Land and Environment Court New South Wales Medium Neutral Citation: Peter Sleiman Property Investments Pty Ltd and Anor v Valuer-General of New South Wales [2020] NSWLEC 123 Hearing dates: 29 July 2020 Date of orders: 29 July 2020 Decision date: 29 July 2020 Jurisdiction: Class 3 Before: Robson J Decision: Evidence subject to objection allowed Catchwords: EVIDENCE — Expert opinion — Disclosure of reasoning process — Where rules of evidence do not apply — Matter of weight Legislation Cited: State Environmental Planning Policy No 55 —Remediation of Land (NSW) Cases Cited: Hancock v East Coast Timber Products Pty Ltd (2011) 80 NSWLR 43; [2011] NSWCA 11 Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 UTSG Pty Ltd v Sydney Metro [2018] NSWLEC 128 Category: Procedural and other rulings Parties: Peter Sleiman Property Investments Pty Ltd (First Applicant) Nabil Sleiman Property Investments Pty Ltd (Second Applicant) Valuer-General of New South Wales (Respondent) Representation: Counsel: R Lancaster SC with M Seymour (First and Second Applicants) R White (Respondent) Solicitors: CMM Quay Legal Group (First and Second Applicants) Crown Solicitor's Office of New South Wales (Respondent) File Number(s): 2018/00366200; 2018/00366212 Publication restriction: Nil EX TEMPORE Judgment (REVISED) 1. HIS HONOUR: Objection has been taken to various paragraphs in the expert valuation report of Grant Jackson dated 21 April 2020 ('Jackson Report'), filed on behalf of the applicants. Mr R White, counsel for the respondent, has provided a table detailing the objections taken. 2. Having heard detailed submissions yesterday and today, the remaining objections to material in Mr Jackson's report comprise nine discrete, but basically related, objections to material commencing on p 26 of the Jackson Report (p 373 of the Court Book), all of which concern the section of the report where Mr Jackson details his approach to determining land value using a hypothetical development methodology. 3. Although I intend to deal with them together, for completeness I will record the nine objections – each of which concerns discrete inputs into the valuation methodology adopted and is objected to on the basis of a suggested dearth of reasoning. 1. First, in relation to "Gross Realisations 2016" and, in particular, the "Rate Adopted" input figure at p 26 of the Jackson Report (p 373 of the Court Book). 2. Second, in relation to "Gross Realisations 2017" and, in particular, the "Rate Adopted" input figure at p 27 of the Jackson Report (p 374 of the Court Book). 3. Third, six further input figures into the "Hypothetical Development Approach" being "selling costs"; "profit and risk factor"; "interest" rate; "purchase costs"; "holding costs"; and "GST input credits", which are each allocated either a specific dollar figure or a percentage at pp 28-31 of the Jackson Report (pp 375-378 of the Court Book). 4. Fourth, the table of calculations at pp 32-33 of the Jackson Report which considers the development proposal prepared by David Haskew, the respondent's planning expert, has a "rate adopted" $/m² figure (pp 379-380 of the Court Book). 5. Fifth, the "Hypothetical Development Approach" detailed on p 33 of the Jackson Report, again including inputs of "selling costs"; "profit and risk factor"; "interest" rate; "purchase costs"; "holding costs"; and "GST input credits" (p 380 of the Court Book). 6. Sixth, in the table titled "Sales Evidence" at par (86) of the Jackson Report there is a percentage figure under the heading "Yield" (p 381 of the Court Book). 7. Seventh, the material under the heading "Service Station Value" for 2016 and 2017 at p 34 of the Jackson Report includes a percentage "capitalisation rate" (p 381 of the Court Book). 8. Eighth, the "Hypothetical Development Approach" tables for 2016 and 2017 at p 35 of the Jackson Report include inputs of "selling costs"; "profit and risk factor", "interest" rate, "purchase costs"; "holding costs"; and "GST input credits" (p 382 of the Court Book). 9. Ninth, the whole of Annexure "5" of the Jackson Report which comprises a table containing "Comparison and Adjustment of Sales Evidence" relied upon (pp 401-402 of the Court Book). 1. In relation to each of the above matters, the respondent submits that the facts and reasoning processes applied to determine each discrete figure (or input) are not set out or explained in the Jackson Report, and further, the reason for the selection of each particular input in each case has not been set out or explained. 2. Although the rules of evidence do not strictly apply to proceedings in Class 3 of the Court's jurisdiction, it is obvious that matters of fairness and justice must still be considered. I accept that the minds of valuers may differ and that valuers may, legitimately, ascribe different weight to different input factors in adopted methodologies. The applicants' response, as carefully articulated by Mr M Seymour of counsel, who appears with Mr R Lancaster of senior counsel, is that the reasoning processes and the facts relied upon to determine each of the inputs have been sufficiently identified. 3. In accepting that valuation is not an exact science, I find that each of the matters objected to should be allowed and, ultimately, will be a matter of weight. In making this overall finding in relation to each of the nine objections (including the comparative tables being at Appendix "5" of the Jackson Report), I have taken the following matters into account. 4. First, while it is clear that the precise manner of selection and determination of certain inputs has not been articulated, it is apparent that the material objected to is based upon the background material otherwise detailed in the report including the consideration of various identified sales of residential apartments set out in the tables subjoined to pars (79) and (80) of the Jackson Report (pp 369-372 of the Court Book). 5. Second, the different valuation methodologies adopted by each of the valuers, Derek Hill, the respondent's valuation expert, (who primarily relies upon a comparative sales approach) and Mr Jackson (who primarily relies upon a hypothetical development methodology), are both well-known and understood. My present view is that the choice of valuation methodology is likely to be a primary issue in these proceedings, with the respondent's position, as I presently understand it, being that the hypothetical development methodology (relied upon by the applicant through Mr Jackson) to determine land value is fraught with difficulties in the current circumstances because it requires a multiplicity of inputs, whereas Mr Hill's methodology requires fewer inputs and variables which the respondent submits makes that methodology more appropriate. 6. Third, each valuer has prepared a detailed primary report and participated in the preparation of a 45-page joint report in which each has responded to the other's primary approach. Although I accept that Mr Hill has not separately dealt with the inputs of Mr Jackson's methodology and there was some reference by Mr Seymour to the fact that he may have chosen not to do so, I note that he does make criticism of Mr Jackson's use of the hypothetical development methodology. 7. Fourth, the veracity or appropriateness of the various inputs in the Jackson Report may be tested in cross-examination and, further, Mr Hill may seek to address any concerns he may have in relation to the articulated basis of Mr Jackson's evidence. I note that Mr Seymour also submits that the fact that Mr Hill has not raised any such concerns in the joint report is a matter the Court will need to take into account if an application is made to have Mr Hill expand these concerns. 8. Fifth, I note that the experts are both experienced valuers and collectively have 60 years of experience in the field. 9. I note that the much considered decision in Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 ('Makita') provided that an expert's primary duty is satisfied if the expert identifies the facts and the reasoning process which he or she asserts justifies their opinion and that this is sufficient for a tribunal of fact to evaluate the opinions expressed. I also note that Beazley JA (as she then was) considered the applicability of Makita in proceedings such as the present where the rules of evidence do not apply in Hancock v East Coast Timber Products Pty Ltd (2011) 80 NSWLR 43; [2011] NSWCA 11 at [79]-[83] and considered that the question of acceptability of expert evidence was primarily one of weight and not admissibility. The applicable principles have been more recently considered by Pepper J in UTSG Pty Ltd v Sydney Metro (No 3) [2019] NSWLEC 49 at [29]-[37]. 10. While I accept that the Court may have been better assisted if there had been more background to the discrete inputs now the subject of objection, I do not consider that the absence of reasoning in relation to certain identified inputs into a well-known valuation methodology adopted by Mr Jackson requires the rejection of those particular inputs, especially where there is opportunity for cross-examination and possibly further evidence in response. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 September 2020