honour, I am sorry, it is page 76 in the hard copy, and it is a cognate provision to 13DF, but it relates to ‑ ‑ ‑

JAGOT J: Fire levies – it is just the same.

MR BATT: It is the second stream of cognate provisions.

JAGOT J: Yes.

MR BATT: I am sorry, Chief Justice, I should have made clear that the paragraphs to which we allude are 13L(2)(g) and (i), which are found on pages 77 and 78.

GAGELER CJ: Thank you.

MR BATT: Your Honours, if we turn to matters of legislative history and extrinsic material. This, if we may submit, is a case where those instruments are unusually significant. They, as your Honours will see in a moment, speak directly to the considerations before the Court. We will step through them in a moment, as concisely as we can, but because so little detailed, may we seek to distil first, for the Court’s awareness, the key points that we seek to distil or take from them.

We submit that what your Honours will see to emerge from the materials are the following, each of which the appellate interpretation contradicts. Firstly, one will take, in our submission, from the matters of legislative history and the extrinsic materials: that the statutory phrase in question is a compound one; that it relates to only one time, namely, the time of valuation; that the notion of benefit unexhausted is simply the inverse of increases value; that, as such, the notion of benefit unexhausted does not have the different, more general, non‑monetary meaning of the nature which the Court of Appeal appears to attach to it, which is an amorphous innominate notion of some utility. With those matters in mind, we will take the Court, if we may, to these materials.

GAGELER CJ: Is there a high point?

MR BATT: I am sorry, your Honour?

GAGELER CJ: Is there a high point in this excursus?

MR BATT: There might be two or three, your Honour. But I will seek to get to them and not tarry on any lower points. The sequence of materials is just a little extensive, because the Victorian legislation borrowed from New Zealand many decades ago, and one sees some of the critical features in that chain of materials. We will be going – so your Honours know – to, particularly, volumes 2 and 5, volume 2 having the legislative instruments, volume 5 having the extrinsic materials. We will seek to do it this way. First of all, your Honours will see, in volume 2, at page 9 of that volume ‑ ‑ ‑

JAGOT J: Which tab is that?

MR BATT: That, your Honour, is tab 5 – the Land Tax Act 1910. It is page 242 in the sequential numbering; it is page 9 of volume 2. If your Honours have the Land Tax Act 1910 (Vic).

JAGOT J: These are just earlier versions of the same provisions.

MR BATT: Yes, your Honour, this is the first instance where the Victorian legislature adopted a definition of “improvements”. What we seek to draw out is simply to orientate the Court to that and to draw the Court’s attention, at the bottom of page 9, to the definition there, which – disregarding some slight amendments, adjustments – is, effectively, what we have today. Now, in respect of ‑ ‑ ‑

GORDON J: Can I just ask one question. I am sorry to cut through, this I do not seek to do it, and I know you are going to take us to the two or three high points – at paragraphs 37 through to 47 of your written submissions you set out, in chronological order, what Justice Jagot just put to you, that is, that you start off and we basically have the same provision the whole way through. Is there any dispute that that is the legislative history, from the respondent’s perspective?

MR BATT: No. Perhaps I can try and short-circuit things, your Honour – and I should have done this when the Chief Justice politely, perhaps, intimated that I could do so. If one traces through the materials that we have cited in our submissions in chief and our reply submission – and, perhaps, I will, in a minute, just give your Honours the references and commend them to you – one will see this: in New Zealand, between 1890 and 1900, the cognate definition started not with a reference to increased value but just to “benefit is unexhausted”. By 1900, that had been amended to insert “the value is increased”. When that happened, the explanatory memorandum said, in terms, this is to give clarity and not to alter meaning.

So, one sees immediately that the antecedent of our legislative language was one that, in that phrase, sought to have only one inquiry, which was “increases value at the time of valuation” – that is in terms. There is then a series of extrinsic materials concerning the New Zealand legislation which makes all sorts of remarks about looking at value enhancement at the time, et cetera, et cetera. The 1910 Act in Victoria was – as the Hansard debates show – in terms, cast as taken from New Zealand. That is at page 561, page 29, volume 5. It was said:

we go directly to New Zealand –

for this – we have taken it from New Zealand. So, one sees relevance in those New Zealand materials. The reference to the lack of any change of meaning is one I will give your Honours in a minute. Then what one sees in the debates in 1909 and 1910, when this Act of Victoria was first adopted, is extensive discussion about the phrase:

increases the value –

and:

benefit is unexhausted –

Prescient members say, should we not just have one component of that phrase? Maybe there is some surplusage there. Indeed, they say, in terms judges do not like having two phrases for one motion, and the Treasurer says, I will go and look at, and he comes back and says, I have taken parliamentary counsel advice, the phrase is not to do different things, but the duality of expression is simply for emphasis and to reinforce meaning, not do anything different. Those are the high points, your Honours.

GAGELER CJ: Can you give us – yes.

MR BATT: Can I give those pages, if the Court does not mind me giving the references and commending them.

GAGELER CJ: No, please give us the references to those.

MR BATT: So, as to the 1910 Act, I have taken your Honours to it. The relevant page of the debates is volume 5 at page 29. As to the New Zealand legislation, there are two streams of it, the Land and Income Assessment Act and the Government Valuation of Land Act. As to the former, the Land and Income Assessment Act, the page references are volume 2 at page 44 and page 49, and volume 5 at page 17. As to Government Valuation of Land Act, for the legislation itself, volume 2 at page 39, and for the extrinsic materials, volume 5 at pages 13 to 15.

GAGELER CJ: I am a little bit interested in your first reference – volume 5, page 29.

MR BATT: Yes, your Honour.

GAGELER CJ: It is very dense text. Can you point to the purple prose?

MR BATT: I will try and assist your Honour further. Without being drawn into the details of the material ‑ ‑ ‑

GAGELER CJ: You say this is the Attorney‑General?

MR BATT: Yes, your Honour. I am just having to – yes, your Honour, so it is page 29. It is not the Attorney, it is another member of the House. It is Mr Mackinnon, and in the left‑hand column of page 29, which is page 2718 of the Debates, at about point 5, your Honour will see the phrase:

in this Bill we go directly to New Zealand.

Then, an inch below ‑ ‑ ‑

JAGOT J: Which tab are you behind?

MR BATT: I am so sorry, your Honour.

GORDON J: It is tab 32.

GLEESON J: It is joint book of authorities 561.

JAGOT J: Yes, okay. Thank you.

MR BATT: Sorry – I will just wait for Justice Jagot to locate it.

JAGOT J: No, I have that. It is just the page numbering was different from – okay, thank you.

MR BATT: Thank you. Then an inch below where I had been referring to in like fashion, Mr Mackinnon says:

we –

That is Victoria:

we have gone to New Zealand to get our land taxation scheme –

And there are other references, Chief Justice, which make it clear, in terms, that, as the text shows, the 1910 Act, in which you see the first adoption of such statutory term as “improvements”, is taken from the then‑existing New Zealand legislation.

GAGELER CJ: I thought this was a reference to the – having taken the advice of parliamentary counsel.

MR BATT: I am sorry, your Honour.

GAGELER CJ: Have I misunderstood it?

MR BATT: This reference is to the adoption, in 1910, of the Act.

GAGELER CJ: Yes.

MR BATT: The other Hansard reference, which relates to taking advice of parliamentary counsel, is in relation to a 1909 Bill that was not passed that year but came back the next year and was enacted. The page references for that are the last I gave you, which is volume 5 at pages 20 and following.

JAGOT J: Sorry, I need the tab number.

MR BATT: I am going to give your Honour a tab number, I should have learnt.

STEWARD J: Tab 30, is it?

MR BATT: Tab 30, yes.

JAGOT J: Thank you.

MR BATT: So, as we have come to be here, perhaps I should just assist the Court a little further, as it is dense text. One sees, starting at page 552 of the ultimate numbering, which is page 20 of the volume, in the right‑hand column – this is the assembly on 10 November 1909 – the Court to see an interim, the top of the second column on page 552, Mr Farrer speaks.

Mr Farrer’s address to the House continues for some little distance. If your Honours drop down to the end of that column, in the last inch, your Honours will see he – Mr Farrer – moves an amendment to remove the words:

“and the benefit thereof is unexhausted” –

And he sets out how the phrase would then read. He says in his ensuing remarks, this would add clarity, in his submission. He says at the top of page 553 in the left‑hand column, that the removed words, he thinks, are not necessary. Your Honours will see, just before Mr Argyle rises, Mr Farrer seeks for the committee to look at it. There are then extensive discussions, the denouement of which is the Treasurer says, very well, we will go and look at it in committee.

JAGOT J: Where is that bit?

MR BATT: I am sorry, Justice Jagot?

JAGOT J: Which page? I am on 553, you have moved to something else.

MR BATT: I am sorry, your Honour. Between pages 553 and 558, there is discussion of ‑ ‑ ‑

JAGOT J: Sure. So, you are now on 558, where the Treasurer ‑ ‑ ‑

MR BATT: Yes, I am. I am sorry, your Honour.

JAGOT J: No, that is all right. I was just trying to keep up. So, where is the bit on 558, about, okay, we will look at it ‑ ‑ ‑

MR BATT: Yes. So, if one has 558, at the bottom of the left‑hand column, Mr Mackey asks the Treasurer:

to look carefully at this clause –

In the next right‑hand column on that page – 558 – Mr Watt, who is the Treasurer, says at line 6:

I shall do that.

And Mr Watt says, again – halfway down that second column of 558 ‑ ‑ ‑

STEWARD J:

I am prepared to take ‑ ‑ ‑

MR BATT:

I am prepared to take counsel –

Now, that is the end of the 10 November debates. The very next page – page 559 – is some two weeks later.

JAGOT J: I think that is a different tab.

GORDON J: Tab 31.

MR BATT: It is tab 31. I am sorry, Justice Jagot, I have not got the tabs. I should have prepared myself with them.

JAGOT J: And I have different – I do not have the page numbers you are referring to. I do not know – anyway, I have it. It is all fine.

MR BATT: Thank you. Just before we leave page 558, I should have said a little more about what Mr Mackey says at the bottom of the left‑hand column. He says, one inch from the bottom of 558, to the left:

I should like the Treasurer to look carefully at this clause again, and I think he will find that these words accomplish nothing –

That is “benefit is unexhausted”:

though they may lead to ambiguity. The definition says “and the benefit thereof is unexhausted.” If the effect of the improvements is to increase the value of the land the benefit cannot be exhausted, and if the benefit is unexhausted the value is there, so that these words are surplusage.

Astutely, he says:

The Judges say—“If we find new words we must try to put a meaning on them.” I do not ask the Treasurer to come to a final conclusion now, but to look at this on another day.
Mr. WATT.—I shall do that.

And then, three lines later:

Mr. WATT.—I will deal with the matter at a later stage.

That is the Treasurer speaking. On 25 November, 15 days later, we have page 559, the next page in the print, and in the right‑hand column one line from the top, Mr Mackey speaks:

I would call the Treasurer’s attention to the words which occur later on in the definition—“and the benefit thereof is unexhausted.” Some discussion took place in Committee –

et cetera, and Mr Watt says, at about 12 lines down:

We had a somewhat important debate on this proposal in Committee. I requested the honorable member to postpone its consideration at that time, realizing that there might be something in the argument that without these words the clause might be quite as effective. I have consulted the authorities and the draftsman as to the effect of the omission of these words, and it is considered that the definition is stronger and more explicit with them in. It is thought that they do not involve any duplication, but merely emphasize what we desire to enforce. Therefore, I think it would be undesirable to accept the amendment that is suggested.

Mr Mackey says, as you have considered it, “I will not press” it. What one takes from that is that any notion of surplusage is of no work, no weight, no substance. The enacting Parliament, through the legislature and these debates, considered the language and in terms expressed the view that the compound phrase was the one notion without surplusage.

GAGELER CJ: It is a European form of drafting where you say the same thing in different words for emphasis.

MR BATT: There is a phrase I tried to think of, Chief Justice, which encapsulates that, and I could not, but quite. Of course, aged drafting from 150 years ago adopted – 115 years ago, which perhaps affects the language as well.

GAGELER CJ: So, that completes paragraph 5 of your outline?

MR BATT: Your Honours, unless I have overlooked anything, and I will check in the break, I think that takes me probably just to disposition of the appeal.

GAGELER CJ: I see.

MR BATT: I was not going to take your Honours through the authorities.

GAGELER CJ: No.

MR BATT: We have set out in written form what we would seek to draw from the decided cases of this Court on the not identical but cognate provisions of the Land Tax Assessment Act (Cth) about the term “unimproved value”, and we would just rely in those respects on paragraphs 48 to 58 of our written submissions.

GAGELER CJ: Did you want to say what you want to say about this position now or would you prefer ‑ ‑ ‑

MR BATT: It might take me some minutes, your Honour. I am in the Court’s hands, but it would be more than a moment.

GAGELER CJ: All right, we will take the morning adjournment. We will take the morning adjournment now.

AT 11.14 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.26 AM:

MR BATT: Would your Honours wish me to commence?

GAGELER CJ: Proceed.

MR BATT: Thank you, your Honour. We come, then, to the disposition of the appeal upon the premise that the construction for which we contend is, as we trust it will be, adopted. We step it through this way. The first proposition is that at the valuation dates, 1 January 2020 and 2021, the building Landene did not increase the value of the land on which it sat. Particularly in aid of that proposition, we refer your Honours – without meaning to take the Court to this source – to the fact that, as recorded in the VCAT reasons, the heritage overlay was of no effect in the absence of the building. Once one notionally disregards a building, whilst the heritage overlay remains in place as an instrument, it had no operative effect. One sees that recorded by reference to the unanimous expert evidence at paragraph 95.2 of ‑ ‑ ‑

JAGOT J: Is this of the tribunal?

MR BATT: This is in the tribunal’s reasons where ‑ ‑ ‑

JAGOT J: Yes, 95.2.

MR BATT: ‑ ‑ ‑ the President of the tribunal and Senior Member Jacono record at paragraph 95.2 of their reasons, appeal book page 25, that it was the common expert evidence, that in the absence of a building the heritage overlay had no operative effect. Ergo, all the development that a reasonable purchaser might seek to undertake on that 1,000‑square‑metre site on St Kilda Road in a development zone surrounded by intensive development was available, absent the building. That is why we say the land value was not increased but, rather, decreased by the building.

Indeed, as the Court of Appeal – we interpolate, quite correctly – said at paragraph 110 of the their Honours’ reasons, appeal book paragraph 85, it is “obvious” and it is “self‑evident” that the land without the effect of the overlay was worth more. So, that is why we say that at the valuation date, Landene did not increase but, rather, decreased land value.

But we do not need to rely, if your Honours please, only upon what was said in the court below or in the tribunal but we can, and we do, refer to the respondent’s own expert evidence before the tribunal. I am going, if I may, to read two passages from the evidence of Mr Jackson, the expert valuer called by the respondent before the tribunal and then I am going, if I may, to give your Honours four references to those two passages and two others which had a common effect, being his evidence – the respondent’s evidence – before the tribunal. The passages are these. First, at one point Mr Jackson in his expert valuation ‑ ‑ ‑

JAGOT J: Sorry, can you just not give us all the references, because which page are you on for these two paragraphs?

MR BATT: Your Honour, I will read the passages and give your Honours
the references but if you would wish me to take you to them, they are in the ‑ ‑ ‑

JAGOT J: No, no, I would prefer just the references myself.

MR BATT: Thank you, your Honour. So, I am ‑ ‑ ‑

GAGELER CJ: Are they in paragraph 9 of your outline?

MR BATT: They are not, I think, your Honour. I will just check that.

GORDON J: So, you have taken us to 95.2 and you have taken us to 110.

MR BATT: Yes, there are then just some references to Mr Jackson’s evidence.

GORDON J: And they are?

MR BATT: It is in the book of further materials that the respondent put on in conjunction with his written submissions – respondent’s book of further materials, page 157, at paragraph 84 of Mr Jackson’s report; also in the book of further materials, page 156, paragraph 80 of Mr Jackson’s report; and to similar effect, page 375, paragraphs 91 and 97, noting that what is said in paragraph 91 is repeated at paragraph 157 of the tribunal’s reasons. What Mr Jackson said in those passages is:

It is evident that the existing heritage building on the land does not increase the value of the land in its assumed vacant state.

And:

if the property was unconstrained by its heritage classification and significance it would have development potential –

of $15.9 million. The short point being, on the respondent’s own evidence – and markedly so, for what that matters – Landene did not increase land value, but rather decreased it greatly compared to the value the land would have undepressed by the presence of the heritage building. We say, on a proper interpretation which directs itself to value increase at the time of valuation, not 1897, it follows from that material that Landene was not an improvement. It did not increase land value at the time of valuation, ergo it was not within the statutory definition.

Because Landene was not an improvement, one is not notionally to take it away and disregard it when one turns one’s attention to valuing the site value. Landene is to be seen to be present when one comes to evaluation step 3. Therefore, site value by definition equates to capital improved value. To put it differently, one has not disregarded Landene as an improvement, therefore the two definitions operate identically. As covered earlier when Justice Steward raised these matters with me, capital improved value was assessed and returned at $7.2 million. That has not been challenged. The returned site value of $6.2 million which was objected to as to being too high was not too high, it was less than the actual site value of $7.2 million. Therefore, the original objections ought to have been disallowed. Therefore, this Court should allow the appeal.

Now, your Honours, we make one final remark in our oral address in chief, if we may, which is this. As best as we can assess the matter, we apprehend from the respondent’s outline of oral submissions, in contradistinction to the rather different content of the written submissions of the respondent, that it might be that the respondent will contend orally that the disposition and the bases for the disposition through which I have just been are not how the matter should be addressed, even upon acceptance of the interpretation for which we contend.

We apprehend that it may be put – we are not sure how, but it may be put that there is not a basis to think that the land was worth more without the heritage constraints that went with the building. If that submission is advanced, we will address it in reply when we have heard how it is put.

GAGELER CJ: Do you have a plan B of remitter to the Court of Appeal if these issues are live issues between the parties which we are unable ‑ ‑ ‑

MR BATT: I am sorry, your Honour. Do we have a plan B?

GAGELER CJ: A plan B. You are asking for the appeal to be allowed, and you want the appeal to the Court of Appeal to be dismissed by us.

MR BATT: Yes, your Honour.

GAGELER CJ: An alternative might be remitter to the Court of Appeal, if these valuation issues are incapable of being resolved by us.

MR BATT: Thank you, Chief Justice. Can I respond this way. Your Honour is quite right, if I may say. As to the disposition we seek, one sees that from the notice of appeal, pages 104 and 105 of the appeal book. In our respectful submission, there is every good basis for that disposition to be ordered. We do not seek for a moment to have your Honours enter upon matters of valuation. We do not seek for your Honours to consider adjustments and numbers. We simply submit that on the record below, it follows inexorably when one accepts, as we contend one should, the interpretive approach which we advance, it follows from that that the disposition that we seek has every proper basis to be granted, and ought be granted.

GAGELER CJ: I fully understand that, and I understand your submissions. I am just asking whether you have an alternative submission as to the disposition.

MR BATT: Your Honour, will the Court permit me to reflect upon that and give a clear and considered answer? I do not wish to embrace that course or reject it in haste.

GAGELER CJ: Yes. Thank you.

JAGOT J: Could I ask this. Part of your reasoning process assumes that the capital improved value, which you say was assessed at $7.2 million, was was not challenged. I assume that means there is a VG valuation out there for the capital improved value that was issued for the same years at that amount, which was not subject to objection.

MR BATT: Yes.

JAGOT J: That does not necessarily mean that in the site value proceedings that there cannot be a challenge to the capital improved value. As in, I am just wondering whether that – your assumption is not just that we allow the appeal, but it is actually that we dismiss the applications for review to the tribunal. That depends upon acceptance of the CIV, which is unchallenged. But that is not unchallengeable in a site value dispute before the tribunal, even if the capital improved valuation, itself, is not challenged. Does that make sense?

MR BATT: It does, your Honour.

JAGOT J: Which rather suggests that us dismissing the reviews to the tribunal might be a step too far, because it would remove any opportunity that the respondent would have to make arguments based on the proper interpretation. Now, it may be that if we accept the proper interpretation, it may be no such arguments can be made and what you say does follow as a matter of course, but then, presumably, the parties – it could be remitted to the tribunal, because that is ultimately, where it goes back to. But it does sound like a step too far, to me, to say ‑ ‑ ‑

STEWARD J: Can I ask a question, Mr Batt – just apropos of what Justice Jagot has suggested?

MR BATT: Of course, your Honour.

STEWARD J: Was it a ground of objection in the site valuation objections, to attack the capital improved value?

MR BATT: My recollection is not, your Honour, but I will check that, lest I have inadvertently misstated the matter.

STEWARD J: Thank you.

MR BATT: So – I am sorry, your Honour, my answer is no, but I wish to confirm that I have not made an error in saying that, and I will do that. Justice Jagot, to respond to the matters you have raised, with a couple of strands, as a prefatory observation, we do not for a minute seek for this Court to adopt, per se, a figure for site value or to undertake a valuation but, rather, we submit that the findings and the record below give a proper basis for the conclusion that the assessed site value was not too high, for the reasons I have given.

May I add this, your Honour. Whilst I originally had contented myself with reference to the CIV of 7.2, both valuers gave evidence that the sale of the property in 2019 – in its improved state, of course, in an actual market of some $8.25 million – was a sale at market value. So, one has – apart from the statutory assessment – one has the finding below.

JAGOT J: I understand. All that may mean that, on a remittal to the tribunal – if that is what happens – those proceedings are settled. If your interpretation is right, and these things follow as a matter of course, it is just that lots of things turn on expert evidence. The tribunal – you say, and the Court of Appeal said the tribunal’s analysis itself miscarried. That was part of what the Court of Appeal held. It is just a bit uncomfortable – assume your interpretation is accepted – is uncomfortable, then, to step in on the review applications – for me, anyway.

MR BATT: If I may say, your Honour, I think I, in a sense, was having that to mind when I went through the numbers that have been adopted and how there was some particular exigencies that had driven the adoption of the figures in the tribunal. The consequence of the interpretation for which our clients contend as a matter of construction, is that – I will withdraw that.

Your Honours, I think I have said what I can say in response to the matters raised and will reflect on them in case there is anything further we should have identified to the Court, but I cannot say more now. Your Honour Justice Steward, I will, at the earliest opportunity, confirm whether I have stated that particular incident correctly.

STEWARD J: Thank you, thank you.

MR BATT: If the Court please, those are our oral submissions in chief.

GAGELER CJ: Thank you, Mr Batt. Mr Goubran.

MR GOUBRAN: Thank you, your Honours. Your Honours, I might start with a trite proposition, which is what is the ground of appeal that we are dealing with today, and address you with respect to limitations that arise in respect of what has befallen the appellant’s counsel’s argument this morning. Let me just go first back to the grounds of appeal. They are found in the core appeal book at 104 and 105. Justice Jagot, I am not sure about the confusion about numbering, but I had thought that that is the standard form of numbering that is in the materials before everyone.

JAGOT J: No, no, that is fine. It was the numbering in the extrinsic materials that was problematic for me.

MR GOUBRAN: I see, your Honour.

JAGOT J: Nothing to do with this appeal.

MR GOUBRAN: Okay. So, you will see that the notice of appeal is framed in a very specific way. It is framed as identifying an error:

in construing the definition of “improvements” –

and I will not read the section:

of the Valuation of Land Act 1960 (Vic) as requiring that the effect of the work done or material used increased the value of the land –

Now, in quotation marks:

“at the time the work is actually done or the material is used” –

Now, I will just stop there. That is certainly what the Court of Appeal found, and that is dealt with in the paragraphs 144 and following. And, clearly, the appellant is seeking to contest that as a proposition. What the appellant says – and that is the ground, in ground (a). In ground (b) the appellant says:

ought to have found that the definition requires that the effect of the work done or material used increases the value of the land at the time of the valuation.

So, the contest that we have before you is really a question of time: when do you conduct the valuation? That is the limited nature of the appeal that we have before you. It is not a contest about the site value of the land more generally. This is not a contest in respect of all the other aspects of the findings of the Court of Appeal below. It is a specific complaint about the court’s finding about the time of the valuation.

It is important, your Honours, because there are a whole host of findings below in the Court of Appeal that are not sought to be disturbed and which are decisive in respect of the Court of Appeal’s disposition of the matter below. So, I would say in advance, your Honours, that I will be spending quite a deal amount of time on the judgment below, in the Court of Appeal, because it is quite essential to understand what it found and what it disposed of.

So, on that matter, I have three topics that I propose to address you today. The first topic is – and I ask the question rhetorically – why was the appellant unsuccessful below? I will seek to identify those reasons that were dispositive of the matter, and I will develop that point in a moment.

The second topic is that the appeal in this Court, as I have just mentioned, is a narrow one limited to the question of the timing of the valuation. The appellant does not seek to disturb a whole host of findings in the Court of Appeal’s judgment, and I will come to this argument, but this is in the second topic, that it fails – or he fails – to grapple with the principal reason that he was unsuccessful below, and that will be a key feature of my address to you.

The third topic is the ground that is raised before you, and that is, in so far as the Court addresses the question of the timing of the valuation, the respondent’s position is that the Court of Appeal undertook an appropriate assessment of giving effect to the ordinary and natural meaning of the words. I will come to that in topic 3.

I will start with topic 1, which is the principal issue in the proceeding below, both in the tribunal and in the Court of Appeal, was whether the building Landene was an “improvement” for the purposes of calculating the site value of the land on which the building was located. That is self‑evident. Specifically, the principal issue was the appropriate method – not timing – appropriate method for determining whether Landene was an improvement. I emphasis the use of the word “method”, your Honours. So, if I can now turn to the Court of Appeal’s reasons, which are found in appeal book ‑ ‑ ‑

GAGELER CJ: We have it in front of us.

MR GOUBRAN: Thank you, your Honour.

GAGELER CJ: Just take us to the paragraphs that are relevant.

MR GOUBRAN: Thank you, Chief Justice. It would help me – I will just go to the paragraphs, without going to the appeal book.

GAGELER CJ: Please do. We do not need more numbers.

MR GOUBRAN: Thank you, your Honour. I am not going to read a number of parts of the judgment. Of course, your Honours are very familiar with the judgment. I will summarise parts of it, but I do want to dwell on a couple of paragraphs in it.

Before I go to a description of that, the ground of appeal raised by the appellant, as I have said, addresses the question of timing. The principal issue before the Court of Appeal was not the question of timing. It was deciding an essential question about whether it would accept a body of case law in New South Wales arising out of Commonwealth Custodial – which might be described as the natural state test – versus an alternative formulation out of Queensland emanating from Caltex as to the highest and best use test.

I will explain the difference between those as I go through my address. That is a methodological contest, your Honours. It does not matter what day you do that evaluation. The question is the method by which you determine the building. Might I emphasise, the appeal before you is not about the method; it is about when you do it.

Now, the tribunal’s preferred method was directed to a “highest and best use” formulation. Justice Jagot, that would be, as your comments this morning suggested – this is an instinctively uncomfortable view of a valuation exercise. It certainly draws on notions in Spencer. What is intriguing is that, in fact, that does not reflect the law in New South Wales, and certainly now does not reflect the law in Victoria, based on the Court of Appeal’s judgment.

It was the reason why the Court of Appeal disturbed the tribunal’s decision on that essential issue of highest and best use. The Court of Appeal found, contrary to what the tribunal had found, that the test for determining whether a building added value to land was not having regard to the highest and best use that the land might be directed to, but rather to a use, by reference to a natural state.

Now, let me give you an example, your Honours. Think of this land that we are dealing with now – and it has a significant historical building located on it – let us suppose that there are no heritage restrictions that attached to the land. If you asked yourself the question: what is the highest and best use of the land? Often the answer is determined by the planning controls that would be associated with the potentiality of that land.

So, if you asked yourself that question and there were no heritage restrictions associated with it, you would logically reach the conclusion – particularly in this instance – that there is a higher potential for the land associated with a 15 to 17‑storey tower. On that basis, the building itself would depress the value – because the building would need to be demolished – and it would be a “worsement”, to use your Honour Justice Gleeson’s description this morning.

That is a conception of highest and best use that might suggest the building does not attract any value, but that is only one way in which determining a building adding value might arise, and it is very specific to a particular use. The particular use is only the highest and best use. What the Court of Appeal found, and what Justice Biscoe in New South Wales in Commonwealth Custodial found, and what the Court of Appeal in New South Wales found in Trust Co, is that is too high a test.

You do not ask yourself the question of: what is the highest and best use of the land? You ask yourself: what use might be applied to the building for which a purchaser would find a use for it, not constrained by notions of highest and best use? It opens the field to other potential uses, and the Court of Appeal found here that the building served a use; it served a use to house an art collection and a museum.

I would emphasise that these matters are not for debate before this Court today. The Court of Appeal has decided – I will take you to those parts of the judgment. So, it is curious that the appellant stands before you in this appeal and seeks to agitate for a different outcome in respect of the site value ultimately recorded in the return valuations when the appellant was wholly unsuccessful in respect of the method of for determining valuation.

Turning to the reasons for judgment, and I will not go to those, paragraphs 11 to 17 set out the legislative framework. Paragraphs 12 and 13 describe site value and defines improvements in paragraph 15. I will not go to them; they speak for themselves. The procedural history in this matter is set out in paragraphs 33 to 46 – and, your Honours Justice Steward and Justice Jagot, there is a useful recitation of what was objected to in those paragraphs and the nature of the return valuation, so they might provide some assistance, your Honour.

Now, the expert evidence then is dealt with in paragraphs 47 to 73. I am just going to take your Honours to paragraph 51, so if your Honours have the judgment here, and your Honours will see there is a description of the expert evidence in the tribunal; you will see that there is a reference to the heritage evidence; and then you will see, in paragraph 51 – so this is a recitation of the evidence in so far as heritage evidences – the Court of Appeal said:

In a joint statement, the experts confirmed that Landene should be substantially retained in any redevelopment and that demolition would not be supported by the Council or the Tribunal. However, some minor demolition and alteration to parts of the building might be possible. They also generally agreed that small‑scale additions might be possible to the rear and south of the Land.

Now that is clearly premised on the continuation of the heritage restrictions associated with the use of land, clear that that is premised on it. If I can then turn to paragraph 56. Now, this is the appellant’s own evidence before the tribunal, which the Court of Appeal is grappling with in determining whether it reveals, or whether the tribunal erred in its assessment of that evidence. And you will see in paragraph 56 the Court of Appeal says – and I will not refer to VGV, I will refer to it as the appellant, the appellant:

relied upon valuation reports by Mr Nicholas Haines –

and my client:

relied upon valuation reports by Mr Grant Jackson . . . Each valuer prepared a report in respect of the first objection . . . and each valuer also prepared a subsequent report in respect of the second objection –

I am paraphrasing a little. You will see, then, in paragraph 57:

The valuers used starkly different methodologies to assess site value. Mr Haines arrived at a value that was far higher than the returned valuation of $6.2 million; Mr Jackson arrived at a value that was far less.

Then the court says:

It is important at this point to note that VGV did not attempt to defend the returned site values. The returned valuers were not called to explain the returned valuations or to otherwise assist the Tribunal. Instead, VGV retained Mr Haines to assess the site values of the Land using the methodology set out in the letters of instruction given to him.

Now, I just need to pause there. These letters of instruction are peculiar. They prescribe the method. The value at judgment is constrained in this case in so far as the appellant presented its evidence. The instructions required a comparison between two scenarios that sought a valuation as between them, and I will come to that when the Court of Appeal rejects that evidence. So, the Court of Appeal says:

Instead, VGV retained Mr Haines to assess the site values of the Land using the methodology set out in the letters of instruction given to him. That methodology involved, first, determining by a particular means whether Landene (that is, the building and works on the Land) was an improvement and then, valuing the Land in the conventional way, including by reference to its highest and best use.

And then in paragraph 59, the court says:

In determining whether Landene was an improvement, Mr Haines emphasised that this involved considering whether Landene added value to the Land. This, he contended, involved comparing:
(a) the value of the Land as vacant (‘scenario one’); and
(b)the value of the Land with existing building and works (‘scenario two’).

Both, your Honours, premised upon requiring a “highest and best use”, by reference to both scenarios:

According to Mr Haines, if the value in scenario one is higher than the value in scenario two, Landene cannot be an improvement because it does not increase the value of the Land.

I emphasise there, your Honours, that that is directed to the question of “highest and best use”. It is a variation to it, but it is directed to it. The Court of Appeal says:

This means that it is not to be treated as not having been ‘made’ –

I am reading in paragraph 60 at this point:

In other words, it is to be included with the Land when determining site value. When carrying out a comparable sales analysis –

I will not read the remaining paragraphs there. There is a reference to my client’s valuation evidence, and indeed, some point seems to be raised about that, in relying upon evidence in the tribunal as a matter that bears on your Honour’s consideration of this. I will come to that in a moment.

If I can now turn to paragraph 78, paragraphs 74 to 90 summarised the tribunal’s decision. They speak for themselves – your Honours, no doubt, will consider that when you get to it. I would like to now turn to paragraph 78. Sorry, this is still within the consideration of the tribunal’s decision, but it is a point that will be developed in the Court of Appeal’s judgment. The Court of Appeal says:

As to the principal cases referred to by the parties that set out the contrasting approaches to the sequencing involved in determining site value –

The court then cites Commonwealth Custodial Services – I will not read the full name – Trust Company, and Caltex:

the Tribunal considered the approach in Caltex Oil to be ‘most similar’ to the approach that was required ‘in this case and in the context of the legislation of this jurisdiction’.

Now, paragraph 79 is instructive, your Honours, because it does describe the gravamen of what the tribunal did. The Court of Appeal says:

In Caltex Oil, the owner sought to reopen the annual valuation of a plot of land that it owned in the parish of –

Now, I am going to struggle pronouncing that:

Yeerongpilly. The land had been developed for service station purposes and, before the relevant valuation date of 31 March 1992, had been entered as a ‘probable site’ in the Contaminated Sites Register –

I will not read what follows:

As between the parties, it was agreed, among other things, that the highest and best use of the land was as residential land and that the figure of $135,000 was the starting point for determining whether the unimproved value of the land should be reduced by reason of the operation of –

the contamination legislation:

The owner contended that in arriving at the land’s value, the relevant zoning of the land and other statutory restrictions affecting the land ought to be considered.

Paragraph 80:

In the course of their reasons, the majority observed that an ‘improvement’ was something that added value to the land and said:

And here is the instructive part, and it is what the Court of Appeal did not favour – this is in the Queensland Land Appeals Court:

It cannot be said whether a structure on or other quality of land amounts to an improvement in this sense until it is known whether the structure or quality enhances the value of the land. Any enhancement in turn will usually depend upon whether the structure or quality advances or inhibits a particular use.

I emphasise the words “a particular use”.

Thus, whether the structure or quality constitutes an improvement cannot ordinarily be known until the highest and best use of the land is determined.

So, the ratio in Caltex is clearly one that says that to determine whether a building increases the value of the land, you ask yourself the question, what is the highest and best use of the land, because only when you know what the highest and best use of the land is will you be able to determine whether it adds value to the land by reference to that highest and best use.

JAGOT J: If I could just say this, this assumes there is some distinction between highest and best use of the land and the use of the land that is most valuable. The use of the land that is most valuable for that particular land is the highest and best use of land. There is no conceptual distinction between them.

MR GOUBRAN: Well, your Honour Justice Jagot, respectfully, the question is not whether it is the most valuable. For the purpose of determining whether a building is an improvement, it is not about whether the value is the most favourable. All that is required is to determine where there is a value.

JAGOT J: I know. I understand that, but what I am saying is, the whole premise of separating highest and best use out from value is meaningless. What I am not following is somehow I understand your first two points simply to be that if the Court of Appeal erred in its interpretation, that error is immaterial to the conclusions it reached. Now, that is either right or wrong. And your third point is, it did not err.

MR GOUBRAN: That is right.

JAGOT J: I am just not following how any of this gets you to immateriality of error, because they did find and you accept that it is the time the improvement – work out improvements at the time the improvement was made. That is embedded in paragraphs 154 or whatever it is.

MR GOUBRAN: Paragraph 143.

JAGOT J: Paragraph 144 onwards. It is either material or it is not, and I am not sure how this gets you to immateriality. That is just for my part, but I will say no more.

MR GOUBRAN: Your Honour, if I might say, bear with me. I want to go to the specific paragraphs where the court rejects the evidence of the appellant. I can jump there, but it is harder to comprehend it without going through the steps to it. So, if I might ask your Honour, just bear with me, I will get to that point.

STEWARD J: Although, Mr Batt does not rely upon his expert.

MR GOUBRAN: It is not the question of the expert evidence, your Honour, it appears he is relying on my client’s evidence in support of some ‑ ‑ ‑

STEWARD J: He is really relying upon the unchallenged capital improved value.

MR GOUBRAN: That is not how I understand it, your Honour. My understanding is that the appellant contends that a finding in respect of whether Landene is an improvement is sustained by the findings in the tribunal.

STEWARD J: No.

MR GOUBRAN: I will stand corrected.

JAGOT J: Can I just cut to the chase as to the materiality. It is that when you come to 144 onwards, clearly, they are looking only at the time of the work that was done to create Landene and then they are asking: is it an improvement at that date? The whole “highest and best use” analysis, in so far as it goes – culminating in 149 – is Landene did constitute the highest and best use when it was added to the land – that is, it increased the value of the land compared to its natural state.

Now, if there is error embedded in that, to me that is material. So, there needs to be somewhere else that says, no, that is not what they are doing, and it is not material. I just cannot understand how the whole highest and best use – because what they are doing is highest and best use at the time the improvement was created versus natural state at the time the improvement was created. The problem is the Valuer‑General is attacking at the time the improvement was created as entirely irrelevant. If that is right, this is all miscarried.

MR GOUBRAN: Your Honour, the Valuer‑General – the appellant – relied upon evidence in respect of whether the building is an improvement.

JAGOT J: Let us not worry – they are not really into the expert evidence, it is that if their interpretation miscarried, then the reasoning miscarried.

MR GOUBRAN: No. So, that is what I wish to quibble with. The appellant was unsuccessful below for reasons quite apart from timing.

JAGOT J: This is the bit ‑ ‑ ‑

MR GOUBRAN: Yes.

JAGOT J: I am just not seeing how that gets you there, given that the key passages all relate to the timing in the reasoning.

MR GOUBRAN: Let me go to the paragraphs that are not in relation to timing that bear on the appellant’s success below. So, I will jump ahead, Justice Jagot.

JAGOT J: Okay.

MR GOUBRAN: So, if your Honour go to paragraph 139 – and I am jumping right to the end, but I might need to go back:

In our view –

So, just to be clear, we are not anywhere near the timing considerations. The timing considerations are found in paragraphs 143 and following.

In our view, these authorities –

Now, Justice Jagot, these are the authorities where there is this contest as to how you go about determining whether a building is an improvement, methodologically:

these authorities are not helpful to the case that VGV seeks to make based on the methodology used by Mr Hains. As discussed, in the Tribunal, VGV expressly disavowed any attempt to identify an improvement by reference to the Land in its ‘natural state’ or to rely upon the approach in Commonwealth Custodial –

The Court of Appeal, your Honour, adopted that as the law:

and cautioned the Tribunal against reliance on authorities considering the NSW Act.

This was the position that the appellant inconsistently took in the tribunal as opposed to what it said in the Court of Appeal:

Moreover, VG led no evidence as to whether Landene was an improvement relative to the ‘natural state’ of the Land.

That is the test, your Honours. That is the test. The test is whether the building increased the value of the land by reference to its natural state.

JAGOT J: I just do not follow this because at 59(a), Mr Hains valued:

the land as vacant (‘scenario one’) –

So, I am just bemused by what 139 even means, frankly, but anyway.

STEWARD J: Can I ask you, is there a finding by the Court of Appeal concerning the value of Landene which is independent of its analysis that Landene satisfied the enhanced value requirement because of testing that in 1897?

MR GOUBRAN: No, your Honour. No, your Honour.

STEWARD J: So, a component of the Court of Appeal’s conclusion – a necessary component – was the timing issue?

MR GOUBRAN: I would put it slightly differently, your Honour. In its reasoning ‑ ‑ ‑

STEWARD J: Well, it must be, because there is no other independent reason.

MR GOUBRAN: Well, if your Honour goes to paragraph 147, I will put my answer to your Honour Justice Steward in this way. I think your Honour is suggesting to me is if this Court were to find there was an error in respect of timing, is it appropriate that we still dismiss the appeal.

STEWARD J: Or send it back.

MR GOUBRAN: Yes. Or have a remitter. My client’s position is that even if an error is established in respect of timing it is certainly not the case that your Honour should interfere and substitute her own orders because, at the very least, the Court of Appeal dismissed, or rejected, the evidence relied upon by the appellant on the basis of principle as to method for determining whether a building adds value.

But to answer your Honour’s question, Justice Steward, if the appellant is correct and says the valuation exercise is required at the date – sorry, the assessment is required at the valuation date, then one must consider whether the Court of Appeal, when it considered unexhausted benefit at the date of valuation, could be understood as resolving that question.

STEWARD J: Well, the way I have read these reasons is that is not the case.

MR GOUBRAN: Well, your Honour, if I could read to you that last sentence at paragraph 147. So, it starts with:

The construction of Landene in 1897 constituted ‘work actually done or material used on and for the benefit of the [L]and’. At that date, the effect of Landene was to increase the value of the Land. More particularly, the work benefitted the Land in comparison to the hypothetical unimproved ‘natural’ state of the Land at the date of the ‘improvements’. Importantly, the benefit of the work done was unexhausted at the time of the 2020 and 2021 valuations –

So, if the appellant’s position is this ‑ ‑ ‑

STEWARD J: But that is an observation about the second part of the component.

MR GOUBRAN: Yes, but, your Honour, if the appellant’s position is – which it asserts before you today – that it is a compound proposition that requires considering whether there is an increase in the value of the land, together with the unexhausted benefit, because those words are found together at the time of valuation – that is the appellant’s position before you today.

STEWARD J: Yes, but a compound based on value with benefit being surplusage, is his case.

MR GOUBRAN: I accept that, but embedded in the Court of Appeal’s reasoning as – its consideration as to unexhausted benefit ‑ ‑ ‑

STEWARD J: All right. So, other than the last sentence of 147 ‑ ‑ ‑

MR GOUBRAN: I cannot point to anything else.

STEWARD J: All right. I understand the point you are making. Okay.

MR GOUBRAN: Yes, your Honour. I cannot take that point further, other than to refer to that line. I jumped ahead a little just to indicate for the Court where the Court of Appeal had rejected the appellant’s position, for reasons quite apart from timing, and that was found in paragraph 139. I just want to finish that point and then go back briefly to other parts:

It did not seek to adduce any evidence relevant to this form of analysis, and nor did it suggest that Mr Haines’ evidence engaged with it.

This is the relevant test:

In fact, Mr Haines’ method for identifying whether Landene was an improvement asked whether Landene added value to the Land having regard to its highest and best use, but assuming that the heritage overlay did not exist.

Then you will see the Court of Appeal rejects that test, and your Honours will see that in paragraphs 140 and 141. The most significant line, your Honours, is at the end of 141 because the Court of Appeal says:

The question posed in the ‘natural state’ cases is whether a use is advanced, not any particular use and not necessarily the highest and best use.

Now, this is not a judgment just of the Court of Appeal in Victoria. This reflects the law in New South Wales arising out of Commonwealth Custodial v Trust Co.

So, the appellant’s position was premised on a false consideration of determining value, because it required that value have regard to the possibility of the land being developed for a high‑level residential tower. What the Court of Appeal found was that is too high a standard. All that you need to determine is whether it added value to the land by reference to its natural state – natural state not being for uses that might maximise value. And, Justice Jagot, I am not going to dwell on this ‑ ‑ ‑

JAGOT J: But there is embedded in that, you cannot value other than at a time. That is the point. And the point is that only makes sense if you are valuing it at the time of improvements, because improvements is about relativities – one value compared to another value – and to have the relativity, you need to have time. That is what comes into 147.

MR GOUBRAN: And I have not yet addressed you on the timing issue.

JAGOT J: No, but embedded in the rejection of the method is a conclusion that you look at improvement at the date of the improvement being made, otherwise you cannot reach ‑ ‑ ‑

MR GOUBRAN: No, your Honour. No, your Honour. It is, with respect, no, because the Court of Appeal expressly adopted the reasoning out of New South Wales, and the reasoning out of New South Wales is an assessment at the date of valuation.

JAGOT J: No – but they did not do that.

MR GOUBRAN: They did it here, and I will take you back to that paragraph. Just bear with me, your Honour – I have just jumped ahead. If your Honours can give me a second, I will go back to it.

GAGELER CJ: This is Justice Biscoe’s reasoning in Commonwealth Custodial, is it?

MR GOUBRAN: Thank you, Chief Justice. That is where I was looking to back to.

GAGELER CJ: Maybe paragraph 129, 130.

MR GOUBRAN: It is. Yes, your Honour. I might just go back to 119, if I might, your Honour the Chief Justice:

Trust Company is a decision of the New South Wales Court of Appeal, once again concerning ‘land value’ within the meaning of s 6A –

and, incidentally, the New South Wales legislation does not have a definition for “improvements” in the way that the Victorian legislation does, and that is ‑ ‑ ‑

JAGOT J: I am pretty sure it does.

MR GOUBRAN: I stand to be corrected – my learned junior will check – but my understanding is it does not have a definition for “improvements”:

The land for which the ‘land value’ (site value) fell to be determined was a parcel of land in the Sydney suburb of Ashfield. At the relevant time, the Ashfield land contained –

now, this is a useful example for your Honours:

At the relevant time, the Ashfield land contained two five‑storey office buildings that did not conform to the highest and best use of the land; under the land’s mixed‑use zoning, the highest and best use was a residential tower. It was common ground that if the Ashfield land was to be developed for mixed use, the existing office buildings could not be converted to that use and would have to be demolished.

So, the buildings there do not reflect “the highest and best of use of the land”, and if you were to unlock the value, you would need to demolish the building. The Court of Appeal then says:

The appellant, the owner of the Ashfield land (‘owner’), contended that in deciding whether particular structures are improvements, one should ask whether they make land better for the purpose of the highest and best use. The owner argued that because the presence of the office buildings on the site detracted from its value as a site for mixed use, there needed to be deducted from the value found by the trial judge amounts representing the cost of demolition and removal of debris –

Paragraph 121:

This circumstance gave rise to the following question of law:
if at the base date for valuation –

And I just need to pause there, your Honours – the valuation is at the date of valuation, which is the date that is contended for by the appellant before you today. The appellant’s position before you today is an adoption of the New South Wales way in which improvements are to be assessed, and so:

if at the base date for valuation a parcel of land has structures on it, but those structures are not suited for the best and highest development of the land and would need to be demolished if the best and highest development were to be achieved, are those structures ‘improvements’ within the meaning of the definition –

Paragraph 122:

The trial judge (Biscoe J) held that the office buildings were improvements and the Court of Appeal upheld his Honour’s decision.

Justice Jagot:

While there is no definition of ‘improvements’ in the NSW Act, Campbell JA (with whom Beazley P and JA agreed) considered that there was ample recognition in the case law of the need for an improvement to ameliorate the land –

Then there is a reference towards Morrison, and I will not read the reference to Morrison. And then, also, at paragraph 124:

Thus, although the NSW Act contains no statutory equivalent to the definition of ‘improvements’ in the VLA –

the Victorian legislation:

the requirement that the works or materials in question ‘enhance’ or ‘increase’ the value of the land is common. In both cases, the effect of the improvement must be to increase or enhance the value of the land.
In response to the owner’s submission, Campbell JA first confirmed that while the NSW Act contains no express recognition of the concept of ‘highest and best use’, it was well established that the highest and best use of the land was to be used for the purpose of ascertaining its value.

Then there is a refence to the sequencing. Then Justice of Appeal, in paragraph 126, makes a further comment which, again, I will not read. The appellant in, paragraph 127:

relies on these passages to argue that the Tribunal was wrong to hold that the assessment of site value must commence by determining the highest and best use of the land in question –

Now, I will just stop there. It is not quite site value, it is the anterior step of determining whether something is an improvement before you get to site value. If I might say, there has been a level of conflation of those two principles in the discourse this morning.

The prior exercise is just simply to determine whether the building is an improvement. That is determined on a self‑contained basis in the definition of “improvement”. Once it is found to be an improvement, then the Act provides that it has to be assumed away, for the purposes of the site value assessment, and section 2(2) provides for a valuation of a building determined to be an improvement.

GLEESON J: That is why you cannot include the demolition costs in the valuation.

MR GOUBRAN: If I might say, Justice Gleeson, not only that, but it is not appropriate to assume “highest and best use” concepts such as the Spencer formulation at the first step, because the first step is not concerned with determining value per se with a selection of a monetary amount. It is simply asking a binary question – is the building an improvement?

It is not asking you to determine the amount, it is simply requiring the threshold be satisfied. Only once you are satisfied that the building is an improvement, then you come to the consequences for the tax regime, which is site value is to be assessed assuming that building – the improvement – has not been made. But I was going to paragraph 128 – this is a key paragraph in the Court of Appeal’s reasons, because the Court of Appeal says:

However, in Trust Company, the New South Wales Court of Appeal endorsed the approach to identifying improvements articulated by the trial judge, Biscoe J, in Commonwealth Custodial. In our view, this approach is not reflected in the methodology deployed by Mr Haines.

Now, Justice Jagot, that is a finding before we get to anywhere in the timing considerations. That is a finding that the law that applies for determining a method or the method for determining whether a building is an improvement by reference to New South Wales law, which accepts the date of valuation being the decisive date, that the appellant’s evidence did not satisfy.

The appellant’s evidence did not satisfy because it impermissibly dictated an outcome that did not consider the full range of uses that would be permissible in arriving at a conclusion to determine whether the building is an improvement.

STEWARD J: Mr Goubran, one problem you may have is how we fit this New South Wales jurisprudence, which compares the building with the land in its natural state – the natural state here last being, one assumes, 1897, which is how the court reasoned – with a statutory definition in the Act. Where do we get the direct – which words direct our attention to a comparison with the land in its natural state, in the definition?

MR GOUBRAN: Your Honour, the court’s finding in respect of natural state is not the subject of this appeal.

STEWARD J: I understand that, but ‑ ‑ ‑

MR GOUBRAN: In fact, it is an uncontested item.

STEWARD J: It is a necessary outcome of Mr Batt’s argument that you must be satisfied that there is – that the building is increasing the value of the land as at the valuation date, and he must reject the natural state test.

MR GOUBRAN: Well, that is not his appeal. That is not his appeal.

STEWARD J: It is just a matter of logic, though.

MR GOUBRAN: Your Honour, the submissions made before you do not seek to agitate, do not seek to reopen any of the debate associated with ‑ ‑ ‑

STEWARD J: But it is – I take it you agree with me that adopting this natural state comparison is what drove the Court of Appeal to look at the situation in 1897.

MR GOUBRAN: No, your Honour. No, your Honour.

STEWARD J: Then why did they look to 1897?

MR GOUBRAN: Because of the words in the definition of “improvement” itself, in the Victorian legislation.

STEWARD J: So, if that is an error, how does this save you?

MR GOUBRAN: Because this finding did not require an acceptance of the proposition of ‑ ‑ ‑

STEWARD J: But you just said to me that they went to 1897 because of the language in the statue. I infer from that, not because of an adoption and application of the natural state jurisprudence.

MR GOUBRAN: I am sorry, your Honour, could you repeat the question, please?

STEWARD J: I am probably not very clear. I think your answer to me before was you rejected the proposition that the natural state jurisprudence compelled the Court of Appeal to look to the land in 1897. You told me they did that because of the language of the definition. If that is so, what is the relevance of this jurisprudence to that potential error? What is the connection between the natural state jurisprudence and what the Court of Appeal did below?

MR GOUBRAN: Well, the way the Court of Appeal approached its reasoning was not to start with asking itself the question of when you conduct the valuation. What it did was to start its reasoning with the question of: how do you determine whether the building is an improvement, regardless of time? That is embedded in this reasoning. There is no mention of when you conduct that assessment.

Justice Steward, I would go a bit further. The case law that it is referring to all are premised on assessments being done at the date of valuation. That is the New South Wales legislation – the case law. So, if I might answer your observation, Justice Steward, indirectly ‑ ‑ ‑

STEWARD J: But – sorry to interrupt you, I do apologise.

MR GOUBRAN: No.

STEWARD J: But that New South Wales test is done at the date of valuation, but it compares the building with the land in its natural state, and the land will not be in a natural state – probably – at the valuation date. It is casting you back to a ‑ ‑ ‑

MR GOUBRAN: No, no, your Honour. The New South Wales case law – let us start with the New South Wales case law and then discuss the Victorian case law.

STEWARD J: Okay.

MR GOUBRAN: The New South Wales case law says, as at the date of valuation, you ask yourself the question, does the building add value to the land by reference to its natural state, at the date of valuation. And embedded in that assessment is whether the benefit has been exhausted. There is no anterior question, Justice Steward, it is at the date of valuation.

STEWARD J: Okay.

MR GOUBRAN: That is what the appellant wishes to contend, at least on the question of timing, your Honour. But what the appellant disregards ‑ ‑ ‑

STEWARD J: So, understanding all of that, why did the Court of Appeal ask questions about 1897?

MR GOUBRAN: Yes. What happened, to be practical about it, is that the Court of Appeal spent all of its time up to paragraph 144, Justice Steward, dealing with the case law out of New South Wales, which was premised on the date of valuation. That is what it did, because everything up to that point was referable to it.

But when it got to paragraph 144, it actually says what it did – and I might read that briefly to you. Sorry, it is paragraph 143, your Honours. Forgive me, I am going to go back to paragraph 142 and then go to 143. Paragraph 142 is the wrap‑all conclusion where there is no mention of, Justice Steward, an earlier timing of an evaluation – no mention of it.

GAGELER CJ: But there is also no embracing of any methodology. It is just leading to the statutory definition, is it not? It is not like one finds, independently of the statutory definition, an adoption of Justice Biscoe’s analysis.

MR GOUBRAN: There is an adoption of Justice Biscoe’s analysis as the basis for rejecting the appellant’s evidence by application of the law.

GAGELER CJ: Sorry, just show me that paragraph – where does that occur?

MR GOUBRAN: Certainly, your Honour. Just bear with me.

GAGELER CJ: I can see it at 155.

MR GOUBRAN: Sorry, your Honour, just bear with me whilst I find that.

GORDON J: Maybe 139, where I think you took us to earlier.

MR GOUBRAN: Can I go back to 128 before I do, Justice Gordon?

GORDON J: Sure.

MR GOUBRAN: If you go back to paragraph 128, Chief Justice, you will see:

However, in Trust Company, the New South Wales Court of Appeal endorsed the approach to identifying improvements articulated by the trial judge, Biscoe J, in Commonwealth Custodial. In our view, this approach is not reflected in the methodology deployed by Mr Haines.

So, it is first, a commentary about whether the appellant’s evidence by reference to the natural state ‑ ‑ ‑

GAGELER CJ: I follow that.

MR GOUBRAN: And then paragraph 138 ‑ ‑ ‑

JAGOT J: Can I just ‑ ‑ ‑

MR GOUBRAN: Sorry, your Honour Justice Jagot, if I could just answer Justice Gordon ‑ ‑ ‑

JAGOT J: No, no, of course.

MR GOUBRAN: So, paragraph 138 ‑ ‑ ‑

GORDON J: I was actually going to 139.

MR GOUBRAN: Yes, your Honour – and going to 139:

In our view, these authorities are not helpful to the case that VGV seeks to make based on the methodology used by Mr Haines. As discussed, in the Tribunal, VGV . . . disavowed –

and then you will see a reference to “natural state”.

JAGOT J: But it is the date of the natural state that is embedded in all this. Justice Biscoe expressly said it is the natural state:

at the date of valuation –

MR GOUBRAN: Yes, your Honour.

JAGOT J: The Court of Appeal did not do that.

MR GOUBRAN: It adopted the natural state as being the applicable test, but it ‑ ‑ ‑

JAGOT J: Yes, but it did not do what Justice Biscoe said at all, because Justice Biscoe was comparing the natural state at the date of valuation with the state of the land at the date of valuation with the building on it, and was finding that the building in fact increased the value of the land compared to the natural state at that date.

MR GOUBRAN: I grant you that, your Honour.

JAGOT J: This Court is just not doing that, it is comparing – it might be saying it is applying Justice Biscoe, but when you go to what it does, it is comparing the natural state of the land at the date that Landene was created, constructed, with the state with Landene on it at that date, 18‑whatever‑it‑is. That is how it comes to the view that Landene adds to the value, and no doubt that conclusion is no doubt right, given what you could do with the land at the time. But that is not what Justice Biscoe did. That is why the timing is inherent in all of this, it seems to me, and I have not yet found a paragraph where it is not.

MR GOUBRAN: Justice Jagot, I will accept that there is a fundamental difference between the date that Justice Biscoe assessed whether the natural state test is satisfied with the date the Court of Appeal in this matter determined that the natural state was satisfied. I readily accept that, Justice Jagot. Without dwelling on it, I do emphasise, though, that it embraced the natural state test.

JAGOT J: Well, it did, but that is not – that test has, embedded with it, a time.

MR GOUBRAN: No, no, your Honour ‑ ‑ ‑

JAGOT J: I guess what I am coming to is this. So far, I have not seen anything that says it is immaterial if it is an error, and, therefore, it seems to me the real issue for you is, is it an error, not that it is not material, because ‑ ‑ ‑

MR GOUBRAN: If I might, I might jump ahead.

JAGOT J: Okay.

MR GOUBRAN: Let us assume that I am not able to persuade you, Justice Jagot ‑ ‑ ‑

JAGOT J: Just me.

MR GOUBRAN: ‑ ‑ ‑ as to the timing, and your Honour is considering a remitter.

JAGOT J: Well, that assumes, also, that it is an error as well.

MR GOUBRAN: Let us engage in some speculation.

JAGOT J: What I am not finding here is immateriality of the alleged error, assuming it is an error.

MR GOUBRAN: No, but what I want to focus on is what would be remitted, because if this Court takes the view that there is an error, an error in the Court of Appeal’s reasoning as to the selection of the timing of the valuation, which is the contest that is before you, what about all the Court of Appeal’s findings associated with the method for determining the building ‑ ‑ ‑

JAGOT J: You cannot separate, though – there is just no clear distinction in this reasoning. All of this is premised on the relevant time being the time that you look at whether it is an improvement. So, it is all part and parcel of it. It is either right or it is wrong.

MR GOUBRAN: I would take great issue, Justice Jagot ‑ ‑ ‑

JAGOT J: I understand.

MR GOUBRAN: ‑ ‑ ‑ because that is essentially suggesting that, on a ground not raised before you today, which is the findings against the appellant in respect of its evidence associated, because of the application of the natural state test, is reopened on any remitter so that we are not only having a debate about the time of the valuation but also the fundamental debate as between natural state versus highest and best use, which occupies 143 pages of the judgment paragraphs below, before you get to timing. I guess the point I am seeking to emphasise ‑ ‑ ‑

JAGOT J: The point is simply this. Once you get the statutory interpretation right, everything else then follows from it. But you have to get that right before you do the rest of it.

MR GOUBRAN: Yes. So, that is where I ‑ ‑ ‑

JAGOT J: So, the Valuer‑General is either right or wrong on statutory interpretation.

MR GOUBRAN: Where I cavil, your Honour, is it is not – the statutory interpretation has a number of aspects of to it. It has the question of timing, but it also has what is the appropriate method at that time for determining whether the building increased the value of the land.

JAGOT J: Methods of valuation are many and varied and all sorts of things in between, but, ultimately, they have to fit with the proper interpretation.

MR GOUBRAN: I accept that, your Honour. I accept that. So, Justice Gordon, I think we were at paragraph 139, which is:

In our view, these authorities are not helpful to the case that VGV seeks to make based on the methodology used by Mr Haines. As discussed, in the Tribunal, VGV expressly disavowed any attempt to identify an improvement by reference to the Land in its ‘natural state’ or to rely upon the approach in Commonwealth Custodial . . . It did not seek to adduce any evidence relevant to this form of analysis, and nor did it suggest that Mr Haines’ evidence engaged with it. In fact, Mr Haines’ method for identifying whether Landene was an improvement asked whether Landene added value to the Land having regard to its highest and best use, but assuming that the heritage overlay did not exist.

The Court of Appeal rejected that and adopted the natural state test, at the end of paragraph 141 and 142, and only after adopting the natural state test did it turn to the question of timing for determining valuation. You will see that in paragraph 143. It says:

In our view, however, the answer to whether Landene is an improvement lies in the definition of ‘improvements’ in the VLA and, in particular, the requirement not only that the improvement increases the value of the land, but that the benefit to the land conveyed by the improvement be ‘unexhausted’ at the time of valuation.
It will be recalled that the definition refers to ‘all work actually done or material used on and for the benefit of the land, but in so far only as the effect of the work done or material used increases the value of the land and the benefit is unexhausted at the time of the valuation’. This formulation distinguishes ‘the work done or material used’, which must increase the value of the land, and the ‘benefit’ to the land, which must be ‘unexhausted –

And this is where we start to see where the Court of Appeal is seeking to give meaning to the words found in the definition of “improvements”. Up to that point in time, it was considering the case law, arising out of New South Wales, particularly, as to how a building is determined to be an improvement, without adding any further flourish arising out of the words of the statute in this instance.

GAGELER CJ: And then all that reasoning ends up in paragraph 155, right? It is a step on the way to the conclusion in 155.

MR GOUBRAN: And – if I might say, Chief Justice – paragraph 147, because paragraph 147 expressly refers to “natural state” in the fourth line.

GAGELER CJ: Yes.

MR GOUBRAN: I accept that.

GORDON J: So, what you just put to us is really what is set out in paragraph 4, is it not, of your outline of argument, and 5 and 6?

MR GOUBRAN: Yes, your Honour. Justice Gordon, are you referring to paragraph 4 of our outline?

GORDON J: Paragraphs 4, 5 and 6, I think is what you have just put to us.

MR GOUBRAN: Yes, I have, your Honour.

GAGELER CJ: I am just trying to summarise what you have been saying. You are saying that the real contest before the Court of Appeal was one as to valuation methodology. If it is the case that a material error of law was made by the Court of Appeal at paragraphs 143 and following, leading to the conclusion at paragraph 155 – which rejected the methodology put by the Valuer‑General – you would say that there remains an unresolved debate as to methodology.

GLEESON J: And whether Biscoe is correct.

MR GOUBRAN: No, I would not concede that.

GAGELER CJ: Okay. So, do you say that the debate as to methodology is resolved independently of that reasoning? Is that right?

MR GOUBRAN: Yes, your Honour.

GAGELER CJ: That is what you would have us accept?

MR GOUBRAN: That is my submission ‑ ‑ ‑

GAGELER CJ: All right.

MR GOUBRAN: ‑ ‑ ‑ and a fair reading of this judgment reveals that.

GAGELER CJ: And if that is not correct and the debate as to methodology is resolved by a process of reasoning that includes a flawed statutory interpretation, what is the result?

MR GOUBRAN: A remitter that considers the matter according to law.

GAGELER CJ: All right. Remitted to the Court of Appeal?

MR GOUBRAN: Yes, your Honour.

GAGELER CJ: Yes, I understand.

MR GOUBRAN: That is not my client’s submission.

GAGELER CJ: I understand; it is your alternative submission.

MR GOUBRAN: One thing is for certain, your Honours, there is no basis upon which you would be making orders substituting yourselves a view of the value of this land and the dismissal of the objection raised by my client below; one thing is for certain.

GAGELER CJ: Yes.

MR GOUBRAN: Particularly in circumstances where the appellant’s evidence was rejected. Now, can I address you on the question of law. It is the third topic ‑ ‑ ‑

GAGELER CJ: Yes.

MR GOUBRAN: ‑ ‑ ‑ and it is clearly the matter that will occupy most of your time in the consideration of this matter. I am conscious of the time, your Honours ‑ ‑ ‑

GAGELER CJ: How long do you expect to be in the balance of your submissions?

MR GOUBRAN: I think I could be finished by 1.00 pm.

GAGELER CJ: Mr Batt, your reply?

MR BATT: Your Honours, there will be some matters in reply, but they will consume under 10 minutes.

GAGELER CJ: All right, we will sit on.

MR GOUBRAN: I will endeavour to finish at 1.00 pm so that your Honours can break. Can I start this part of my address by naturally turning to the words of the statute. So, your Honours will no doubt have copies of the Valuation of Land Act at hand. Chief Justice, in the same way, I will not refer to the appeal book numbers, I presume everyone has copies of the Act.

GAGELER CJ: And they are highlighted and tabbed, we are ready to go.

MR GOUBRAN: I am just going to go straight to the definition of “improvements” and just dwell on each part of it, and then address you as to why we contest propositions that are raised by the appellant. It is true that when one looks at the definition of “improvements” that there are a number of propositions contained within it. It starts with, what I would describe, the first proposition, which is identification of:

work done or material used –

on and:

for the benefit of the land –

That is the first part of the definition. It means all work actually:

done or material used –

on and:

for the benefit of the land.

So, let us just stop there. Clearly, what is being asked of us is a consideration – an identification, I would submit – of work done or material used that has a benefit to the land. That is the first part. The second part commences with the word “but”, and what follows is:

in so far only as –

And then I will not read on, but very clearly that is a carve‑out – as my learned friend I think used that phrase, or I would describe as an exclusion – to what otherwise would be an improvement because it says:

but in so far as only –

And then what follows are two further propositions, which are the second and third propositions I would like to put to you. The second is the phrase:

only as the effect of the work done or material used increases the value of the land –

Now, much emphasis has been placed on the phrase “value of the land”. I would invite your Honours to put equal emphasis on the preceding words:

the effect of the work done –

So, to read the phrase again:

but in so far only as the effect of the work done or material used increases the value of the land –

There is no question that that should be construed as a combined expression. So, one is looking for an effect, an effect of the work that is described in the first part, and whether that causes an increase or increases the value of the land. We then come to the third part of this statutory language, which is the phrase:

The benefit is unexhausted at the time of valuation –

Now, that expression very clearly is connected to the use of the word “benefit” that precedes in the first part, because if your Honours avert your eyes, you will see in the third line the word “benefit”, and your Honours will then see unexhausted benefit or “benefit is unexhausted” in the seventh line.

In my submission, those two terms are inextricably connected. What is sought to be identified is first whether the work done or the material used benefitted the land, and that is at the time in which it is done, and then there is an exclusion. The exclusion is but only in so far as it is exhausted at the time of valuation. Now, the only reference to time of valuation is where the words “unexhausted benefit” arise. There is clearly an invitation, your Honours, for a comparison between two states. One is benefit where the work or material is done or used, and a subsequent enquiry as to whether it has been exhausted.

If you accept that proposition, your Honours, you invariably arrive at the view that there is an inquiry of an earlier juncture as to whether a benefit has occurred. If you accept the principle that an earlier inquiry as to whether a benefit has occurred, then invariably you are comparing two points in time. If you are accepting that there are two points in time, then the question becomes, where does the phrase, “increase in the value of land” – its effect, the effect of the work – arise? Is it at the first point in time where the work or material is done, or is it done at the point at which one is considering whether it has been exhausted?

That is the true debate that we have before you today, and that is the heart of the appeal that you will be deciding, because the question is: was the Court of Appeal in error at law for having said the answer to that question is whether the increase in the value of the land, the effect of it, is to be put in the first pot, instead of the second pot? Excuse the expression, but that is the essence of the debate.

What the appellant rather curiously says before you is not to concede at all that there is a first inquiry as to whether the benefit has occurred at an earlier date and requiring a finding to that effect. All that the appellant would seek for you to accept as a construction of these provisions is a singular analysis at the date of valuation. In my respectful submission, that is wrong. The words of the statute very clearly invite a comparison between points in time, and that is particularly evident from the expression “unexhausted benefit”.

If now I can turn to the three main arguments that the respondent relies upon, and then I would like to briefly respond to the arguments raised by the appellant in their submissions and provide your Honours with a brief response, particularly the reliance placed on the New South Wales legislation which resulted in Victoria’s legislation in 1910.

GAGELER CJ: New Zealand, I think.

MR GOUBRAN: Did I say “New South Wales”? I am sorry, I misspoke. New Zealand. I was still thinking of Commonwealth Custodial, Chief Justice. I meant New Zealand. So, the Court of Appeal undertook a close examination – so, the three reasons we say that your Honours should be satisfied that no error is revealed in the Court of Appeal’s analysis of the timing of the valuation.

The first is that the Court of Appeal undertook a close examination of the words of the definition of “improvement” and sought to give them meaning. Specifically, the Court of Appeal sought to give meaning to the word “benefit”. The Court of Appeal sought to distil the reason for the Parliament’s reference to multiple states – there being benefit and unexhausted benefit. The Court of Appeal was persuaded, and we submit that there is no error in it having found, that there are two points in time in this exercise, and that that is necessary to determine at the very least whether there is an exhaustion of a benefit.

The second reason that the respondent contends no error is revealed is that to construe “improvement” in the way that the appellant contends is to deny meaningful work to be done to words of the statute. The appellant appears to concede that this is the consequence of his construction. That is found in paragraph 20 of the appellant’s reply submissions. The appellant’s argument that exhausted benefit is surplusage is odd, your Honours, because the word “benefit” is used on multiple occasions in this definition. Your Honours will see it in the third line, your Honour will see it on the seventh line, your Honours will see it in subparagraph (a) and your Honours will see that the time consideration for the exclusion in subparagraph (b) requires consideration of going back 15 years.

So, if the position of the appellant is the phrase unexhausted benefit is surplusage and your Honours cannot give it any meaning, that is a curious form of construction, one you should not favour when the word “benefit” is not only used once in that sense but multiple occasions in the subsection. That would suggest Parliament intended for it to be given meaningful application.

The third argument that we raise is that the appellant’s construction of these provisions – and, specifically, their contention that the date of valuation is to be determined – sorry, that the date of assessment of whether there is an increase in the value of the land is to be done at the date of valuation instead of at the point at which the work or material is done to the land, is premised on reliance on, for instance, New South Wales and Queensland adoption of law; there is a reference to the Commonwealth’s treatment in Morrison. The respondent’s position is that that belies the differences that exist between Victoria and those jurisdictions.

It is significant, your Honours, that Victoria has a provision that has this intricate detail of prior assessment of benefit with subsequent consideration of exhausted benefit. None of that appears in any of those jurisdictions. In so far as it does not appear in those jurisdictions, you ought have some caution in adopting a construction that replicates those jurisdictions.

In so far as any reliance is place on other jurisdictions, we noted in our submissions that Tasmania has a provision that more closely resembles Victoria. Unhelpfully, there are no cases that have decided the Tasmanian provision. But if you are looking at how the Victorian legislation has been treated, at least similarly to other jurisdictions within Australia, Tasmania is the closest. Victoria and New South Wales do not have the equivalent.

So, now, in the time that I have remaining, just respond specifically to the arguments raised by the appellant, if I may. These are the six arguments the appellant raises. So, the six arguments raised by the appellant are, if I have understood them correctly: first is a textual interpretation, second is a contextual interpretation, third is a legislative history, fourth is analogous legislation and case law, fifth is a reference to policy concern, and the sixth is some notion of practicality. So, I will not repeat it, there will be a transcript of it, but those are the six propositions, I would like to briefly respond to each of them.

So, dealing first with the textual interpretation. The appellant places emphasis in its textual interpretation of these provisions on the use of the word “increases” in the phraseology. The appellant says nothing turns on that. The reason the appellant says that is that it has to be understood where it fits in the statutory language, it comes after the consideration of the word, or the use of the word, “effect”. So, if your Honours see:

but in so far only as the effect of the work done or material used increases the value of the land –

So, the use of the word “increases” does not answer the question of when you would conduct the valuation because the provision is directed to an effect of the work done, and that effect can be from the moment it is done up to any other later point where you conduct the date of valuation.

We would submit that that is a neutral consideration. It does not point heavily one way or the other. We certainly would not suggest that it is a decisive consideration in our favour, but equally we would say that the appellant’s reliance on it should not persuade you. So, if it is said by the appellant, as it does say, that the use of the word “increases” is a matter of consideration, we would say it is of no significance or note. Just to finish that submission, we would submit that the use of the word “effect” is equally significant because that gives some notion of what you are looking for, which is the effect of the work or material being applied to the land, and that can be at any point from the point at which it is done to the point at which ultimately there is a date of valuation.

The second argument raised against my client is a contextual interpretation, and that contextual interpretation appears to collapse a number of propositions found in the Valuation of Land Act. There is a reference to “site value”, there is a reference to “capital improved value”, there is a reference to section 2(2). Can I start by just going to the definition of “site value”.

If your Honours have the Valuation of Land Act at hand, your Honours will see “site value” is defined, and I will not read the opening words – the words speak for themselves – but if your Honours cast your eyes down to about two‑thirds down in the definition, your Honours will see:

be expected to realise at the time of valuation if offered for sale on such reasonable terms and conditions as a genuine seller might be expected to require, and assuming that the improvements (if any) had not been made –

Self‑evidently, there needs to be an improvement as found for it to be the subject of the latter part of the definition. So, whether something is an improvement is not answered by that definition. It assumes that it has been determined already; it has been determined already because the definition of “improvements” itself resolves that question.

So, it is wrong to go to the definition of “site value” to seek guidance in any meaningful way to determine whether something is an improvement, because site value is premised on the concept that it is having been found to be an improvement by other provision of the Act. We would submit any reliance on the definition of “site value” does not really assist. Then we would go further. We would say reliance placed on subsection (2) equally is misplaced, because section 2(2) provides:

In estimating the value of improvements –

Let me stop there. The whole provision is premised on something being an improvement:

In estimating the value of improvements on any land for the purpose of ascertaining the site value of the land, the value of the improvements is the sum by which the improvements upon the land are estimated to increase if offered for sale –

And I will not read on. That provision has the same features as the definition of “site value”. It assumes the thing to have been determined as an improvement, so it does not provide any assistance in the court’s consideration of whether that thing is an improvement.

The answer to that question is to be found in the definition of “improvement” itself. Your Honours should not be persuaded by reliance, as the appellant does in paragraphs 29 to 31 of his submissions, that seeks to draw an elaborate connection to these other provisions, in determining the fundamental question of what is an improvement and, specifically, the timing of the valuation for the purposes.

And I use the word “valuation”. It is not quite right to think of it as a valuation that is involved in site value because on one view, your Honours, as I said perhaps at the start of my opening address, the definition of “improvements” does not require a quantitative assessment of the amount of the value of the improvement. That is embedded in the latter analysis of the deduction of that improvement for the purposes of site value. All that is required is a binary assessment of whether the thing is an improvement. That does not require someone nominating an amount for it; just simply requires that it benefitted the land – the building benefitted the land – and that it increased the value of the land, whichever point that assessment is required.

So, when the appellant addressed you this morning by reference to the value of the land and the extent to which the site value would be affected by particular propositions, that is, in my respectful submission, conflating propositions. It is conflating site value with the fundamental task that we are concerned with here, which is the anterior question of whether the building is an improvement. So, the respondent’s submission is that the contextual submissions relied upon by the appellant do not advance the question of the timing aspect of this consideration.

The third argument is one directed to legislative history. I would like to take you, very quickly, to those in the time that I have remaining. If your Honours have pages 8 and 9 of the appellant’s submissions at hand – this is dealt with in paragraph 37 and following in the appellant’s submissions. I would like to respond to these paragraphs. Can I take you to a number of the provisions. Let me start with the summary proposition.

The respondent does not cavil with the proposition that the genesis of the Victorian legislation at least drew from New Zealand. The respondent does not cavil with that. But the respondent does emphasise that there is a meaningful difference when the Victorian legislation was enacted. I am going to make that point good as I go through these provisions. If your Honours go to, first, appeal book 277.

GAGELER CJ: Book of authorities.

MR GOUBRAN: I am sorry, yes. The joint book of authorities. Unfortunately, Justice Jagot, I do not have the tab, but it is 277.

GAGELER CJ: It is tab 9. Is this the New Zealand legislation?

MR GOUBRAN: Yes it is. So, I am going to start with the New Zealand 1891 provisions, then I am going to take you to the 1900 provisions and then I am going to take you to the Victorian 1910 provisions. That is the sequence I am going to go, but let us start with the 1891 provisions.

This is the first, at least, iteration that is relevant for the purposes of today’s debate. Your Honours will see that the definition of “improvements” is found at 277 of the folder of authorities. It is right at the bottom of the page:

“Improvements” include houses and buildings, fencing, planting –

I will not read all of that. You will see right at the end of it:

the benefit of which is unexhausted at the time of valuation.

So, it was a relatively simple provision. It did not have any notion of a comparison between two points in time, no mention of increase in value of land, it just simply required an assessment of whether there was a benefit which:

is unexhausted at the time of valuation.

That is the version in 1891. We then see, in 1900, further changes made to this provision and that is found at – I am sorry – the joint book of authorities at 272.

GAGELER CJ: Tab 10.

MR GOUBRAN: Thank you, Chief Justice. If your Honours turn to that part which is at joint book of authorities, this is the further change, and you will see that New Zealand at that point says:

“Improvements” on land means all work actually done or material used thereon by the expenditure of capital or labour by any owner or occupier of the land, nevertheless in so far only as the effect of such work or material used is to increase the value of the land, and the benefit thereof is unexhausted at the time of valuation –

So, we see a couple of things at this point. We see the introduction of “increase in the value”, we also see the introduction of some words at the start of the definition which are “all work actually done or material used”, but there is a significant difference. Your Honours will see in their opening words no reference to “benefit”. So, you will see that there is a reference to exhaustion of the benefit, but when you look at the opening words it says:

all work actually done or material used thereon –

and then goes straight to exclusion. At that point, if we could turn to the Victorian legislation which was said to be drawn by this New Zealand legislation. That is found at folder of authorities 242.

GAGELER CJ: Tab 5.

MR GOUBRAN: Thank you, Chief Justice. Now this is the first version of the Victorian legislation going back to 1910, and it resembles the New Zealand legislation, but it is not identical. If your Honours look at the words at the third line, your Honours will see:

on land means all work actually done or material used thereon by the expenditure of capital or labour on or for the benefit of the land –

We have sought to identify why those words were inserted. We cannot, unfortunately, assist your Honours as to why those words have been inserted. The fact remains that they were. The fact is that the insertion of those words is clearly – at least in my submission, as a constructional issue – highlighting the connection between the anterior step of determining whether a benefit exists with the question of whether three is an exhausted benefit at a later point. That does not exist in the New Zealand legislation.

So, your Honours might wonder how is any of this of assistance to us at all. The answer, your Honours, is that ultimately – and this is one of those perhaps unusual cases – you will decide the question of what is meant by these words by reference to, first, principle and application of the ordinary and natural meaning of those words. There is little assistance from the contextual provisions that the appellant relied upon, there is little assistance from the historical evolution of the provision, as the appellant has identified, and there certainly is limited assistance by reference to other case law, at least on the question of timing, which the appellant has sought to rely upon – and this is found in the appellant’s submissions at paragraphs 54, 55 and following.

The respondent’s submission in respect to that can be shortly stated. The law in the States upon which there is apparent reliance simply does not have the complexity of the words in their provisions that we have sought to address you about today. Not only is there just simply not a definition of “improvement” in the New South Wales legislation, there is no mention of the comparison between benefit and unexhausted benefit which features in our legislation.

I am conscious of the time; I am going to finish. The fifth and sixth points are – there was a complaint made about a response to the Court of Appeal’s reasoning on policy found in the appellant’s submissions in paragraph 61. I will just simply state, your Honours, that that is a misreading of paragraph 154 of the Court of Appeal’s reasons for judgment.

The Court of Appeal’s reasons for judgment in that paragraph simply sought to return to the debate as to whether “highest and best use” versus “natural state” should be adopted, and it should not be read as seeking to

develop the argument about the timing of the valuation. In so far as it said that there was some policy concern that was misplaced, that is a misreading in the respondent’s submission of paragraph 154.

The last point that seems to be raised against the construction adopted by the Court of Appeal is practicalities. Now, that does not appear in the appellant’s written submissions but appeared in their outline. The respondent’s position in respect of that is that if it is accepted as an essential feature of the construction that at the very least one has to determine an anterior benefit, and whether it has been exhausted, then the notion of it being an impractical exercise is embedded in that process.

There is no sugar‑coating it. One has to do a prior assessment of what the benefit is, and one has to consider whether it has been exhausted. It is not, of itself, a basis upon which this Court should disregard words in the statute. I am sorry, I have gone a bit quicker than I should have but thank you for hearing the respondent’s submissions.

GAGELER CJ: Thank you, Mr Goubran. Mr Batt, you have a reply?

MR BATT: I do, your Honour. Am I right to gather that – if I may respectfully enquire, is the Court still content for me to put the reply now? I am in the Court’s hands, naturally.

GAGELER CJ: Yes, go ahead.

MR BATT: I start by returning to two matters to which I said I would return. Justice Steward, to my relief I was correct in stating that CIV was not objected to in either year in which objection was taken. Our instructing solicitors have checked the actual objection documents.

STEWARD J: Thank you.

MR BATT: Secondly, as to remitter, whilst for the reasons given, we submit there is an adequate basis for the Court to grant the relief sought in the notice of appeal, our instructions are that if the Court considered it appropriate to remit the matter to the tribunal of the appellate court, then we would not oppose it in the alternative.

GAGELER CJ: Is it to the appellate court, or the tribunal?

MR BATT: We would have thought the tribunal, your Honour, but I perhaps wrongly had to mind that I have been asked in a fashion that brought up the intermediate appellate court.

GAGELER CJ: Was the debate about the methodology resolved other than through what you state to be a wrong construction of the definition of “improvements”?

MR BATT: The way we would put it, your Honour, is that the Court of Appeal expressed some disapproval of Mr Haines’ methodology on account of its understanding of how he proceeded. We would not wish to accept that the court made a finding, other than resting upon its own interpretation of the statute – which paragraph 155 is a holding – which is bound up in the Court of Appeal’s interpretation of the statute.

GAGELER CJ: Rejecting your valuer’s approach?

MR BATT: Yes, when proceeding on the basis driven by the Court of Appeal’s interpretative holding. Beyond that, we do not wish to accept that Mr Haines’ methodology was dispositively rejected by the Court of Appeal, but we accept that it was described as not consistent with or not assisted by the New South Wales decisions that the Court of Appeal had considered.

JAGOT J: If we remit it to the Court of Appeal, they will then be seized of working out how this all fits with everything else, and they can remit it to the tribunal themselves if there is ‑ ‑ ‑

MR BATT: I accept that, your Honour.

JAGOT J: Because if we remit it to the tribunal, we do not know how what we are saying cuts across every single thing that the Court of Appeal perhaps did.

MR BATT: I accept that, your Honour. My reference to the tribunal was from a premise that this Court would fill in an equivalent position to the appellate court on the matters in issue. If this Court does not fill that, then I have nothing further to say about taking that particular path.

JAGOT J: Okay.

MR BATT: I am sorry if I have not put that clearly, your Honours. We can be very brief in relation to the question of the proper interpretation of the statutory definition. Our learned friends point to the phrase “the benefit is unexhausted”, contending that it embodies or involves a temporal comparison itself. In our submission, it does not. It is an absolute notion. Does there remain, or not, any benefit considered as at the time of valuation? And, as your Honours know from our earlier submissions, we characterise the notion of “unexhausted benefit” in the statutory phrase as simply the inverse of “added value”.

In relation to any notion of surplusage in the reading for which we contend, whilst I have largely covered that in what I have said in chief and will not repeat anything, our learned friends point or seek to point to the presence of the word “benefit” on more than one occasion in the statutory definition as somehow assisting in their contention of surplusage.

In our respectful submission, that is a non sequitur and, in any event, when regard is paid to those differing instances, which are found in volume 1, tab 1, at page 17, when one looks at the definition of “improvements” at that page, page 17, one sees that the term “benefit” is used in differing manners in what I characterised in my submissions earlier today as structurally separate components of the composite definition – in line 3, benefit is locational – that is “work” and:

material used on and for the benefit of the land –

In the next part of the phrase, one sees it in the critical element of the definition that I have already addressed. Then, one sees it, finally, in subparagraph (a), which is another locational reference:

work done or material used for the benefit of the land by the Crown –

In our submission, one does not take anything from that repeated reference of the one word used differently. In relation to the extrinsic materials, we would only point to two passages.

Firstly, we remind the Court that at page 549, tab 29 the preface to the 1900 New Zealand Act said, halfway down the page there, that although the term improvement had been “redefined”, it was with an intent to clarify, not alter the meaning. It was that redefinition that added the element of increased value to the preexisting notion of unexhausted benefit.

So, when the increased value component was inserted, it was explicitly on the basis that it did not alter the meaning. Then, your Honours know, from my laborious attempt to take the Court to the 1909 debates earlier today, that the same was explicitly considered and addressed by the legislature when adopting the 1910 Victorian statutory provisions in similar form, that there was no ‑ ‑ ‑

GAGELER CJ: I am sorry, the 1909 debate related to an earlier Bill that was rejected, was it not?

MR BATT: I am sorry, your Honour. I do beg the Court’s pardon. The 1909 debate was about the 1909 Bill, which resurfaced a year later, in relevantly identical terms, so we say therefore it is pertinent.

GAGELER CJ: Did you give us the Bill, the 1909 Bill? Have we got that somewhere?

MR BATT: I will check, your Honour. The other matter that arose from my learned friends’ submissions on the extrinsic materials was our learned friends’ reliance on the relevant difference between the New Zealand and Victorian provisions, arising from the words “on and for the benefit” or “on or for the benefit”. Our learned friends said that they had not found an explanation for that – there is an explanation in the materials. It is found at tab 31, page 559, which is a page I took your Honours to earlier, but for a different purpose.

If your Honours have tab 31, page 559 – whilst I will not read it, for a moment, in this short reply, I draw the Court’s attention to the left‑hand column towards the bottom. Your Honours will see about two‑thirds of the way down, some indented phraseology.

The short point is that the Treasurer, when the matter returned on this day, moved an amendment to insert the words “on or for the benefit” to pick up works not on the land but paid for by the landowner in a way that benefitted the land, such as a levee, bank or drain. So, we say that it is clear from those materials that “on and for the benefit”, is, as brought in with that point, “on or for the benefit”, was to extend the relevant location to be potentially outside the bounds of the land.

I will not tax your Honours by traversing the detail, but I can say to your Honours, because we have looked at it, that decades later there was a contraction that took “on and for the benefit” to prevent that from being the case. In short, nothing really, for present purposes, turns on the language “on and for the benefit” as a difference from the New Zealand legislation. It was, as that material attests; a phrase brought in for that particular reason.

May we turn briefly to the submission of the respondent that, even upon adoption of the interpretation of the definition for which our clients contend, the appeal is, to use our learned friends’ language, “arid”. In our respectful submission, that is in no way the case. The dispositive component of the Court of Appeal’s reasoning is seen, as I commenced my address this morning by stating, at paragraphs 143 to 149.

It is upon the Court of Appeal’s adoption in those paragraphs of the notion that one looks for increased value at step 1 to the time of construction that the Court of Appeal’s disposition of the appeal turned. That is seen incontestably and in terms, in our respectful submission, and we point – if I may take the Court paragraph 142 of the appellate judgment, after the passages through which our learned friend went, in the anterior part of the judgment, at paragraph 142 their Honours went out of their way to say that:

The cases decided in other jurisdictions . . . are useful for understanding the way in which the concept of an ‘improvement’ . . . has developed, absent a statutory definition such as we have in Victoria.

Then, by counterpoint, their Honours turned – again, in terms – to “the answer” which, as they said, lay in the provisions of the Act that applies in Victoria, and adopted, there, the interpretation that they did. Having done so, they applied it in paragraph 147 and dismissed the appeal accordingly, noting that, in paragraph 155, the rejection of the approach of Mr Haines was in the course of disposition on the basis of the interpretation now under challenge.

So, in short, what we say, your Honours, is that, taking as a premise – without meaning to be presumptuous, but this is the sphere of debate – taking as a premise this Court’s adoption of the contrary interpretation as we have advanced before this Court, in no way can it be said that there is any impediment to allowance of the appeal, because it was this Court’s – upon adoption of the interpretation for which we contend, it would necessarily be the case that this Court was holding that, applying the legislation of Victoria, what mattered was whether there had been an increase in value – or would be an increase in value, or not, were the land vacant or with the works on it that there were – as assessed at the time of valuation.

To put it differently, the notion that anything to do with the natural state test and how it is to be applied could be any part of the disposition of the matter is incompatible with the presence of the Victorian legislative provisions and the interpretation that, ex hypothesi, would be given effect to – which, in terms, requires, if adopted, an assessment of whether pecuniary value is added by the relevant structures or not at the time of the valuation.

I do not want to be drawn into – especially mindful of the liberties we are taking with the Court’s time – to any detail about the natural state test. But may I, to seek to assist the Court, merely say this: it was our client’s position before the Court of Appeal that the natural state test ought be adopted. That was ground 1. That was put, in contrast to, and to seek the reversal of the tribunal’s adoption of a test that started by – even for improvement purposes – looking to a given, static, a priori highest and best use. So, of course, if I may say, with respect, our client does not appeal to this Court in respect of the Court of Appeal’s acceptance of the natural state test. We sought that test to be adopted.

The question is, at what time does one assess the question asked by the natural state test of whether the relevant structure increases value or not, as compared to the land in the natural state? It was and is the temporal issue that matters. The cases such as Commonwealth Custodial, Trust Company, Surfers Paradise, all of them make clear in terms that one is looking to whether there is value added by the relevant structure compared to the natural state considered at the time of valuation. The Court of Appeal’s adoption, in the legislative context that we have in Victoria, of a differing approach is what drove the outcome of the case.

In the decisions such as Commonwealth Custodial, Trust Company and Surfers, unlike in this matter, there was held to be an increase in value from the relevant structure at the date of valuation. Here there is not, albeit that in those matters, the increase in value perhaps was not to the highest and best use of the land, but the natural state test simply says, as Chief Justice Griffiths said all of those years ago in Morrison: what would be the value of the land if it had then continued in a state of nature, and what is its value now? There is nothing incompatible, in our submission, in positing and adopting that test with the way in which we proceed before this Court.

It is true that in the course of their analysis of the authorities about that test, their Honours in the Court of Appeal expressed disapproval of the way in which Mr Haines has proceeded. We do not seek to enter into that question, because we do not need Mr Haines or his conclusions for our pathway home. Once your Honours accept ‑ ‑ ‑

GAGELER CJ: But it is not a pathway that was presented to the Court of Appeal.

MR BATT: Your Honours, the question of the construction of the Act and the temporal element was not raised ‑ ‑ ‑

GAGELER CJ: No, but your pathway home, if you are right, as a matter of construction ‑ ‑ ‑

MR BATT: Yes, your Honour, sorry, that is what I meant to – I meant to put that, your Honour, our pathway is a matter of construction.

GAGELER CJ: I am sorry, if you are correct, as a matter of construction, the way you get from winning your construction argument to the orders that you primarily seek is by a pathway that was not put to the Court of Appeal.

MR BATT: I accept that, your Honour.

GAGELER CJ: Yes.

MR BATT: I am sorry, I misunderstood what your Honour said to me. I did not mean to disagree with the proposition that is plainly correct. The pathway is to look to the capital improved value or the market value as found by the uncontested evidence below. I quite accept that, your Honour. In the circumstances, I will say nothing further.

Thank you, your Honours, for allowing us to conclude as we have.

GAGELER CJ: Yes, thank you, Mr Batt. The Court will consider its decision in this matter and will adjourn until 10.00 am next Tuesday.

AT 1.24 PM THE MATTER WAS ADJOURNED

[2025] HCATrans 16

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