Worthington v Jack Willers - Senior Complaints Officer of the Department of Consumer and Employment Protection
[2005] WADC 38
•4 MARCH 2005
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: WORTHINGTON -v- JACK WILLERS - SENIOR COMPLAINTS OFFICER OF THE DEPARTMENT OF CONSUMER AND EMPLOYMENT PROTECTION [2005] WADC 38
CORAM: GROVES DCJ
HEARD: 28 JANUARY 2004
DELIVERED : 4 MARCH 2005
FILE NO/S: CIVO 122 of 2003
BETWEEN: BERNARD WORTHINGTON
Appellant/Respondent
AND
JACK WILLERS - SENIOR COMPLAINTS OFFICER OF THE DEPARTMENT OF CONSUMER AND EMPLOYMENT PROTECTION
Respondent/Applicant
ON APPEAL FROM:
For File No : CIVO 122 of 2003
Jurisdiction : LAND VALUERS LICENSING BOARD
Coram :B GARDINER (CHAIRPERSON), J MCNAMARA AND DR JOHN BOLLIG
File No :NO 3 of 2002
Catchwords:
Appeal - Land Valuers Licensing Board - Inquiry in relation to appellant's valuation report - Standard of proof - Method of valuation - Whether Board's findings open on the evidence
Legislation:
Land Valuers Licensing Act 1978
Result:
Appeal as to procedural fairness allowed
Otherwise dismissed
Representation:
Counsel:
Appellant/Respondent : Mr N D C Dillon
Respondent/Applicant : Ms P J Giles
Solicitors:
Appellant/Respondent : Dwyer Durack
Respondent/Applicant : Stephen Simpson, Department of Consumer and Employment Protection
Case(s) referred to in judgment(s):
Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322
Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616
Derham Brian Leeming (Registered Valuer), unreported; Supreme Court of Victoria, 17 December 1982
Devries v Australian National Railways Commission (1993) 177 CLR 472
Dyall v Medical Board of Western Australia [2001] WASCA 200
Hunt v Osteopaths Registration Board of Western Australia [2002] WASCA 347
Jemielita v Medical Board of Western Australia, unreported; SCt of WA; Library No 920584; 13 November 1992
Minister for Immigration & Multicultural Affairs v Yusuf (2001) 180 ALR 1
Moursellas v Pharmaceutical Council of Western Australia (1992) 10 WAR 240
Re A Medical Assessment Panel; ex Parte Hays, unreported; FCt SCt of WA; Library No 980575; 5 October 1998
Re A Medical Assessment Panel; Ex Parte Rusich [2001] WASCA 111
Re Babban; Ex Parte Suleski [2001] WASCA 289
Re Hodgekiss (1959) 62 SR (NSW) 340
Case(s) also cited:
Arnold v Veterinary Surgeons Board (1994) 10 SR (WA) 228
Briginshaw v Briginshaw (1938) 60 CLR 336
Iveagh, Earl of v Minister of Housing & Local Government [1964] 1 QB 395
Malone v Marr [1981] 2 NSWLR 894
Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577
New South Wales Bar Association v Evatt (1968) 117 CLR 177
Roberts v J Hampson & Co [1989] 2 All ER 504
Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd (2000) 16 BCL 255
GROVES DCJ: This is an appeal from a decision of the Land Valuers' Licensing Board whereby it suspended the appellant's land valuer's licence for a period of three months and imposed fines totalling $1,500.
The decision was made after an inquiry held by the Board pursuant to s 27 of the Land Valuers' Licensing Act 1978 ("the Act") for the purpose of determining whether the appellant had acted in breach of the requirements of the Act and/or the Code of Conduct for Land Valuers, 1985 ("the Code").
The Re-Amended Notice of Inquiry sent by the Board to the appellant contained allegations as follows:
"1.On 10 January 1997, the Respondent prepared a valuation of a property being a proposed development of a Veterinary Clinic on Part Lot 738 Dugdale Street, Warwick, now No. 22, Lot 948 Diagram 92484 ("the property").
2.It is alleged that the valuation gives proper cause for disciplinary action pursuant to section 28(2)(b) of the Act, in that the Respondent was guilty of negligence in the preparation of the valuation.
Particulars
(i)The Respondent provided a valuation dated 10 January 1997 for the completed development of $2.286 million. In the event of a forced sale a valuation was stated at $1.6 million.
(ii)The Respondent placed too much reliance on the summation method of valuation. The Respondent inappropriately relied upon a land and improvement contract which was not supported by appropriate market research.
(iii)The Respondent used a capitalisation rate which was not adequately supported by any relevant evidence with which to make his valuation.
(iv)The Respondent failed to have any, or any sufficient regard to the available sales evidence.
(v)The Respondent did not give sufficient details of the rental evidence relied upon for the purposes of conducting a valuation of the property.
(vi)As a consequence of the above particulars the Respondent made a valuation which was far in excess of that which would have been made in applying the proper standards of valuation.
3.Further or in the alternative it is alleged that the valuation gives proper cause for disciplinary action pursuant to section 28(2)(b) of the Act, in that the Respondent was guilty of incompetence in the preparation of the valuations.
Particulars
The Applicant repeats the particulars set out at paragraph 2.
4.Further or in the alternative it is alleged that the Respondent has acted in breach of Rule (3)(a) of the Land Valuers Code of Conduct 1985 in failing to carry out the valuation to the best of his knowledge and ability and in accordance with the proper principles of valuation.
Particulars
The Applicant repeats the particulars set out at Paragraph 2.
5.By reason of the matters referred to in paragraphs 1 to 4 inclusive of this complaint, it is alleged that the Respondent has acted in a manner which gives proper cause for disciplinary action pursuant to section 28(2)(c) of the Act, in that he has conducted himself in a way that injures or is likely to injure the reputation of the profession or of the status of licensed valuers, contrary to Rule 4(a) of the Land Valuers Code of Conduct 1985.
6.The information and belief in regard to the matters and the allegations set out in paragraphs 1 to 5 inclusive of this Notice of Inquiry are based on oral and documentary evidence obtained in the course of the inquiry which shall be presented to the Board during the inquiry.
Appellant's background and background to valuation
The appellant holds a Bachelor of Business Valuation and Land Administration Degree from Curtin University and also an Associate Degree in Applied Science from Charles Sturt University which he obtained in the year 2000.
Since 1981 he has been an Associate of the Australian Property Institute and the Real Estate Institute of Western Australia. He has also held a licence as a land valuer and real estate agent and business agent since 1981. From 1983 until 2002 he held a licence as an auctioneer. Since 1981 he has worked as a valuer. Between 1981 and 1987 he worked with Elders and was principal of his own Elders franchise. Between 1987 and 1992 he was the Managing Director of the real estate and valuing business Mair & Co. Between 1992 and 2001 he was a partner in the business known as Australian Property Consultants which was also known as Ross Hughes and Co. Since October 2001 he has been the principal of his own business.
The inquiry before the Board related to a valuation dated 10 January 1997 ("the valuation") which the appellant prepared in relation to a property which was a proposed development for a veterinary clinic on Part Lot 738, Dugdale Street, Warwick now No 22, Lot 948 Diagram 92484 ("the property"). The land is located within an area known as the Warwick Commercial Park. The valuation was prepared at a time when he was then a partner in the business of Ross Hughes & Co.
The appellant had prepared an earlier valuation on the property. The earlier valuation ("the first valuation") was dated 26 August 1996 and was prepared so the appellant contended on the same basis as the later valuation the subject of the inquiry. The first valuation was initially also the subject of the Notice of Inquiry but ultimately was not pursued.
From about 1991/92 the appellant undertook a considerable number of valuations for the property development group controlled by Westpoint Corporation Pty Ltd ("Westpoint"). The work for Westpoint included undertaking valuations throughout the Perth metropolitan area and included valuations within the Warwick Commercial Park. The Warwick Commercial Park forms part of the Warwick Regional Shopping Centre precinct. As a regional centre it was in 1997 one of only five or six such centres within the Perth metropolitan area. Others included Karrinyup, Booragoon, Whitfords, Maddington and Carousel.
In the early 1990's Westpoint acquired the Warwick Hotel site which the appellant had valued. The hotel site also forms part of the Warwick regional precinct. The hotel site was subsequently developed as the Warwick Entertainment Centre. Over the years the appellant had undertaken numerous valuations on the Warwick Entertainment Centre both as a whole and individual strata lots within the Centre of which there were about 26. He had valued each of these at least twice since the lots were created. Shortly after development of the Entertainment Centre Westpoint also acquired a large parcel of land behind the Warwick Shopping Centre and subdivided it into what was known as the Warwick Commercial Park. That was Lot 738 which was subdivided which included No 22 being the property the subject of the valuation dated 10 January 1997.
The appellant was further engaged by Westpoint to provide a report to supplement an application by Westpoint to modify a restrictive covenant which was registered on the land comprising the Warwick Commercial Park. The report included a full review for the value of the land held by Westpoint if the restrictive covenant was modified. Included in that exercise the appellant did a full review of all of the regional shopping precincts within Perth. The restrictive covenant was modified.
As a result of the work which the appellant had undertaken in the Warwick Commercial Park area prior to August 1996 he had acquired a very deep knowledge and understanding of the area and property values in that area. In addition he had also undertaken valuations at other regional shopping precincts, valuations throughout regional Western Australia and in the Perth metropolitan area and in commercial precincts. His extensive experience has also included valuing vacant land upon which it was proposed a construction or commercial development to be built. These are known as "on completion valuations".
The property the subject of the valuation dated 10 January 1997 was proposed to be developed as a veterinary clinic. As far as the appellant could recall he had never been instructed to undertake an on completion valuation of a veterinary clinic, however he had valued a number of veterinary hospitals and practice suites and medical centres, they all being existing developed premises, throughout the metropolitan area.
Instructions for the first valuation were initially received from a Mr Cary of Westpoint with instructions to address the report to the Home Building Society. The first valuation was subsequently updated into the valuation of 10 January 1997 for distribution to Mr Mark Donovan at the Bank of South Australia.
Reasons for decision of the Board
The powers of the Board on inquiry are stated in s 28 of the Act. Insofar as is relevant s 28(2) provides:
"There shall be proper cause for disciplinary action if ‑
(a)…
(b)the licensed valuer has been guilty of negligence or incompetence in making a valuation of land;
(c)the licensed valuer is acting or has acted in breach of the licensed valuer's code of conduct; or
(d)any other cause exists that, in the opinion of the Board, renders the licensed valuer unfit to hold a licence.
The inquiry commenced in December 2002 and was finally heard on 17 and 18 February, 24 March and 9 April 2003. The Board's Reasons for Decision are dated 2 July 2003. As to the standard of proof to be applied in a disciplinary enquiry such as this the Reasons state:
"The Board considers it must follow Briginshaw v Briginshaw (1938) 60 CLR 336 and apply the balance of probabilities standard taking into account the serious nature of the proceedings."
The appellant takes issue with the standard adopted.
On a number of occasions at the hearing and in written submissions the appellant raised the complaint that the respondent (as prosecutor) had failed to produce an original complete copy of the valuation. The Board expressed its satisfaction that nothing turned on the "differences" between the various copies of the valuation which were produced. It rejected the appellant's submission that the copy reports produced were not true and correct copies "…and on the balance of probabilities the majority of the report appears to be in the subject report." Implicit in those words is an acceptance by the Board that the copies of the valuation produced to it were not complete copies. The appellant takes issue with the Board's acceptance of and reliance on a document which does not constitute a complete copy of the valuation.
The Board also rejected the appellant's submission with respect to the expert evidence of Mr K Rogerson who was called to give evidence on behalf of the respondent. Again, the appellant takes issue on that finding.
Turning to the valuation itself there were two components namely:
(a)the valuation of the land; and
(b)the valuation of the proposed improvements at $1,786,000.
As to the valuation of the land the Board was "…of the opinion that whilst the valuation of the land component is on the high side, it just falls within allowable parameters." No issue arises on this finding by way of the appeal.
As to the valuation of the proposed improvements however the Board found that the appellant was negligent in accepting a lump sum contract for the proposed improvements at face value without any qualification in the valuation. It found that the cost of $1,950 per m2 being the lump sum building contract cost, which was accepted by the appellant, was a gross over‑valuation and was "So gross as to be negligent."
In using the summation method of valuation the Board said that the "valuer must absolutely satisfy himself that the building costs involved are realistic." On the evidence before it the Board found that the appellant had failed to do that.
As to an "alternative use valuation" the Board found that the rental of $250 per square metre and the adoption of a capitalisation rate of nine per cent were both unsupported. The Board believed that those two figures "…were chosen for the result they achieved rather than being the properly researched figures that should have been used." The Board found that the alternative use for part of the valuation was not professionally prepared, that no credence could be given to it and that it therefore followed that it was negligently prepared "as not one shred of evidence was given to support the figures adopted."
As to the allegation of negligence in paragraph numbered 2 of the Re-Amended Notice of Inquiry the Board found that:
"Particular 2(ii) (although the Reasons refer to 2(i))
The Board for the reasons set out above finds to its reasonable satisfaction that the Respondent placed too much reliance on the summation method, and relied upon an improvement contract which is unsustainable. Market research should have been done to ascertain the veracity of the building contract. No research was done by the Respondent.
Particular 2 (iii) and (v) (although the Reasons refer to 2(ii) and (v))
For the reasons set out above the Board finds that these particulars are made out by the Applicant. Neither the Respondent nor the expert called on his behalf were able to provide any evidence to the Board which supported the assumed figures. The Board also finds that it was extremely unlikely that there ever was material annexed to the Subject Report which could be used to support the figures.
Particular 2(iv)
Other than the offer and acceptances referred to in the Subject Report the Board does not believe the Respondent used available sales evidence, but rather his general knowledge when determining the land value.
Particular 2(vi)
It follows from the above that the Applicant's case has been made out to the reasonable satisfaction of the Board and that the Respondent was guilty of negligence in the preparation of the Subject valuation.
Particulars 3 and 4
The Board considers that its findings in relation to Particular 2 also prove breach of these Particulars by the Respondent."
Appellant's grounds of appeal
Pursuant to s 16 of the Act the appellant appeals against the decision of the Board and the orders made by it.
"GROUNDS OF APPEAL
1.The learned Board erred in law by failing to allow the Appellant procedural fairness.
Particulars
The learned Board made orders in relation to penalty and costs without hearing from the Appellant, by counsel or otherwise, in relation to the appropriate orders on sanction and/or costs.
2.The learned Board erred in law and or in fact in that the learned Board failed to take into account all the material evidence in imposing the sanctions ordered against the Appellant.
Particulars
In circumstances where:
(a)the learned Board made no finding that the sanctions were necessary for the protection of the public or the protection of the reputation of the members of the profession of Licensed Valuers;
(b)there was no evidence adduced or any finding that the valuation specified in the Subject Report(s) was incorrect or wrong;
(c)there was no evidence adduced or any finding that any party had suffered any loss or damage as a result of relying on the Subject Reports;
(d)the Subject Report was dated 10 January 1997 and, accordingly, related to matters some 5 years ago;
(e)the Appellant had given evidence that his practice as a licensed valuer was his only source of income;
(f)the Appellant had given evidence his family (including his wife, two daughters and a granddaughter) were entirely dependent on the Appellant;
(g)where the learned Board had not heard any evidence or submissions on the practical effect of the sanctions imposed under the learned Board's orders,
the sanctions imposed by the learned Board's orders are:
(i)manifestly excessive; and/or
(ii)in the nature of punishment rather than protective.
3.The learned Board erred in law by failing to give any or any adequate reasons for the material findings reached in the Reasons.
Particulars
(a)The learned Board correctly identified the relevant standard of proof was that referred to by the High Court of Australia in Briginshaw v Briginshaw (1938) 60 CLR 336, the learned Board then failed to specify, either generally or in respect of any specific conclusion or finding reached, to what extent, if at all, the learned Board had taken into account the seriousness of the allegations made in each of paragraphs 2, 3 or 4 of the Re‑Amended Notice of Inquiry ("Re‑Amended Notice") (or the particulars thereof).
(b)The learned Board although finding the relevant part of the Subject Reports ("Subject Report(s)" being the valuation report dated 10 January 1997, 3 different copies of which were tendered during the hearings) lay in the text of the Subject Report and not the annexures, then, without further explanation, materially referred to the annexures in the Reasons at pages 3 and 7.
(c)The learned Board gave no explanation or no adequate explanation in the Reasons for rejecting the Appellant's uncontroverted evidence that the Subject Reports may not be a complete copy of the Subject Reports and that the Subject Reports may have included an annexure detailing sales evidence.
(d)The learned Board gave no or no adequate explanation why it preferred the evidence of Mr Rogerson (the Respondent's expert valuation witness) with respect to construction costs and the standard of construction costs required for a veterinary clinic (being the property the subject of the Subject Report) in preference to the evidence of the Appellant, Mr Vincent (the Appellant's expert valuation witness) and/or Mr Volk (a valuer called by the Respondent).
(e)The learned Board gave no explanation or no adequate explanation why it rejected in whole or in part the evidence of Mr Vincent, the expert valuer called by the Appellant.
(f)The learned Board gave no explanation why it rejected or disregarded or gave no weight to the evidence of Mr Carey, a valuer and commercial real estate agent called by the Applicant.
(g)The learned Board gave no explanation why it found that comparative evidence of properties at Booragoon and Karrinyup Shopping Centres, relied upon by the Appellant, was not properly comparable in 1997 to the Warwick Centre where the property the subject of the Subject Valuations was located.
(h)The learned Board gave no explanation why it concluded or on what basis it considered the evidence supported a finding of not only negligence but also incompetence as alleged in paragraph 3 of the Re‑Amended Notice.
(i)The learned Board gave no explanation why the learned Board treated the AIVLE Guidance Note – "Provisional Mortgage Valuation Practice Standard for the Valuation of Commercial, Industrial and Retail Property for Mortgage Purposes" as obligatory practice standard in 1997 and not merely as a guide.
(j)The learned Board gave no explanation of what standard of care it applied for the findings made in relation to paragraphs 2, 3 and 4 of the Re‑Amended Notice and, more particularly, whether a different standard and if so what standard was applied in finding the Appellant guilty of incompetence.
(k)The learned Board gave no explanation for the sanctions ordered against the Appellant.
4.The learned Board erred in law or, alternatively, in fact in relying upon or giving any weight or undue weight to the evidence of Mr Rogerson, the Respondent's expert valuation witness, when Mr Rogerson (on his own evidence) had no or no material experience in undertaking a valuation of the type under scrutiny in the proceedings before the learned Board.
5.The learned Board erred in law or, alternatively, in fact, in finding it was safe to rely upon the Subject Reports tendered by the Respondent in circumstances where:
(i)the Respondent made no attempt to prove that any of the Subject Reports were true and complete copies, the Respondent did not call any of the alleged recipients of the Subject Report or any party from the Appellant's office, the Respondent did not even give evidence himself in respect of any efforts to ensure that any of the Subject Reports relied upon were true and complete copies.
(ii)on behalf of the Appellant at the commencement of the hearings on 16 December 2002 a call was made for the Respondent to produce the original of the Subject Reports and the call could not be answered;
(iii)at the re‑commencement of the hearings on 17 February 2003 the Respondent sought to answer the call with a further copy of the Subject Report;
(iv)however, the further copy of the Subject Report was different to the Subject Report which was submitted by the Respondent as the document which was included in the documents provided in the Respondent's bundle of hearing documents and had been said to be the document used as the basis for the Respondent's investigation and ultimately the initiation of the Inquiry;
(v)there were difference or inconsistencies with the Subject Report as originally tendered by the Respondent in the bundle of hearing documents and the document rendered in answer to the call;
(vi)further, during the hearings and, more particularly, after the Respondent's evidence had been completed, the Respondent produced a third copy of the Subject Report, the third copy having been obtained by the Respondent in answer to a subpoena issued to a third party;
(vii)further, the third Subject Report was also different to the two Subject Reports previously produced; and
(viii)the Appellant's uncontroverted evidence was that it was his usual practice to attach sales and rental evidence to valuation reports he prepared.
6.The Board erred in law or, alternatively, in fact in relying upon or giving weight or giving undue weight to Mr Rogerson's evidence in relation to construction costs of the veterinary clinic the subject of the Subject Report and, further, the evidence of Mr Stranger, an expert quantity surveyor called on behalf of the Respondent.
Particulars
(a)The evidence was that Mr Rogerson was licensed valuer and not a quantity surveyor.
(b)Mr Stranger's evidence was limited, following objection, to giving evidence of the comparative building costs that would have been used from two specialist publications, given the specialist publications used by valuers for the purposes of calculating building construction costs did not provide a specific category of veterinary clinics.
(c)Mr Rogerson gave evidence that a comparable veterinary clinic had been reported as having construction costs of $1,400 per square metre.
(d)Mr Volk, a valuer called on behalf of the Respondent, gave evidence that in a valuation in 2001 he had allocated a value of $1,450 per square metre in relation to that part of the subject property which was to be used as a veterinary clinic.
(e)Mr Volk gave evidence that if the entirety of the subject property was to be used for a veterinary clinic, then the $1,450 per square metre may have applied to the entirety of the subject property.
7.The learned Board erred in law or, alternatively, in fact in finding the AIVLE Guidance, Note – "Provisional Mortgage Valuation Practice Standards for the Valuation of Commercial, Industrial and Retail Property for Mortgage Purposes" had status other than as a guideline and, more particularly, in circumstances where the evidence supported the summation valuation used by the Appellant.
Particulars
(a)The learned Board accepted into evidence without challenge the standard theoretical text Rost and Collins "Land Valuation and Compensation Australia" which text supported the use of a summation method where no directly comparable sales evidence was available, such being, on the evidence adduced at the hearings, the circumstances facing the Appellant in preparation of the Subject Reports.
(b)The evidence of the Appellant, Mr Vincent and, further, Mr Rogerson (although qualified to the extent of the weight to be given) supported or accepted the use of the summation method in the circumstances facing the Appellant.
8.The Board's findings that there was nothing in the subject valuations "or the annexed material" that in any way supported a rental of $250 per square metre as used by the Appellant, was against the weight of the evidence.
Particulars
(a)The Appellant gave uncontroverted evidence that he had recourse to his own vast experience as a commercial valuer for many years.
(b)The Appellant gave uncontroverted evidence that the Applicant had unique experience in valuing properties in the Warwick Commercial Park Centre/Warwick Shopping Centre where the subject property was located.
(c)It was uncontroverted by any evidence called by the Respondent, for example by the calling of other valuers who worked at the Appellant's then offices, that the Appellant would have had recourse to the comprehensive data bases and internal schedules of recent rental evidence compiled and updated by his former firm, Ross Hughes & Co.
(d)It was uncontroverted that the Appellant would have had recourse to the Valuer General's Offices data and, more particularly, to lithographs obtained from the Valuer General's Office.
(e)In re‑examination of the working files obtained from the Appellant's former firm, Ross Hughes & Co, the Appellant was able to identify rental evidence which would have assisted in the determination of the rental of the subject valuations.
(f)Further, in any event, the evidence of Mr Carey, a valuer and real estate agent called on behalf of the Appellant, supported a yield of 9.4 to 10% based on a $2.35 million value for the subject premises and, accordingly, supported a rental in or near the $250 per square metre referred to in the Subject Valuation.
(g)Further, in any event, the evidence of Mr Volk, a valuer called on behalf of the Respondent, supported yields of between 9.5 and 9.92% for comparative medical centre properties.
(h)Further, in any event, the Respondent abandoned (during examination of Mr Vincent, the Appellant's expert valuation witness) the line of questioning in relation to testing whether there was sufficient evidence of the capitalisation rate used by the Appellant.
(i)Further, in any event, the Subject Reports do contain evidence in relation to rental evidence. The reports refer to locations adjacent to the Karrinyup and Booragoon Shopping Centres attracting rental rates "as high as" $350 per metre which were said to support the rental rate referred to in the Subject Reports. Further, the Subject Report referred to "adjoining quasi‑retail, showroom and office rentals" being in the region of $250 per square metre. Further, in any event, the files tendered and which were obtained from the Appellant's former offices, on the Appellant's evidence provided comparative capitalisation rates.
(j)Further, the Respondent adduced no evidence whatsoever in relation to establishing the actual capitalisation or rental rates applicable for comparable properties in 1997. That is, the Respondent did not call any evidence by any qualified valuer or otherwise to provide evidence of what would have been the actual capitalisation or rental return rates in 1997 for comparable properties."
The nature of the appeal
The nature of an appeal is determined upon an examination of the legislative provisions relating to it: see Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 621 per Mason J, Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322 and Moursellas v Pharmaceutical Council of Western Australia (1992) 10 WAR 240.
This appeal is an appeal by way of re‑hearing on the evidence before the Board: see Griljusich v Andrews [2003] WASCA 206 where the Full Court of the Supreme Court of Western Australia considered identical appeal provisions in the Real Estate and Business Agents Act 1978 (WA). There the Court said at par 85:
"In conducting such an appeal by way of re‑hearing, a court may well undertake a broad review of the decision of the primary decision maker, but will only uphold an appeal if error on the part of the primary decision maker is demonstrated. On such an appeal, it is not for the court to make such decision as it thinks would have been appropriate if it had been the primary decision maker. To conduct the hearing of an appeal on that basis, would be to constitute the appeal as one de novo rather than as one by way of re‑hearing."
Thus, this Court can exercise its appellate powers only if satisfied that there was an error on the part of the Board. The onus is on the appellant to satisfy the Court that the decision before it is wrong: see Bradshaw v Medical Board of Western Australia (supra) at 328 per Kennedy J.
A finding of fact by the tribunal at first instance based on the credibility of a witness is not to be set aside even if an appellate court thinks that the probabilities of the case are strongly against that finding. The Appeal Court will only disturb a tribunal's findings of fact if it can be shown that the finder of fact has failed to use or palpably misused his or her own advantage or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or was glaringly improbable: see Devries v Australian National Railways Commission (1993) 177 CLR 472 at 497 per Brennan, Gaudron and McHugh JJ.
Furthermore, the Court should give great weight and be slow to differ from the Board's opinion concerning whether conduct constitutes professional misconduct, particularly when determining matters requiring professional or technical judgment: Re Hodgekiss (1959) 62 SR (NSW) 340 followed in Dyall v Medical Board of Western Australia [2001] WASCA 200 at par 50: Bradshaw (supra) per Rowland J at 335.
Adequacy of reasons for decision
Section 15 of the Act provides that:
"The Board may, and on request by any party to the proceedings, shall, give to the parties reasons for its decision."
The decision which the Board had to arrive at was whether or not it was satisfied that proper cause existed for disciplinary action. (Section 28(1)). Proper cause would be shown if the appellant was guilty of negligence or incompetence in making a valuation of land, if he had acted in breach of the Code or if any other cause existed which in the opinion of the Board rendered him unfit to hold a licence (s 28(2)). The inquiry was not whether the figure arrived at was so far off the mark as to amount to negligence or incompetence. That is, the focus is not on the end result but the process of valuation where the skill of the valuer lies. A request having been made the Board duly published its Reasons for Decision.
What then are the requirements for Reasons for Decision of a tribunal such as the Land Valuers Licensing Board? In Re A Medical Assessment Panel; ex Parte Hays, unreported; FCt SCt of WA; Library No 980575; 5 October 1998 Wheeler J, with whom the other members of the Court agreed, said at 6‑7 of her Reasons:
"The essence of Reasons for Decision is that they disclose the reasoning processes of the tribunal. Fulfilment of the obligation to give reasons ensures that a person whose interests may be adversely affected by a decision understands why the decision has been made, and allows a party dissatisfied with a decision to determine whether there has been a reviewable error (authorities omitted).
As has been said on many occasions, no standard of perfection is required in preparation of the reasons, and they are to be considered fairly and not combed through "with a fine appellate toothcomb to find error": Minister for Immigration & Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291, Bisley Investment Corp Ltd v Australian Broadcasting Tribunal (1982) 59 FLR 132 at 157. At a minimum, however, it seems to me that in a case of this kind the panel must not merely list the materials upon which it relied, without any hint as to what portions of those materials is considered particularly relevant or the way in which it reconciled any portions of those materials which might have been in conflict. It should at least have set out what it considered to be the material facts which emerged from the materials to which it referred, and its process of reasoning from those material facts to its conclusion. Although each case must be considered individually, having regard to the purpose of the obligation to provide reasons, it is generally sensible for a fact finding body of this kind to make a particular reference to material which would appear to be inconsistent with the conclusion which it reached…and to explain why such material was considered not to be relevant, or to be outweighed by other considerations." Cited with approval in Re Babban; Ex Parte Suleski [2001] WASCA 289 and see also Re A Medical Assessment Panel; Ex Parte Rusich [2001] WASCA 111."
In Re Babban;Ex Parte Suleski (supra) the Court said at par 14:
"It is important that the applicant should be able to understand from the Reasons for Decision, why he has had his claim dismissed. He should be told in clear and unambiguous language why he has lost."
The adequacy of reasons of a disciplinary Board was also dealt with recently by Heenan J in Hunt v Osteopaths Registration Board of Western Australia [2002] WASCA 347. In that case, the statutory provision concerning Reasons requires they record "the grounds on which the decision was based and its reasons…" (Osteopaths Act, 1997 s 28). His Honour at pars 24‑25 said:
"Furthermore, the provision of Reasons allows the parties to understand the reasons for the decision of the Board and permits any aggrieved party to consider whether or not he should exercise a right of appeal, if one exists, or whether other remedies might be available for a reviewable error.
What will constitute sufficient detail or content in the Reasons for Decision will depend upon the nature of the decision being made by the Board at first instance, the matters in issue before it and the scope of any appellate or other available review. But it must be clear from the reasons for the decision of the Board what are the issues upon which their decision has turned and what factors or criteria have been applied for the determination. If there have been disputed issues of fact before the Board it should be apparent from the Reasons for Decision how those disputes have been resolved, and, where possible, why they have been resolved in a manner which allows the process of reasoning to be analysed and reviewed. … However, one must be guarded about prescribing constituent components as essential for Reasons for Decision because so much will depend upon the particular decision, the context of the controversy, and the nature of the body making the decision, especially where, as here, it is a Board comprised by members with a special professional knowledge and experience which the members can be expected to apply to their decision making process."
The requirement that the Board give Reasons for Decision in my view obliges it to set out its findings on those questions of fact which it considered to be material to the decision which it made and the reasons it had for reaching that decision. "Reasons for Decision" do not mean reasons in detail with respect to each and every argument advanced by the appellant at the hearing before the Board. "Reasons" means reasons why the tribunal considers that a case of proper cause for disciplinary action has been made out: see Minister for Immigration & Multicultural Affairs v Yusuf (2001) 180 ALR 1 at 57 per Callinan J at par 235.
Identifying the issues raised on appeal
As a more practical approach the several grounds of appeal and their particulars can conveniently be grouped and considered under the following heads:
1.Procedural fairness in imposing sanctions and costs.
Grounds: 1, 2, 3(k).
2.The standard of proof.
Grounds: 3(a), 3(h), 3(j).
3.Reliance on copies of the subject valuation which were not "true and complete copies".
Grounds: 3(b), 3(c), 5.
4.Valuation of the proposed improvements.
Grounds: 3(d), 3(e), 3(f), 4, 6.
5.Summation method of valuation.
Grounds: 3(i), (7).
6.Alternative use valuation.
Grounds: 3(g), 8.
Procedural fairness in imposing sanctions and costs
The respondent concedes that the Board was in error in failing to hear submissions in mitigation prior to the imposition of sanction. Grounds 1 and 2 of the appeal will therefore be upheld. The imposition of a sanction, having regard to the ultimate findings on this appeal, should be remitted to the Board for hearing and determination.
Notwithstanding the respondent's concession the appellant contends that the orders sought to be imposed by the Board were "…indicative the Board misunderstood its function…" and "…is indicative the entire process undertaken by the Board has been misconceived". The consequence of that so it was submitted was that "…the Board's misunderstanding of the purpose of the enquiry has infected the entirety of the proceedings and the conclusions reached…" and that the findings reached are not safe and cannot be allowed to stand. I do not accept that proposition for one moment. The nature of the sanction which the Board sought to impose is irrelevant to both the process whereby the enquiry was undertaken and its reasoning in arriving at the conclusions as stated in its reasons for decision. There is no basis whatsoever for suggesting that the Board misunderstood the purpose of the enquiry. Such submission is of no merit whatsoever.
The standard of proof
The Re‑Amended Notice of Inquiry made three distinct allegations against the appellant. These were as follows:
(a)Paragraph 2, negligence in the preparation of the valuation.
(b)Paragraph 3, incompetence in the preparation of the valuation.
(c)Paragraph 4, acting in breach of Rule 3(a) of the Land Valuers Code of Conduct 1985 in failing to carry out a valuation to the best of his knowledge and ability in accordance with proper principles of valuation.
The Board's Reasons deal with the question of standard of proof as follows:
"the Board considers it must follow Briginshaw v Briginshaw (1938) 60 CLR 336 and apply the balance of probabilities standard taking into account the serious nature of the proceedings."
The appellant complains that the Board in its Reasons has chosen not to explain how it has applied that test or to explain what standard of care it has used in determining each of its findings of negligence, incompetence or breach of statutory duties. The appellant contends that the test in Briginshaw suggests a "sliding scale" of proof. That is, the more serious the allegations or the consequences of an adverse finding the higher the standard must be. He contends that given the seriousness of these charges a test commensurate with the criminal standard of "beyond any reasonable doubt" should have been applied.
This assertion was rejected by Owen J in Jemielita v Medical Board of Western Australia, unreported; SCt of WA; Library No 920584; 13 November 1992 where at p 20 he said:
"The civil standard is the balance of probabilities or, put another way, that something is more likely than not. The test in Briginshaw does not alter that situation and it is misleading to refer to the standard as being on a 'sliding scale'. What is required is that because of the gravity of the allegations, reasonable satisfaction of proof should be established so that the tribunal of fact feels an actual persuasion of the occurrence or existence of the fact in issue."
Nor do I accept the appellant's contention that the Board failed to have regard to the seriousness of the allegations (to use the wording of particular 3(a) of the Grounds of Appeal) or that it has not applied the appropriate standard. In discussing the standard of proof the Board has reflected the language used in the classic statement of the appropriate standard as contained in Briginshaw and also the language used by Gobbo J in the matter of Derham Brian Leeming (Registered Valuer), unreported; Supreme Court of Victoria, 17 December 1982 at 5 where he said:
"The standard of proof is proof on the balance of probabilities but one which, taking into account the gravity of the allegations, produces a reasonable state of satisfaction in one's mind."
The standard requires the decision maker to arrive at a "reasonable state of satisfaction" having regard to the seriousness of the allegations. That is not suggestive that the standard is commensurate with the criminal test. Similarly, Leeming (supra) was an appeal from a determination of the Valuers Qualification Board (Victoria) which had found that the appellant was guilty of negligence as a valuer.
The Board did specifically state in its findings as to Particular 2(ii) and 2(iv) that the allegations had been made out "…to its reasonable satisfaction…". Furthermore, it is apparent from the reasoning that the standard insofar as Particular 2 is concerned was set in the context of the allegation of negligence. When the Board made its finding in respect of incompetence and breach of the Code (Particulars 3 and 4) it is apparent that it was on the basis of the highest standard applicable to a finding of negligence. Even if one accepted the appellant's submission as to a "sliding scale" it is apparent that an appropriate standard having been applied insofar as negligence is concerned that standard is inclusive of whatever lesser standard may have been appropriate (on the appellant's argument) to the complaints of incompetence and breach of the Code.
Having said that it therefore needs no further explanation as to what standard of care the Board applied for the findings made in relation to par 2, par 3 and par 4 of the Re‑amended Notice. (Appeal ground 3(j)).
Appeal ground 3(h) asserts further that the Board in its reasons gave no explanation why it concluded or on what basis it considered the evidence supported a finding of incompetence as alleged in par 3 of the Re‑amended Notice. In that respect the Board found as follows: "Particulars 3 and 4 – the Board considers that its findings in relation to Particular 2 also proved breach of these Particulars by the respondent." Whilst negligence and incompetence are two aspects of professional misconduct and may in certain circumstances overlap they are nevertheless distinctly different. A single act or omission may amount to negligence. On the other hand, whilst incompetence may be something less on the scale of misconduct it connotes something more than an individual incident. Jemielita v Medical Board of Western Australia, (supra) involved a consideration as to whether the doctor's conduct amounted to "gross carelessness or incompetency." In identifying the appropriate meanings of those phrases the Board held that the concept of incompetency involved an unfitness to practice the particular field of medicine which was under examination or an ability to perform the techniques or reach the judgments needed for the proper practice of medicine in that field. The Board went on to identify the meaning of gross carelessness. In relation to the Board's understanding of "gross carelessness or incompetency" Owen J at p 19 said:
"In my view, the Board has correctly identified the appropriate meanings of those phrases as they apply to disciplinary proceedings and to standards of professional conduct required of medical practitioners. I should add one small point. The concept of 'carelessness' may not be endemic to the practitioner's affairs generally. It may be limited to individual, perhaps sporadic, incidents. However, the concept of incompetency seems to suggest a more generalised deficiency in the way in which a practitioner handles his professional affairs."
Although said obiter it seems to me to be a correct statement as to what would commonly be understood to amount to incompetence. That is not a single occurrence of not coming up to the requisite standard but rather a "generalised deficiency" endemic in the way of the person's professional practice. The new Shorter Oxford English Dictionary gives a definition of incompetent as "of inadequate ability or fitness: lacking the requisite capacity or qualification: incapable." A single incident would not demonstrate an inadequate ability or fitness to practice. Applied to the present circumstances it is my opinion that a finding of "incompetence" cannot be made on an isolated finding of negligence in respect of one event. The Board's reasons insofar as its finding of negligence is concerned does not indicate why it also concluded that the appellant's conduct amounted to incompetence.
In this respect I conclude that the Board has erred in its findings in concluding insofar as par 3 of the Re‑amended Notice is concerned that the appellant was incompetent in the preparation of the valuation. The same reasoning does not apply to par 4 of the Re‑amended Notice and that issue will be dealt with later in these reasons.
Reliance on copies of the subject valuation which were not "true and complete" copies
The essence of appeal ground 3(b) is that the Board did not explain in its Reasons its reference to annexures when it held (at p 2 of its Reasons) that "…the damning part of the Subject Report lies in the text and not in the annexures." There were in fact three different copies of the valuation which were tendered during the hearing. Each was in relatively minor respects different from the other. None was what the appellant contended a complete or full copy of the valuation originally prepared by him and sent to the client. The Board made reference that "on the balance of probabilities the majority of the report appears to be in the Subject Report" which I take to be acknowledgment by it that it did not necessarily have before it a complete copy of the valuation.
Be that as it may it is readily apparent that "…the damning part…" of the valuation is referring to those parts of the Board's Reasons which related to the deficiencies in the body of the valuation itself and is not to be understood as referring to what might have been contained in the annexures. Those references by the Board were:
(i)to the valuation of the proposed improvements, which is referred to in the body of the valuation;
(ii)the appellants use of the summation method which was based on the valuation of the proposed improvements which the Board found to be fundamentally flawed; and
(iii)the failure to explain or support the estimated market rental of the property, which evidence should have been either in the body of the report or in the annexures, with an explanation or at least reference to them in the body of the report.
In the circumstances the references to annexures in the Reasons at p 3 par 2 and p 7 par 2 do not need further explanation. The Board is not obliged to spell out what is, upon analysis of its reasons, the obvious.
Appeal ground 3(c) asserts a failure to give reasons for not believing the appellant's evidence that there were missing annexures to the report containing further evidence. First, let me reiterate that it is important that the appellant should be able to understand from the Reasons "…why he has lost.": see Re Babban; Ex Parte Suleski (supra). That is not to say, however, that the Board is obliged to spell out its reasons for not apparently accepting the appellant's evidence. In its Reasons the Board found as follows:
"The Board rejects the respondent's submission that the subject report is not a true and correct copy and on the balance of probabilities the majority of the report appears to be in the subject report."
The appellant's evidence was that the valuation before the Board may not have been a complete copy and that it was his "usual practice" to annex sales and rental evidence to his valuation reports. His evidence was uncontroverted. That "usual practice" was, it was said, supported by evidence of such annexures to three other valuation reports of unrelated properties which were adduced into evidence.
As indicated earlier it is apparent that the Board was accepting of the fact that none of the three copies of the subject valuation which it had may not have been complete copies. However, it was satisfied on the balance of probabilities that it did have "…the majority of the report…" and that which it did have, described as "…the damning part…", was sufficient upon which to make its findings.
As to the appellant's contention that the valuation "…may have included an annexure detailing sales evidence" the appellant did produce three valuations prepared by him in relation to other properties which did include annexures detailing sales evidence. His argument was that it was his usual practice to annex sales and rental evidence as he had done on each of those three occasions and therefore he may have done that also on this occasion. I would observe that the evidential value of the three unrelated valuations is questionable. First, in each of the three other reports there is reference to an annexure in the body of the report itself. If one were accepting of a usual and consistent practice then the expectation would be that a similar reference would be contained in the subject valuation. There was no such reference. Secondly, the body of the subject valuation does contain reference to a number of annexures. For example, it refers to the design and construct contract and the contract of the sale of land. It contains no reference to annexed evidence of sales and rental figures. As there was reference to those other documents in the body of the report one would expect that had there been annexed evidence of sales and rental figures there would also have been reference to that in the body of the report.
It is not necessary that the Board should explain in detail or give reasons on each and every issue which may have arisen in the proceedings before it. The Board came to its conclusion on the basis of "…the majority of the report…", it being satisfied that the shortcomings of the valuation were contained in the body of the report in any event and not in the purported annexures. In these circumstances it was not necessary for the Board to say more.
Valuation of the proposed improvements
The relevant part of the subject valuation (at p 8 and p 9) states:
"The total construction price of $1,786,000 equates to a rate of $1,950 per square metre over the gross building area." [Said to be approximately 915 square metres]. This cost does not include furniture, telephone or cat/dog cages and kennels.
Recognised building cost indicators, such as 'Rawlinsons' Australian Construction Handbook or 'Ralph & Beattie, Bosworth' Building Cost Compendium, do not provide any indication as to the likely costings for such a building.
Buildings such as medical centres or single level district hospitals with two theatres are quoted in the very broad range of $1,000 to $1,750 per square metre exclusive of fit‑out and car parking.
These quotations are for building area only and do not include site works, landscaping or car parking.
The agreed contract price of $1,786,000 appears therefore to fall at the upper limit of the available indicators."
The thrust of the grounds of appeal which fall to be considered under this head is directed at the reliance which the Board placed on the evidence of Mr Kim Rogerson, the respondent's expert valuation witness, in preference, with little explanation, to the evidence of the appellant and other witnesses called by him.
In its Reasons for Decision the Board said:
"The Board also rejects the respondent's submission with respect to the expert evidence of Mr K Rogerson. The Board finds that Mr Rogerson, with his 22 years of experience, is as competent as any of the other valuers who gave evidence during the hearing. Mr Rogerson's limited experience with respect to mortgage valuations does not in any way detract from his ability to give evidence on market valuation methodology and practice."
It was the Board's finding that the appellant "…was negligent in accepting the lump sum contract at face value without any qualification in the subject report." The lump sum contract was for the construction of the improvements on the property at a cost of $1,786.000. The Board went on to find:
"The respondent should have made enquiries to ascertain the costs of construction of this type of veterinary clinic and he certainly did nothing to acquaint himself with the facilities provided in a veterinary clinic. There were in 1997 clinics of this type in the outer regions of the metropolitan area, which have facilities of a similar size so far as the actual veterinarian section is concerned, and a visit to any one of this (sic) by Mr Worthington would have alerted him to the fact that $1,950 per m2 was possibly close to double the cost of these type of facilities on a m2 basis."
The Board expressed the view:
"…that the cost of $1,950 per m2 accepted by Mr Worthington is a gross over‑valuation. So gross as to be negligent."
It is of relevance to bear in mind that the valuation of the proposed improvements goes to Particular 2(ii) of the Re‑amended Notice. That particular asserts that "the respondent inappropriately relied upon land and improvement contracts which were not supported by appropriate market research." The consequence of that flows through to the allegation that "the respondent placed too much reliance on the summation method of valuation" which allegation was upheld by the Board. That is not saying that the summation method adopted by the appellant was not an appropriate method to adopt.
The nub of the appellant's criticism of the Board's reliance on Mr Rogerson's expertise is that Mr Rogerson had no relevant experience in undertaking an "on completion valuation of a commercial property for a third party financier." (Appeal ground 4). Appeal grounds 6 and 3(d) go to Mr Rogerson's evidence in relation to construction costs of the veterinary clinic. Appeal grounds 3(e) and 3(f) complain that the Board failed to give reasons why it rejected the evidence of the appellant's expert Mr Vincent and the witness Mr Carey, the latter not rating a mention at all in the Reasons.
It is the fact that Mr Rogerson had effectively "zero" (to use his own words), experience in providing valuations of the type described. He readily acknowledged that. His valuation experience had not been in "…dealing with the financial market or financial valuations as such…". On that basis the appellant contends that Mr Rogerson was not qualified at all to give expert evidence in relation to the subject report. It is contended that as the case against the appellant "relies entirely on Mr Rogerson's evidence…" it must fail because the expert evidence sought to be relied upon has no probative value whatsoever and/or is of such low probative value it would be manifestly unsafe for the Board to place any reliance on such evidence.
Mr Rogerson has been working in the valuation industry for 24 years. He qualified as an associate member of the Australian Property Institute in 1983 and has practised as a licensed valuer for 15 years. His work has principally been with the Valuer General's Office as a District Valuer and he has had considerable experience in the valuation of most forms of property types and a broad experience in valuation of industrial commercial residential, rural and some specialised properties. At the Board's request he provided in a written report dated 15 February 2002 (exhibit 1) his observations and comments on elements of the valuation process, methodology and principles arising from the subject valuation. The methodologies he said are fairly well accepted and basic to most experienced valuers. In that report he states:
"The lump sum building contract…does not appear to be supported by evidence of a range of building construction costs. Reference material quoted appears to provide selectively high construction costs without reference to construction materials or method. The single level district hospital is not considered comparable with the subject development."
In his conclusions he states:
"For an experienced valuer, both the land and improvement contract prices appeared at the highest end of the spectrum at the date of valuation. It would be prudent to investigate a range of evidence so the valuer could satisfy himself of the fairness of the contract amounts, in order that greater reliance could be placed on them. When dealing with a specialised development in an untested market, the summation method is less consistent, as 'cost does not always equal value', especially when reliance was placed on the actual contracts. Hence this method should be approached with caution."
In his oral evidence to the Board he described the veterinary area, approximately a third of the construction, to be "…no more complex than say an office, internally partitioned office development, possibly a medical centre and not a particularly complex one." For the remainder, the open space was more akin to a showroom. He went on to say, referring to "Rawlinsons" Australian Construction Handbook, that he would have:
"…looked at a range of building types there which would include offices, shops, even small medical practices, the replacement cost was in the order of $600 to $800. Allowing for other on costs or otherwise, I couldn't believe that this property could be in excess of $1,000 a square metre, just by looking at our guide."
It was his opinion that the use of a single level district hospital which the appellant adopted, was "…in no way comparable to the construction that was proposed for that site.
Mr Rogerson also identified in his evidence that the appellant had erroneously described the building as being of cavity brick walls whereas the plans indicated that it was for a precast concrete tilt slab construction.
Mr John Stranger, a well qualified and experienced consultant quantity surveyor, was called by the respondent. His evidence was limited to what comparative types of construction there were available in Rawlinsons and other construction cost guides that might have been appropriate for this building. It was his opinion that construction cost for the subject development was comparable to that of a primary school. As to the building design and layout he described the sales area as being akin to a small shopping centre display area and the vet clinic area "…at best you could rate it as a medical centre, which is really the top of the line but it is pretty straight forward, simple construction." It was his evidence that it was "…certainly not of a hospital type quality building. It is, to put it in the vernacular, cheap and cheerful." On checking Rawlinsons he ascertained construction rates as being $600 to $700 for a primary school, $765 to $865 for offices and $570 to $630 for neighbourhood shops. Mr Stranger was not cross‑examined on his evidence.
Dennis John Volk is a licensed valuer practising for 13 years. In February 2001 he had been instructed to undertake a valuation of the then constructed building known as Warwick Veterinary Clinic. For the purpose of his valuation he had inspected the premises which he described as "…a reasonable quality commercial premises…it looked fairly standard." He described there being two components to the property namely the medical centre component and the commercial component. As to the medical centre component he adopted as an indicative idea as to its replacement cost including fit‑out and additional plumbing the sum of $1,450 per square metre. As to the commercial component he adopted the sum of $850 as indicative of its replacement cost. It is to be appreciated that his valuation was being undertaken with the benefit of seeing the completed building and some four years later than the appellant's valuation. Even so, the cost per square metre was substantially less than that adopted by the appellant.
On the other hand it is accepted that the appellant is an experienced valuer also with a wide range of experience particularly in the valuation of commercial properties for third party interests. I have referred to his experience earlier in these Reasons. He adopted in his valuation as a comparable building cost indication buildings such as medical centres or single level district hospitals with two theatres. Rawlinsons and others quote a very broad range of $1,000 to $1,750 per square metre exclusive of fit‑out and car parking. The total construction price of $1,786,000 equates to a rate of $1,950 per square metre. The appellant stated in the valuation that the agreed contract price "…appears therefore to fall at the upper limit of the available indicators."
Mr Kingsley Vincent, a certified practising valuer, was commissioned by the appellant to provide a written opinion as to whether the appellant applied the proper principles of valuation when undertaking his valuation. His written opinion dated 7 February 2003 was tendered and he also gave oral evidence. Again, it is accepted that Mr Vincent is well qualified and experienced having been a licensed valuer for over 30 years. It was his opinion in reference to Mr Rogerson's "zero" experience in undertaking commercial valuations for mortgage purposes that he did not think it would be proper for such a valuer to do so because it was outside their experience. However, it was not put to him the broad experience which Mr Rogerson had over a wide range of valuations. Nor was it put to him on the basis that Mr Rogerson had only been called on to provide his observations applying the appropriate methodology and principles and practice to the appellant's valuation. Furthermore, in his written report Mr Vincent states:
"Giving 'on completion' valuations is a standard practice. Such instructions would not be unusual or call for any unusual valuation techniques." (Emphasis added)
I would not accept therefore the criticism of Mr Rogerson's evidence simply because of his lack of experience in providing any particular type of valuation.
Mr Vincent rejected the notion that a primary school (as suggested by Mr Stranger) would be comparable as being "nonsense". Asked whether a single level regional hospital would be a reasonable comparison he responded "Well, certainly it would be better than comparing to a primary school." That response however could not be understood to be endorsing in fact the comparison of the proposed development to a single level regional hospital. In his written report Mr Vincent mentions that the appellant referred to the two available and well regarded building cost indicators for guidance and that he did refer to the agreed building price as being at the upper limit from that reference. It is not apparent to me that he expressed an opinion himself as to what he considered to be a reasonable comparison. Whilst the texts offer guidance it was his opinion that nevertheless some further research as to construction costs was appropriate in the particular circumstances and so too by looking at smaller veterinary clinics from which some guidance might be obtained.
Bradley Robert Carey, a licensed valuer and a licensed real estate agent, was engaged in 1999‑2000 by the proprietor of the veterinary clinic to sell the property. Substantially, he gave evidence regarding certain offers which were received. No sale was effected. He gave evidence in his capacity as a real estate agent and not as a licensed valuer. His evidence was of no assistance insofar as the construction cost of the building or as to rental or capitalisation rates. It is not surprising therefore that the Board made no reference to his evidence in the course of its Reasons for Decision.
Put at its simplest there is a conflict of evidence between experts as to what type of construction provided a reasonable comparison in assessing the reliability of the sum of $1,950 per square metre for construction of the proposed development. Where the expert evidence differs sharply the Board was obliged to prefer the evidence of one or some experts over others in order to reach its decision. The exercise of the Board in assessing the conflicting evidence of the experts is one of considered assessment with the benefit of seeing and hearing each of the witnesses. The members of the Board will also undoubtedly apply their own specialist knowledge and expertise when considering and resolving such conflict as there is. For the purpose of doing so the Board has set forth in its Reasons what it considered would have been a more realistic costing for the construction. On its own calculations the building construction costs were estimated as being substantially less than the rate of $1,950 per square metre as adopted by the appellant in his valuation. Clearly the weight of evidence was against the appellant.
In all of the circumstances it is my view that the Board was entitled to find, as it did, that Mr Rogerson was as competent as any of the other valuers who gave evidence and to accept his evidence which was supported by that of Mr Stranger with respect to the construction costs of the veterinary clinic.
The construction cost for the proposed improvements was clearly integral to any valuation of the property. The task of the valuer in these circumstances was to verify the construction costs to the best of his ability. The Board found, and on my review of the evidence were entitled to so find, that the appellant did nothing to acquaint himself with the facilities provided in a veterinary clinic. Even if I were of the view (and I am not) that the probabilities so far as the valuation of the construction were strongly against the Board's finding it is not in any event open to me to set aside that finding given that the Board has made that finding based on the credibility of the witnesses Mr Rogerson and Mr Stranger. Furthermore, it has not been shown that the Board failed to use or palpably misused its own advantage or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or was glaringly improbable. (See Devries v Australian National Railways Commission (supra)).
In passing two matters raised by the appellant may be commented on. First the Board's reference to the appellant accepting the lump sum contract "…at face value…" and secondly that the appellant "…should have made enquiries to ascertain the costs of construction of this type of veterinary clinic…". The appellant did give evidence of steps taken to verify the construction costs. The evidence was that he –
"(a)obtained copies of the construction contracts and specifications;
(b)contacted the General Manager of the construction company on two occasions and was advised the construction was 'a quality building, purpose built to provide a state of the art veterinary clinic.
(c)checked the construction costs against the accepted building cost guide 'Rawlinsons'.
(d)expressly warned in the subject report that the agreed construction contract price fell at the upper limit of available indicators; and
(e)cross checked the summation valuation against the alternative use method which resulted in a higher value for the subject property and then 'conservatively' used the lower valuation as disclosed by the summation method."
As to (b) above the Board did refer to that evidence and said:
"The Board also finds that having discussions with the Managing Director of the builder and developer about the costs in the building contract he has signed with his client is not the best way of checking the accuracy of the building costs. The Managing Director has an obvious conflict of interest and is going to tell the valuer it is an 'arms length' contract whether it is or not."
Clearly the Board were not accepting that that was an appropriate way to verify the construction cost. As to the other steps on my view they do not take the matter any further than was in fact stated in the valuation. On the Board's view that was not sufficient insofar as verifying the construction costs.
The Board also adverted to the appellant's failure to include some qualification in the report putting the recipient on notice that the construction costs had not been fully investigated. It is pertinent that in the first valuation of the development addressed to Home Building Society dated 21 August 1996 there was such a qualification. That report referred to a construction price of $1,720,000 equating to a rate of $l,880 per square metre over the gross building area. Reference was also made to the recognised building cost texts and also quoted the range for medical centres or single level district hospitals. The report went on:
"The agreed contract price of $1,720,000 appears therefore to fall at the upper limit of the available indicators and in this instance we recommend that you verify the construction cost by referring the construction contract to a suitably qualified expert." (Emphasis added)
The Board adverted to that reference in its Reasons and said:
"The Board further finds that what may have been stated in earlier reports by the (appellant) has no relevance whatsoever to the subject report. It is a well established principle of valuation that a report must stand on its own feet. If references to other documents are required then those references should be clear and unequivocal."
In the course of his evidence the appellant acknowledged that the actual cost of the building component was significantly less than the $1,950 referred to. For example, developer's profit and risk margin and other expenses were included in that sum. Reading from his statement of evidence the appellant went on to say:
"Given the construction costs variables I have referred to were difficult to verify, I consider it appropriate in the first report to include a warning that the construction costs may need to be suitably verified."
If it was so important then why, only five months later, was it any less important so as not to include any qualification? The response to that would seem to be that the client Mr Donovan of the Bank of South Australia "…was only interested in an alternative use scenario". Given that in the subject valuation the construction cost was adopted for the primary valuation (summation method) and the alternative use valuation was presented as a check valuation it provides no explanation as to why the qualification was any less important for the purpose of the subject valuation.
Conversely, if Mr Donovan was only interested in an alternative use valuation then why was supporting rental and capitalisation rates not included in the second valuation? Mr Vincent's rationale was that it wasn't needed because the alternative use valuation was only a check valuation. The appellant cannot have it both ways. The explanations do not stand scrutiny. It is quite understandable that the Board would reject Mr Vincent's suggestion that no qualification was necessary.
There was other evidence as to construction costs. Mr Rogerson gave anecdotal evidence that a veterinary clinic owned by the same veterinary surgeon as the property the subject of the valuation had been reported, informally as having a construction cost of $1,400 per square metre. Such anecdotal evidence is of no use and no weight should be attached to it in proceedings such as these.
Mr Volk, in cross‑examination, went on to say that if the entirety of the subject property was to be used for a veterinary clinic then the $1,450 per square metre may have been applied to the entirety of the property. That would suggest that the rest of the premises would be fitted out in similar manner to the 350m2. Given the large open area on the building plans it would not in my respectful view be appropriate to apply that figure to the entirety of the property in any event. That was the Board's view too as expressed in the calculations made by it.
As has earlier been stated it is not for the Court on hearing the appeal to make such decision that it thinks would have been appropriate if it had been the primary decision maker. Nevertheless, as will be apparent from the foregoing broad review I am satisfied that the Board's findings were open to it on the evidence.
In coming to its view the Board had the benefit of seeing and hearing the witnesses and observing their demeanour so as to form a view as to the credibility of the evidence of each witness. The Board also has the benefit of its own expertise. It is not the role of the Court to reassess the expert evidence. Although reference has not been made to all material inconsistent with its findings I am satisfied that upon analysis such failure to do so as there may be is not something which would warrant a different finding. The basis upon which the Board came to its conclusion on this issue is in my view clearly stated with an adequate reasoning process such that the aggrieved party, namely the appellant, can well understand why it is that the Board came to that conclusion.
Having regard to the several issues raised I am not satisfied that any error on the part of the Board has been demonstrated.
Summation method of valuation
The essence of the appellant's appeal grounds 3(i) and 7 is that the Board treated the AIVLE Guidance Note – "Provisional Mortgage Valuation Practice Standard for the Valuation of Commercial, Industrial and Retail Property for Mortgage Purposes" as an obligatory practice standard and not merely as a guide.
The appellant contends that in arriving at its findings the Board determined the status of the Guidance Note was as a "…mandatory regime" in respect of use of the "summation method" of valuation.
The document referred to is described on its cover page as "Guidance Note". Guidance, simply understood means the action of guiding, leadership, direction. The Board in its Reasons has extracted salient parts of the guidance note and then goes on to say:
"This is the practice standard that was applicable at the time and it is clear from the standard that the summation methods primarily used is as a check method and it is predominantly used for residential rather than commercial properties."
Whilst the Guidance Note says that "valuations for mortgage purposes should be based on available market evidence…" that is not a mandatory requirement and cannot be understood to be saying that is the only method which might be adopted as the primary method. That was recognised by the Board in its Reasons when it went on to say:
"If a valuer however chooses the summation method [as the primary method] then the valuer must absolutely satisfy himself that the building costs involved are realistic."
There is no suggestion in that statement that the Board treated the Guidance Note as mandatory or obligatory. Quite the contrary is indicated by its reference to a valuer choosing the summation method as the primary method rather than as a check method. Nor is it saying that it was an inappropriate method to adopt because the valuation was dealing with a commercial property rather than residential.
The appellant's approach in the circumstances which faced him in the preparation of the valuation determined that the summation method was the most appropriate methodology for his valuation and he used as a check an alternative use valuation. Without question evidence before the Board supported the approach used by the appellant. The standard text Rost & Collins "Land Valuation and Compensation in Australia" supported the use of the "summation method" in the circumstances facing the appellant. Furthermore, Mr Vincent gave evidence that the summation method "is acceptable as the primary method of valuation and is commonly used" in commercial valuation circumstances whilst Mr Rogerson's only criticism of the use of the summation method was that he would have preferred to rely more heavily on the capitalisation method.
Thus, I do not accept the appellant's contention that the Board elevated the Guidance Note to the status of being obligatory. There is nothing in the decision which indicates that the Board considered the Guidance Note to be anything other than a guide.
A summation method of valuation is a calculation based upon the derived vacant land value to which is added the added value of the improvements to arrive at its total value (per Mr Vincent's report). Critical to that, as the Board identified, is that the valuer should properly analyse sales evidence of nearby and comparable vacant lots and the constructions costs of the proposed improvements. The Board found that the valuation of the land component, whilst on the high side, just fell within allowable parameters. The shortcoming of the appellant's valuation, however, was that he failed to satisfy himself that the building costs involved were realistic. That is, it was based on the largely unsubstantiated premise that the proposed improvements were of a value of $1,786,000.
As was recognised by Mr Rogerson, Mr Volk and Mr Vincent cost does not always equal value. That is why it was necessary that the appellant should have more critically analysed the proposed building cost or otherwise stated a qualification insofar as the costs were concerned in the report. The Board found that the appellant fell short in both respects.
Whilst it cannot be said that the appellant was negligent in utilising the summation method as the primary method to do the valuation the fact is that it was wholly flawed by reason of his having accepted the lump sum contract without having critically analysed the costing and without having made any qualification on that in his report.
The grounds of appeal which are referable to this issue are rejected.
Alternative use valuation
Having used the summation method as the primary method of valuation the appellant supported that by using the alternative use valuation as a check method.
This method involves the capitalisation of fair rental returns and, as the appellant noted in the valuation, this method is normally used as the primary method of approaching the valuation of a property such as proposed. However, as he went on to explain the property represented a level of structural improvements for a veterinary hospital not before seen in Perth and for which he was not aware of any specifically comparable sales or rental evidence. His report then goes on to state:
"When considering alternative uses, it is considered that a minimum fair market rental rate of $225 to $275 per square metre should be readily achieved given the location of the development.
For example, excellent evidence of office rentals in locations adjacent to Karrinyup and Booragoon Shopping Centres at rates as high as $350 per square metre support this.
This factor is particularly important given that the property is located within a designated regional shopping area."
His alternative use valuation went on to adopt a rental rate of $250 per m2 and a capitalisation of "say 9%".
The concern expressed by the Board in its Reasons was that there was nothing in the valuation which supported a rental of $250 per m2 or the adoption of a capitalisation rate of nine per cent. The Board went on to say that it:
"…believes that the two figures $250 per m2 and capitalisation rate of 9% were chosen for the result they achieved rather than being the properly researched figures that should be used. The Board finds that the alternative use part of the valuation was not professionally prepared and no credence can be given to it and it therefore follows that it was negligently prepared as not one shred of evidence was given to support the figures adopted."
In saying that there was not one shred of evidence in the valuation then the statement the Board is partially incorrect. The only shred is reference to office rentals adjacent to Karrinyup and Booragoon Shopping Centres. However, there is no detail in the valuation comparing location, size of premises, etc. Nor is it comparing like with like.
The AIVLE Guidance Note does state that all valuation reports should address, inter alia, details of rentals used as market evidence in support of the valuation assessment with comments as to the applicability and justification of any capitalisation rate adopted by market evidence. Again it is not mandatory but indicates what is appropriate.
The relevant particulars of allegations pertaining to this issue as specified in the Re‑amended Notice of Enquiry were as follows:
"(iii)The respondent used a capitalisation rate which was not adequately supported by any relevant evidence with which to make his valuation.
. . .
(v)The respondent did not give sufficient details of the rental evidence relied upon for the purposes of conducting a valuation of the property."
In his submissions the appellant points to uncontroverted evidence before the Board as to his own vast experience as a commercial valuer for many years, his unique experience in valuing properties in the Warwick Commercial Park Centre, that he would have had recourse to a comprehensive data base and to the Valuer General's Office's data and lithographs obtained from that office and that in his working files he was able to identify rental evidence which would have assisted in his determination of the rental of the subject property. Further, he points to the evidence of Mr Carey and Mr Volk, both valuers, who supported yields of between 9.5 and 9.10 per cent and in the case of Mr Carey a rental in or near $250 per square metre.
All of that may well be the case and a lot of evidence was put before the Board but it misses the point. The fact is that information was not detailed in the report. It was effectively a bald assertion without any or little supporting detail. It is in that respect that the Board found this part of the valuation not to have been professionally prepared.
Although not crucial to the report in his view, Mr Vincent in his written report both in respect to the capitalisation rate and the adopted rental noted that the report did not provide the reader with any specific details but that it would have been preferable in the report for the appellant to have given more informative comment or better details to give the reader, ie the client to whom the valuation was directed, a better understanding of the basis upon which these figures were adopted.
The same concern was echoed by Mr Rogerson in cross‑examination when he said:
"On the material that has been provided no reader, whether expert valuer or a client who is using it, would be able to draw any comparison or conclusion from the answers that are given because there is no reasoning or basis in fact other than for one or two paragraphs which generalise about rentals that are used and generalise about capitalisation rates."
And that was the Board's concern, namely that there was nothing in the valuation itself to indicate the basis on which the assumptions had been made.
Insofar as the reference to the Booragoon and Karrinyup Shopping Centres the Board expressed the view that neither of those Centres was able to be properly compared with the Warwick Centre in 1997. Again, without relevant detail in the valuation this bald assertion would not be meaningful to the client. It did not require the Board to elaborate when one comes to understand the point made by the Board. Presumably also the Board here was relying on its own experience and knowledge as to those Centres when compared to the Warwick Centre in 1997.
Similarly, the Board expressed the view that it "…believes the two figures…were chosen for the result they achieved…". No explanation is given as to the basis upon which the Board formed that belief. However, given the shortcomings of the appellant's valuation it is not difficult to draw that conclusion.
In the circumstances it was open to the Board to find as it did that this part of the valuation was not professionally prepared and was thereby negligently prepared. The shortcoming of the report in this respect was more than simply having failed to carry out the valuation to the best of his knowledge and ability.
I simply reiterate the principles insofar as dealing with an appeal of this nature as stated in Devries v Australian National Railways Commission (supra).
In all the circumstances the appellant has not made out its grounds of appeal on this issue.
Outcome of the appeal
1.Grounds 1 and 2 – procedural fairness – the appeal will be allowed.
2.Grounds 3(a), (h) and (j) – the standard of proof – appeal dismissed.
3.Grounds 3(b), (c) and 5 – reliance on copies of the valuation by the Board – appeal dismissed.
4.Grounds 3(d), (e), (f), 4 and 6 – valuation of proposed improvements – appeal dismissed and the finding of the Board of negligence stands.
5.Grounds 3(i) and 7 – summation method of valuation – appeal dismissed.
6.Grounds 3(g) and 8 – alternative use valuation – appeal dismissed – Board's decision as to negligence upheld.
Consequences of the outcome
The finding of the Board that the appellant has been guilty of incompetence (1(a) and (b) of its Order made 2 July 2003) will be set aside.
The finding that the appellant has been guilty of negligence will be upheld (specifically that is in the context of par 2(ii)(iii)(v) and (vi) of the Re‑amended Notice of Inquiry.
The finding that the appellant breached rule 3(a) of the Land Valuers Code of Conduct will be upheld.
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