Land and Environment Court New South Wales Medium Neutral Citation: Kogarah Town Centre Pty Limited v Valuer General [2014] NSWLEC 1085 Hearing dates: 10 - 13 March, 30 April and 1 & 2 May 2014 Decision date: 13 May 2014 Jurisdiction: Class 3 Before: Moore SC and Brown C Decision: See (136) to (141) Catchwords: VALUATION: methodology appropriate to be adopted; adjustment values Legislation Cited: Valuation of Land Act 1916 State Environmental Planning Policy (Infrastructure) 2007 Rockdale Local Environmental Plan 2000 Kogarah Local Environmental Plan 1998 Cases Cited: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 112 CLR 111; (2003) 195 ALR 236 and (2003) 77 ALJR 727 Tetzner v Colonial Sugar Refining Co. Ltd [1958] AC 50 Category: Principal judgment Parties: Kogarah Town Centre Pty Limited (Applicant) Valuer General (Respondent) Representation: Mr R White, barrister (Applicant) Mr T Hale SC Ms M Carpenter, barrister (Respondent) Gadens Lawyers (Applicant) Crown Solicitor's Office (Respondent) File Number(s): 31133 of 2012 31134 of 2012 31135 of 2012 31136 of 2012 31137 of 2012 Judgment Introduction 1COMMISSIONERS: Kogarah Town Centre is a shopping centre located immediately adjacent to the Kogarah railway station. The land upon which the Kogarah Town Centre is erected comprises the whole of Lots 1 and 2, DP558531 (the valuation site). The valuation site is located between Railway Parade and Station Street at Kogarah. Lot 1 is adjacent to the Kogarah railway station with a frontage to Railway Parade and has an area of 2,958 m². Lot 2 is air space located over the railway station and the railway line. Whilst Lot 2 has an unlimited height, a defined horizontal plane sets its lowest level. Lot 2 has an area of 4,390 m². 2The valuation site is bisected by the boundary between the Kogarah Local Government Area and the Rockdale Local Government Area as the boundary between the two councils runs along the railway line. The boundary between the two councils does not coincide with the boundary between Lots 1 and 2. It is necessary, therefore, for rating and other statutory valuation based purposes, to apportion the land value on the basis of the area of the valuation site in each of the two Local Government Areas. This is achieved by designation of a property identification description (PID) to each of those areas. For these purposes, PID 1502216 identifies the portion of the valuation site that is within the Kogarah Local Government Area. This PID comprises the whole of Lot 1 and part of Lot 2. It has an area of 4,421 m². The balance of Lot 2 has an area of 2,927 m² and has been given the PID of 1536207. This portion of the valuation site lies within the Rockdale Local Government Area. 3A recently renovated shopping centre (constructed in the mid to late 1970s) is located on the valuation site. It comprises a part one and part two level retail centre with rooftop car parking accessed from the north and a loading dock facility also accessed from the north. The upper retail level is linked to the main concourse of Kogarah railway station. Pedestrian access to the centre is not available, directly, from the western (Rockdale) Station Street side of the valuation site. Access from the western side is, however, available via the station concourse. Pedestrian access, on the Kogarah side, is presently available in two locations in addition to being available through the railway concourse. First, pedestrian access is available to the lower retail level and thence to the upper retail level from the small pedestrian plaza adjacent to the entrance to Kogarah station on its eastern side. A second pedestrian entrance, to the upper retail level, is available adjacent to what is referred to in the evidence as the bus interchange on Railway Parade, a little to the north of the intersection of Railway Parade and Regent and Montgomery Streets (this being the major intersection in the Kogarah commercial centre). 4These proceedings are appeals against the statutory valuations of the valuation site that have been made for the base dates of 1 July 2007, 2008, 2009, 2010 and 2011. The appeals are provided for by the Valuation of Land Act 1916 (the Valuation Act). For appeals, the Valuation Act provides that the applicant bears the onus of proving that the relevant statutory valuation is not accurate. On such appeals, the Court has a wide range of powers and is not merely confined to upholding the appeal and substituting the applicant's proposed value or confirming the statutory value imposed by the Valuer General. The Court, acting as judicial valuer, has the power to substitute, for proper reasons, some alternative valuation that differs from those proposed by either the applicant or the Valuer General. Zoning and planning controls 5At each of the base dates, the element of the valuation site in the Kogarah Local Government Area was zoned Business 3(b)(Town Centre) under the Kogarah Local Environmental Plan 1998 (the Kogarah LEP) and, for the area in Rockdale, was zoned Special Uses 5 - Railway under the Rockdale Local Environmental Plan 2000 (the Rockdale LEP). 6Clause 50 of the Rockdale LEP, in effect, permits the portion of the valuation site within the Rockdale Local Government Area to be developed in a fashion compatible with the land in the Kogarah Local Government Area. State Environmental Planning Policy (Infrastructure) 2007 also applies to facilitate use of Lot 2 so that there is no confining of permitted uses of Lot 2 to railway infrastructure. 7The land within the Kogarah Local Government Area was, at all the relevant base dates, governed by the Kogarah LEP (although now repealed but a repeal not relevant in these proceedings). 8As earlier noted, under the Kogarah LEP, Lot 1 and the Kogarah portion of Lot 2 (the land comprising PID1502216) are zoned 3(b) Business (Town Centre). Retail shops, commercial uses and residential development are all permitted development in this zone. On the Kogarah side of the municipal boundary, the valuation site is surrounded by extensive lands that are similarly zoned. 9Kogarah Development Control Plan No 5 (the Development Control Plan) is the relevant Development Control Plan for the Kogarah lands for each of the base dates involved in these proceedings. In this Development Control Plan, the valuation site was identified as being within the area noted as Area E - Kogarah railway station - Deferred pending future study. Although there was an extensive consultation process with Rockdale Council seeking to develop controls for the land within Area E, no controls for the area have been adopted. As a consequence, there are no specific development standards in the Development Control Plan for the Kogarah portion of the valuation site and, as a consequence of the consistency of development principles in the Rockdale LEP, that absence of development standards extends to the whole of the valuation site. 10The Development Control Plan sets out Kogarah Council's desired future characteristics for the Kogarah Town Centre. 11Relevant to the subsequent evidence given by the town planning experts (to which more attention is given later in this decision), the Development Control Plan notes that the St George Bank and St George District Hospital buildings are the highest buildings in the area and should remain so as they create the twin peak form of the Town Centre. The Development Control Plan notes that the Kogarah Town Centre has a character and role distinct from its neighbouring town centres, Rockdale and Hurstville. Kogarah is identified as having village characteristics and is to have a scale reflective of this character. It is clear that the Development Control Plan envisages that Rockdale and Hurstville are to be more major centres with Kogarah having a more subordinate role. The Valuation Act 12The Valuation Act provides, in s 6A(1) the basis upon which land is to be valued. The provision is in the following terms: (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. 13The Valuation Act also makes provision for how a valuation site that straddles the boundaries of two local government areas is to be valued. This is set out in s 28 of the Valuation Act and is in the following terms: 28 Land or stratum in two or more districts (1) If different parts of any land or stratum in respect of which one valuation would otherwise be made under this Act are situated in different districts, the value of the land or stratum is to be apportioned so as to show the value of each part. (2) The value of each part is to bear the same proportion to the value of the whole as the area of each part bears to the area of the whole. 14As a consequence, as earlier noted, as the allotment boundaries do not align with the local government area boundaries, the result of the valuation process must apportion the values of the aggregated valuation site between the two local government areas with each portion being given a unique PID for valuation purposes. Those PIDs were set out earlier. The scope of the valuation contest 15The two expert valuers who have given evidence in the proceedings, Mr Duguid for the applicant and Mr Watt for the Valuer General, have agreed that, when a statutory valuation is determined for the base date 1 July 2009, the valuations for the other four base dates can be calculated, automatically, by utilisation of a process that has been set out in their evidence. As a consequence, the detailed valuation evidence analysed later in this decision is confined to determining that 1 July 2009 base date statutory valuation. 16Unsurprisingly, the applicant contends that for the 2009 base date (and all four other base dates) the statutory valuation is too high. On the other hand, the values derived by Mr Watt through his expert analysis leads him to the conclusion that the statutory valuations for each of the relevant base dates is lower than the value that he considers should appropriately be attributed to the valuation site. Despite this, however, the Valuer General does not contend that the higher valuations should be substituted for the statutory valuations, merely that the statutory valuations should be confirmed. Matters in dispute in the proceedings 17There were both planning and valuation matters in dispute. 18Mr Martin gave planning evidence for the applicant and Mr Haskew gave it for the Valuer General. They were unable to agree on the highest and best use for the site and whether, for reasons that are discussed in more detail later, Lot 1 was appropriate to be developed separately and before Lot 2 and, if so, in what form. 19The differences between the valuers were in two distinct strands. These were: * What method of valuation (the comparable sales method or the apportionment method) was more appropriate to be applied to the exercise required to derive the 2009 base date value for the valuation site? and * If the comparable sales method were to be utilised, what were the appropriate adjustments to be made to the relevant comparable sales? 20However, it should be noted that, for the comparable sales method, only some of the proposed adjustments to the sales were in contest and the majority of the necessary adjustments were agreed between the valuers. 21Although there was initially a difference between the valuers as to what might constitute the relevant appropriate comparable sales at the time of the preparation of their initial expert reports (some considerable period prior to the hearings commencing), Mr Duguid subsequently accepted that the appropriate comparable sales were those that were in what might be regarded, generally, as the Kogarah precinct rather than on the more far ranging basis he had initially selected for this purpose. The planning issues 22The starting position of the planners in their initial consideration of the highest and best use for the site, from planning sense, derived from the unadopted Appendix E in the Development Control Plan. Appendix E of the Development Control Plan was intended to house the specific development standards proposed to apply to Area E, the Kogarah railway station, in the Development Control Plan. 23However, despite a number of attempts between the Councils based on several design concepts commissioned to reflect what might be an appropriate future form of development within the Area E, no agreed position resulted. As a consequence, Appendix E of the Development Control Plan is blank and, as a further consequence, no development standards apply to the site as earlier noted. 24To the extent relevant, general propositions that might flow from the Development Control Plan can inform consideration as to what might be an appropriate hypothetical development for the site but there are no specific numerical controls to be considered. Therefore, the hypothetical design for a highest and best use for the site must be developed from first principles for the site having regard to aspirations such as that to be derived from seeking to have the St George Bank and St George Hospital buildings set an upper AHD level beyond which it would not be appropriate for any development on this (or any other) site in the Kogarah precinct to rise. 25The first planning issue requiring consideration was whether or not it would be appropriate to contemplate a hypothetical development on Lot 1 in isolation with the development of Lot 2 being postponed to some future time. This issue arose as a consequence of the unchallenged quantity surveying evidence that the cost of erecting and supporting an appropriate slab as the base for development of Lot 2 in the airspace above the railway line was, for the relevant base dates, so prohibitively costly that it would not be economic to do so. This resulted in the initial proposition advanced by Mr Duguid on behalf of the applicant that the only appropriate development that could be contemplated would be one that developed Lot 1 and Lot 2 simultaneously; the cost of development of Lot 2 was such as to prevent any rational developer from contemplation of any development over both Lots 1 and 2 at any relevant base date; and, therefore, there was no viable hypothetical development from which value could be derived at any of the relevant base dates. 26The planning experts were asked to contemplate the question of the possibility of a hypothetical development for Lot 1 in isolation if, in its design, access were to be preserved so that some interconnected future development could take place on Lot 2 when such a project were to become viable. 27It was Mr Martin's view that an integrated development across the whole of the site would need to be constructed in order to achieve the Council's strategic objectives for the Kogarah town centre. He held this position because he considered that Lots 1 and 2 together comprised the key site for the town centre and that development of both sites in tandem would deliver the broad planning outcome envisaged by the Development Control Plan. Mr Haskew did not agree. 28The consequences of developing Lot 1 in isolation, the planners agreed, would be that direct pedestrian access from a development on Lot 1 to the railway station concourse would not be available, even on in interim basis and that this would have not only an impact on a hypothetical development on Lot 1 but that direct access from Station Street on the Rockdale side of the valuation site could not be incorporated and that there would be no direct pedestrian access from the railway station concourse to the bus interchange in Railway Parade on the Kogarah side of the valuation site. 29Mr Martin expressed the view that both councils would seek to have the full suite of connections established as part of an integrated development on the valuation site. However the applicant accepted, in its written submissions, that a development on Lot 1 in isolation could be designed so as to ensure that it could accommodate future linkages if and when Lot 2 was to be developed. The applicant, however, qualified this position by submitting that doing so comes with an added planning risk. That planning risk would be taken into account by the hypothetical prospective purchaser when considering what price to pay for the site. 30We should note that, although the planners both assumed that no short term temporary access to the station concourse was possible if Lot 1 were to be developed in isolation, we doubt that a prudent developer would not seek to create some interim access. However, we have proceeded to determine this matter on the basis of the agreed position adopted by the planners, as there is no evidentiary basis upon which we could otherwise proceed. 31The planners were also asked to consider what might be the consent authority for any development proposed for Lot 1 in isolation as part of the consideration of planning risk. As we understand their position, they agreed that it was not possible to speculate as to whether the consent authority would be Kogarah Council, the relevant Joint Regional Planning Panel or the Planning Assessment Commission as the delegate of the Minister for Planning (the latter arising if some determination were made that the significance of the site required assessment and determination at that higher level). 32On reflection, we do not consider that identification of the consent authority for a potential development on Lot 1 is overly relevant as we are satisfied that Kogarah Council (or any higher consent body) would not deny development consent to Lot 1 (it being part of the key site for the Kogarah town centre) until Lot 2 could be developed if, as the applicant has agreed is the position, Lot 1 could be developed to preserve and accommodate future development on Lot 2 and the creation of future through access to the rail concourse. We have reached this conclusion because the focal location of the site is such that it would be, as a matter of basic planning principle, inappropriate to leave a readily developable element of the site vacant when development of it would not, in any fashion, prejudice development of the remainder of the site but would, in itself, provide considerable planning and economic benefits earlier than would arise if the requirement to develop the whole site was maintained. 33On the basis of a hypothetical development on Lot 1 as a first step in development of the whole of the valuation site, the planners proposed four possible development scenarios. These were given the designations of: * Martin 1; * Haskew 3; * Haskew 4; and * Haskew 4A. The valuation issues 34At the conclusion of the planning evidence, the proceedings were adjourned to permit the valuers to consider these hypothetical designs. When we continued, we heard from the valuers about what should be regarded as the highest and best economic use for the site by consideration of these four development options as a first stage of a hypothetical development (with development of Lot 2 deferred to some future time beyond any of the five base dates in the proceedings). 35The valuers agreed that the hypothetical development proposal identified by the planners as Haskew 4 was the highest and best use for a hypothetical development on Lot 1. The valuation evidence therefore proceeded on the basis of considering that hypothetical development model and discarding further consideration of the other three hypothetical developments derived from the planning evidence. 36The model that was known as Haskew 4 has a building envelope of five levels with the question of the use of the upper levels being dependent on the valuers' consideration of what uses would maximise the economic values of those levels. The valuers agreed that those five levels, from the top down, should comprise: * Residential development on level 5; * Residential development on level 4; * Commercial development on level 3; * Retail development on level 2; and * Retail development on level 1. 37The Haskew 4 hypothetical development also envisaged four levels of underground parking and the valuers agreed on how the car parking spaces would need to be allocated (96 retail, 38 commercial and 23 residential) with 157 parking spaces in total. Although nothing turns on it, the residential development was postulated to comprise 18 x two-bedroom units. 38Each of the retail levels and the commercial level would have an FSA of 1,910 m² and each of the residential levels would have an FSA of 691 m². 39At this time, it is appropriate to note that, throughout the proceedings, the lower of the two retail levels has been described as the "lower ground floor" but we should observe that, because of the topography of the site (it slopes from north to south with the lowest point being adjacent to the small pedestrian plaza at the foot of the stairs accessing the station concourse), it is not appropriate to draw the conclusion that the descriptor "lower ground floor" means that that space is entirely subterranean. This is a matter that is relevant to consideration of the competing valuation positions advanced by Mr Duguid and Mr Watt with respect to the valuation to be derived for the space on level 1 (the level described as being the "lower ground floor") if the valuation methodology known as the apportionment method (discussed in detail later) were to be preferred by us. 40As it is also relevant to this issue, we note that the valuers subsequently accepted that the retail parking spaces would be located on the parking levels immediately under level 1 and would be designed so as to be accessible to and from that retail level. 41The fundamental difference between the valuers was which of the two valuation methods advanced should be adopted and, having done so, what was the value to be derived from each of the methods. The valuers disagreed on the broad methodological question and, after considering each of the methods advanced, disagreed as to the values to be derived for the 2009 base date for each method. It is, therefore, convenient to set out the nature of those competing methodologies before turning to consider the relevant detail applicable to each of them. Valuation Method 1 description 42This methodology, preferred by Mr Watt, is a conventional comparative sales analysis. Mr Watt undertook an analysis of eight sales within the Kogarah precinct that he considered were relevant. These sales ranged in date from August 2006 to August 2011. Adjustments for market movement and other preliminary factors needed to be made to these sales prior to considering any idiosyncratic site triggered adjustments that might need to be made to them. These sales were referred to, throughout the evidentiary discussion, as Sales 1 through to 8. The addresses of these sales and the date of each sale are set out in the table below. Two of the sales are an initial sale and the subsequent resale of the same site but with differing uses (commercial for the first sale and residential for the second sale) for the proposed future development. The sales varied in size and varied with development outcome. Sale no: Address 1 6-14 Hogben Street, Kogarah 2 13a & 13b Montgomery Street, Kogarah 3 79 Princes Highway, Kogarah 4 8-12 Kensington Street, Kogarah 5 8-12 Kensington Street, Kogarah 6 89-99 Princes Highway, Kogarah 7 232-246 Railway Parade, Kogarah 8 23-26 Station Street, Kogarah 43As we have earlier noted, in the context of Mr Martin's planning assessment, Mr Martin considered that there were planning risks associated with development on the valuation site that differed from and were in addition to those that might be expected for the comparable sale sites. 44However, for each shall be comparable sales, the valuers agreed in the calculations needed to derive the adjusted sale price in dollars per square metre "FSA for parking difference" (this being the descriptor in the relevant spreadsheet) together with the adjustment for market movement to derive a time adjusted sale price of dollars per square metre FSA as at 1 July 2009 thus providing agreed commencing values for each of the comparable sales. 45As we understood the wash-up of the valuation evidence (after a sequence of adjournments to permit further conferencing between the valuation experts), the two substantial differences concerning adjustments that remained on the Method 1 approach were: * Is adjustment required to remove, notionally, that which is on the valuation site to the extent that that might have influenced the sale of the relevant comparable sale? and * Is an adjustment required for what was described as the planning risk and, if so, by what adjustment factor? 46These differences applied to the approach to be taken to adjustment of all eight of the comparable sales. 47Issues also arose between them concerning what adjustment (if any) should be made for two specific locations: * the adjustment to be made (if any) for the proximity of Sale 8 to the valuation site; and * the adjustment to be made to Sale 7, 232-246 Railway Parade, to account for its location at some more considerable distance removed from the commercial centre of Kogarah. Mr Duguid said that an uplift of 5% was the appropriate compensatory adjustment whilst Mr Watt said that 25% was the figure appropriate to be applied for this factor. Valuation Method 2 description 48This method does not rely on a general comparable sales approach as is the case with Method 1. Described by Mr Duguid as an apportionment approach, it takes each of the three separate uses in the hypothetical highest and best use development and derives a rate per square metre FSA for each of those uses which is then applied to the appropriate areas for each of those three uses to arrive at an aggregated value for the whole of the site of the hypothetical development. As we understood it, the value to be applied for each of the three uses needed to be derived from sales information specific to that use. 49Mr Watt agreed with Mr Duguid that the apportionment methodology was an appropriate methodology that could be applied in this case. However, Mr Watt disagreed, vigorously, with Mr Duguid as to whether there was sufficient or any (depending on the use being analysed) information that provided a proper foundation for using this method. 50As we have earlier noted, the expert evidence approach commenced with the preparation of individual expert reports. There was a subsequent first joint expert valuation report that was dated 25 October 2013 and filed on 28 October (Exhibit B Tab 21). 51The hearing included a site inspection on Tuesday 11 March (although the hearing in court commenced the day before). During the course of the hearing, as a consequence of the outcomes of the town planning evidence, the hearing was adjourned to permit the valuers to prepare a supplementary joint valuation report dealing with matters arising out of the town planning evidence. That joint report was dated 16 April 2014 and was filed on 17 April (it became Exhibit H). 52In that document, commencing at paragraph 70 and continuing to paragraph 76, Mr Duguid advanced a summary of his analysis using Method 2. The four calculations derived by Mr Duguid from applying this methodology were incorporated in this joint report as Annexure 6. It was Mr Watt's uncontradicted evidence that this methodology had not been discussed by Mr Duguid with him prior to 16 April and that, as it had been incorporated in the draft report by Mr Duguid without notice, Mr Watt did not have any sufficient opportunity to respond to it prior to finalisation of the second joint report. 53As a consequence, Mr Watt subsequently provided an analysis in response to Mr Duguid's Method 2 analysis but did so with the express reservation that he did not consider that there was sufficient (or any) evidentiary basis upon which Mr Duguid's figures were based for this methodology. Mr Watt's Method 2 analysis, which derived higher resultant component values for the majority of the calculation elements in this methodology, was based on him doing the best as he could with what he had to work with. He concluded that Mr Duguid's derived value was too low but that, in any event, the state of the "information" meant that there was no proper basis upon which this methodology could be adopted. Consideration of the Method 1 analysis 54Method 1 is the conventional comparable sales approach which has taken eight transactions involving vacant development sites in the Kogarah precinct and adjusted them for various factors to enable derived comparable rates per square metre FSA as at 1 July 2009 for the purposes of consideration in deriving such a rate for the valuation site after the valuation site is notionally stripped of its improvements as required by s 6A(1) of the Valuation Act. 55Despite Mr Duguid initially proposing that a wide range of geographically dispersed sites elsewhere in the greater Sydney metropolitan area should be used for such a comparative analysis, he subsequently accepted that Mr Watt's analysis based on the eight comparable sites in the Kogarah precinct was the appropriate approach. As earlier noted, the site inspection took place on the second day of the hearing and comprised an inspection of the valuation site and the eight sites in the Kogarah precinct finally relied upon for comparative purposes. 56It is appropriate, at this time, to note that, with respect to Site 1 (6-14 Hogben Street) the valuers had initially proposed differential adjustments for market movement for this site (Mr Watt proposing -10% and Mr Duguid -20%). In the witness box, Mr Watt reconsidered this and indicated that, on reflection, the adjustment for time should have been a positive one (+11.5%) rather than a negative one. After he had explained why he had reached this conclusion, Mr Duguid agreed with him and, therefore, a revised set of calculations was produced with the being no difference between the witnesses on this point for that sale. Adjustment for planning risk and delay 57We have earlier set out the reasons why there is an absence of specific development controls in the Development Control Plan for Area E. As we then noted, any assessment of development proposed for Lot 1 will be undertaken on general principles and as well as with regard to limited broader matters arising out of the Development Control Plan such as the necessity not to exceed the heights of the St George Bank and St George Hospital buildings. 58Although the site is adjacent to the railway corridor and, as a consequence there are matters arising from that that need to be taken into account, as well as being a key site requiring a consultative approach with the adjacent Rockdale Council, these factors must also be considered in the context of the key nature of the site and what we consider to be the inevitable position that, whatever the consent authority, for a notionally vacant Lot 1 site, that consent authority would have a highly positive attitude to wishing to approve an appropriate development for the site. 59We also satisfied that, if there were to be a development proposal for such a nominally vacant site, it would trigger contact with and cooperation between the councils whether Kogarah Council was the consent authority or some higher planning body had that role. It is in this context that we turn to consider the evidence given on 13 March concerning this process. That evidence, extracted from the transcript of proceedings on that day (pages 96 and 97) is in the following terms: Mr Haskew: Yes. Well, adjoining the rail corridor does create an additional layer of constraints. It introduces additional tests under the infrastructure SEP. There are acoustic dB(A) targets which need to be demonstrated, so it will necessarily involve an acoustic report. Aside from that, I don't think there's anything critically distinguishable. Mr White: Okay. Bearing in mind the site's location - so a question for Mr Martin - bearing in mind the site's location adjacent to the rail corridor, relative to other sites in the town centre not adjacent to the rail corridor, are there likely to be delays in obtaining an approval of planning consent in comparison to those other sites? Mr Martin: I think in response to that, Mr White, if I could just simply say that putting together a development application for a site not adjacent to within the town centre would be an easier task than putting together an application adjacent to Rail Corp land in that key site. I would expect that that would have an extra element of risk of the application, but it's hard to measure. But it's essentially time and the collection of vibration reports, acoustic reports, geotechnical, groundwater, all sorts of things that would go hand in hand with developing adjacent to that infrastructure that you wouldn't necessarily find on some other sites in Kogarah Town Centre. Mr Haskew: Yes, that's broadly correct, in my opinion. It's the additional layer of assessment criteria created by vibration and reports. But it needs to be recognised that developments of that nature happen all the time and we're not breaking new ground in preparing that documentation and Rail Corp is in having to undertake mental gymnastics in order to be able to assess those. They're fairly routine for development adjacent to rail corridors. Rail Corp are notoriously slow in responding to those and it can quite easily be three months before which time you will receive some information back from them and they may ask for some additional information. So there can be delays associated with that. But whether or not those are delays additional to other delays inherent in the development process is another question and the development of this complexity, given the planning controls that apply in our hypothetical scenario, there would be some delays implicit in that with referral to the design review panel for the residential component of things anyway. So I wouldn't expect that the additional layer of constraint represented by Rail Corp is going to add significant additional time. It would be in the order of months [emphasis added]. 60For the development risk for the site, Mr Duguid proposed that there should be an adjustment of -10% whilst Mr Watt did not accept that there should be any adjustment at all. 61We do not accept, given the concluding remarks of Mr Haskew, in bold above, that there would be a delay in the order of months occasioned because of the complexities of development on the site that no adjustment could be the appropriate position on this issue. However, we are not satisfied that an adjustment to -10% is warranted for this factor. 62We have reached this conclusion because, although we accept that a delay of several months might well arise for reasons idiosyncratic to the location of Lot 1, any such extension as a consequence of the site being adjacent to the railway line is, in our opinion, likely to be subsumed by the necessary delay that will arise from the absence of controls on the site and the necessity to consult with Rockdale Council on the acceptability of the outcome and the retention of the future development potential for Lot 2. 63However, all of the conventional technical issues (geotechnical, residential design, traffic and parking, for example), are ones that are not unique to this site and are ones that are conventionally required to be dealt with in any development of this nature. 64Many (if not all) of the comparable sales require consideration of the same broad suite of issues and, having regard to the different features of those sites disclosed in the course of the site inspection means that there were differing but nonetheless significant aspects of complexity in the assessment process that would necessarily have attended development applications for those sites as well. 65As a consequence, although we accept that (and we understood Mr Haskew to have accepted that) there would be some additional complexity involved in gaining a development consent for this site, it is, in our opinion a modest one and that the likely lengthy base approval time for any major development in the precinct would only be extended to a limited, proportional extent of the base approval time for such a proposed development. In our view, the more appropriate adjustment for this risk would be one of -2.5% to reflect this. The proposed adjustment to comparable sales to disregard improvements on the site 66The second of the general adjustment factors that were discussed by the valuers and where there remains a difference of opinion between them is the proposal by Mr Duguid that there should be an adjustment made to each of the comparable sales on the broad comparative methodology discussed as Method 1 that would notionally remove from any of the comparable sale such value as should be ascribed to the present existence of the facilities located within the Kogarah Town Centre development. Mr Duguid's proposition that such an adjustment should be made is founded on what he considers to be an appropriate reading of the terms of s 6A(1) of the Valuation Act. This provision is here repeated and is in the following terms: (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. 67Mr Duguid has assumed that, for the purposes of all valuation analyses, including consideration of what adjustments should be made to comparable sales considered in these proceedings (all of which, as previously observed, are broadly within what might be regarded as the Kogarah precinct), all existing structures on the valuation site should be treated as though they were removed. 68The primary reason why the position advanced by Mr Duguid ought not be adopted is to be found in the language of s 6A(1) itself. 69It is trite to say that the language of the provision is to be given its ordinary, natural meaning (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355) unless there is some intrinsic reason or extraneous guidance that makes it imperative to do so. 70First, for valuing the valuation site, we are obliged to assume that the improvements on it do not exist. This is the well-known and unexceptional consequence of s 6A(1). However, this specific prescription applies to the process of ascertaining the value of a site to which the section is directed. That is the sole purpose for which the improvements are mandated to being disregarded by the statute. 71When we turn to consider those sites that are to be analysed for comparative purposes, had any of them had improvements on them at time of the sale, those improvements would be required to be disregarded for the purpose of analysing such a sale. This also is the conventionally adopted position and is an element of the valuation process endorsed by the High Court in Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 112 CLR 111; (2003) 195 ALR 236 and (2003) 77 ALJR 727. Doing so strips any improved comparable sale site to render it comparable with any notionally stripped improved site that is subject to a s 6A(1) analysis process. 72Just as s 6A(1), in itself, does not mandate the disregarding of improvements on other sites in the vicinity (in this instance, the extent of the comparative proximity to Kogarah railway station is an agreed to be [and is self-evidently] a relevant adjustment factor in the comparative analysis process), so it must be that any improvements on the s 6A(1) analysis site that influence any genuine arms-length sale of a vacant site prayed in aid for a comparable sales analysis process must be taken into account in that analytic process. 73This analysis is consistent with the three-step approach endorsed by the High Court in Maurici. 74Mr White has, during the course of his submissions, advanced reasons to us that he says establish the correctness of Mr Duguid's approach. In anticipation of matters foreshadowed by Mr Hale, he addressed the decision of the Privy Council in Tetzner v Colonial Sugar Refining Co. Ltd [1958] AC 50. 75Mr Hale, for the Valuer General, on the other hand has submitted that, based on Tetzner, such an approach is impermissible. 76Although we do not consider that, strictly speaking, we are bound by this decision of their Lordships as the case was an appeal from the Supreme Court of Fiji, we consider that the conclusions appropriate to be drawn from it do not support the approach adopted by Mr Duguid - on the contrary we consider this approach is antithetical to the approach in Tetzner. 77It is, necessary, therefore, to set out briefly, the facts and a relevant lengthy extract from the decision in Tetzner before turning to an analysis of the submissions about the decision of their Lordships concerning the valuation issues there in question. 78The facts and circumstances in Tetzner are conveniently summarised in the following extracts from the headnotes of the report of the decision. The extracts are in the following terms: ..........the appeal arose out of a valuation for rating purposes of certain land belonging to the respondent company within the town of Lautoka, in the Colony of Fiji. ...................... The appeal, which was originally confined to mere matters of area and quantum of valuation, was amended to include what was the substantial question in the present appeal, whether the appellant had failed to assess the unimproved value of the land in accordance with correct legal principles inasmuch as he had, it was said, wrongly taken into account factors which should in law be disregarded in assessing such unimproved value. .............................. The company came to Lautoka in 1903 and set up a sugar cane crushing mill. The total area of the company's estate amounted to some 2,200 acres, but until 1952 none of that estate was within the town of Lautoka. In that year the boundaries of the town were extended to take in, inter alia, 650 acres of the company's land. The other material facts are as follows:- (A) The respondent's land comprised some 650 acres in the town of Lautoka. (B) The respondent had erected on this land a large sugar mill with its subsidiary installations. It had made roads on the land. It had constructed a wharf adjoining its land. (C) Lautoka was a prosperous sugar town where land values were high. (D) Lautoka had only one sugar mill which was that erected on the respondent's land. (E) Lautoka's prosperity depended to a large degree on the existence of this sugar mill. (F) The sugar mill had been a major factor in creating, and was a major factor in maintaining, the values of land in Lautoka. (G) If the sugar mill were closed down the present market values of land in Lautoka would drop very considerably. 79We consider it appropriate to set out the whole of the relevant portion of the Tetzner decision as Mr White and Mr Hale each relied upon elements of it (with some overlapping of elements). The extract (comprising most of Lord Keith's speech) is as follows: In their Lordships' view this argument places upon section 100 of the Ordinance a meaning which it cannot, on a reasonable construction, be taken to bear. The section draws a clear distinction between the land and the improvements on or appertaining to the land. And the improvements have to be made or acquired by the owner or his predecessor in title. The improvements pointed to, are, in their Lordships' opinion, clearly physical improvements of one kind or another and not an improvement, or increase, in the value of the bare land. It is these physical improvements and any value directly attributable to and inhering in them that have to be excluded from valuation. Further, it is an over-simplification to say that the values of the surrounding lands have been increased by the existence of the mill and other improvements on the subject land. This is merely one, and it may be a relatively minor, factor in the development of the surrounding district. To give every credit to the company, this may be assumed, in the present case, to be due, among other causes, to the enterprise and management of the company, to capital provided or profits applied (other than that sunk in the physical improvements on the land) in carrying on the business, to ability to find or grow raw material and obtain suitable markets and export facilities, and to its good fortune in attracting a suitable and sufficient amount of labour. In other words, the prosperity of the neighbourhood is due to all that goes with the carrying on of a successful manufacturing enterprise. None of these factors can be regarded as improvements made or appertaining to the land, and it would be an almost impossible task to expect of a valuer to assign to the physical improvements their quota of contribution to the land values of the locality. But in their Lordships' view this would be an irrelevant inquiry. What in their opinion is required in the present case is that the physical improvements, with any value which they attach to the land on which they are situated, be excluded from the valuer's computation. The land will then be valued as land void of buildings but situated in the community with the amenities and facilities which have grown up around it. Their Lordships see no objection in the process of valuation to regarding the land as land situated in a sugar town. The valuer need not shut his eyes to the fact that there is a sugar manufacturing industry in existence, though he is not entitled to value the sugar mill and its accessories situated on the subject land. Their Lordships find themselves in agreement with an illustration given by the learned magistrate in his judgment. "If the undeveloped capital value of a city power house is being assessed one does not assume a city without electricity and all the consequences of the lack of such an amenity." Any other view would lead to great anomalies and difficulties. If the mill in the present case happened to be outside the town's boundaries (where the Ordinance does not apply) and the rest of the company's land inside the boundaries the influence of the mill and its operations on the value of the land could not be ignored. And if a town be assumed in which several industries are carried on, the proportion which each lends to land values in the town might well be an insoluble problem and in their Lordships' view not one which it is to be assumed the Ordinance intended a valuer to solve. Reference was made in the course of the argument to Toohey's Ltd. v. Valuer-General and particularly to the passage already quoted in the judgment delivered by Lord Dunedin. The section of the statute there under consideration is indistinguishable from that in the present case. What, was being valued in that case was the unimproved value of the site of premises licensed as a public house. The valuer arrived at the unimproved value by deducting the value of the buildings from the amount that would have been realized if the whole subject had been sold as licensed premises. This was clearly wrong because it left as adhering to the unimproved value that element of goodwill attaching to the premises as such. Particular emphasis was laid by counsel for the company on the sentence in the passage referred to: "They [the improvements] are to be taken not only as non-existent but as if they never had existed." This should be read, however, with a later passage not yet quoted: "It will be observed that the value is not what has been sometimes designated by the expression 'prairie value.' The land must be taken as it exists at the date of the valuation." Their Lordships are unable to attach any special significance to the words "as if they had never existed." The words of the Ordinance are as if they "had not been made." Nor can they extract from the judgment any principle that would prevent a valuer in assessing the unimproved value of land from resorting for purposes of comparison to the values of surrounding land at the date of valuation even though these values may have been largely built up by the initiative of the owner of the subject land in developing the neighbourhood. The Supreme Court set aside the judgment of the learned magistrate. The formal judgment of the Supreme Court sets out the grounds for so doing as follows: "And having found that the valuer proceeded on wrong principles in that the benefits given to the neighbourhood by the operations of the sugar mill on the subject land which continue to be a factor in the value of that land were not disregarded by him in assessing its value it is ordered that this appeal be allowed and that the valuation of £110,493 determined by the magistrate and set out in his judgment dated October 10, 1953, be set aside and that the proceedings be remitted to the said magistrate's court to direct the valuer to make a valuation of the appellant's land itself as it at present stands with such advantage as it at present possesses and viewed as bare land without the sugar mill upon it and without any consideration of the value of the subject land as including the de facto sugar mill." This gives effect to the opinion of the learned judge of the Supreme Court where he says: "In my opinion, the benefits given to the neighbourhood by the operations of the sugar mill on the subject land which continue to be a factor in the value of that land should be disregarded in assessing its value." In the view of their Lordships the learned judge has here misdirected himself. It is not the "operations" of the sugar mill that have to be disregarded, but the improvements consisting of the sugar mill and its accessories as physical entities. 80Neither Mr White nor Mr Hale was able to point to any decision subsequent to Tetzner that provided relevant authority in support of the position he advanced as appropriate to be derived from Tetzner. 81Mr White, in this context, correctly pointed out that Tetzner does not involve issues of comparable sales and is a decision solely concerning the valuation methodology to be applied to a site when the value of that site is to be determined as if the improvements upon it did not exist. He relied on passages from within the extracted portion of Tetzner to support the proposition that the requirement to disregard the improvements on a particular site being considered in a valuation exercise extended to disregarding, as we understood it, those improvements for any purpose whatsoever in the valuation exercise - in this case, for the valuation of other sites in the Kogarah commercial precinct. 82On the other hand, Mr Hale took us to passages from Tetzner to support the thesis advanced on behalf of the Valuer General, namely that whilst the improvements required to be removed by s 6A(1) were to be disregarded for the purposes of the valuation of that site, because the presence of those improvements informed the market for the purposes of sales of other sites in the vicinity (where the existence of the improvements on the valuation site had the effect of a positive influence on those comparable sales), that was an entirely appropriate influence and one that should not be disregarded. It was his submission that to do so would be to be acting contrary to the approach adopted by the Privy Council in Tetzner. 83In this context, it is appropriate to note, simply as an observation, that although Mr Duguid seeks to make a negative adjustment to compensate for the improvements on the valuation site in a fashion consistent with his approach and the submissions made in support of it by Mr White, Mr Watt simply considered that it was not appropriate to make any adjustments (positive or negative) for the existence of the improvements on the valuation site when valuing comparable sales of other sites in the Kogarah commercial precinct. 84In further support of his approach, Mr White submitted that the approach taken by Mr Duguid (and supported by his submissions) concerning Tetzner was entirely consistent with the three-step approach endorsed by the High Court in Maurici. On the other hand, as we understood the submissions made by Mr Hale on this topic, such an approach based on Maurici was an inappropriate analysis of that decision. 85First, it is appropriate to deal with the extent to which Maurici provides any basis for our consideration of the appropriate interpretation of Tetzner. Tetzner is referred to in Maurici on page 122 of the report in the limited context of the consideration given to the earlier proceedings in the New South Wales Court of Appeal in the same matter. We do not see anything in our careful reading of Maurici that provides any assistance to our analysis of the decision in Tetzner. 86Self-evidently, we are obliged to follow the three-step process endorsed by the High Court in Maurici. Doing so, however, does not mandate us to include or exclude whatever influence the improvements on the valuation site might have (if there be any) on sales of undeveloped land in the vicinity of the valuation site where the existence of the improvements on the valuation site is an element relevant to the sale price for such undeveloped sites. Use of such sales, if to be relied upon (with appropriate adjustments for the purposes of analysis of those sales), provides a conventional comparison basis for deducing a s 6A(1) value of the valuation site. 87We accept that Mr Hale's submission as to both the applicability of and that which follows from consideration of Tetzner. It seems to us that, reading the above extract from the speech of Lord Keith in its entirety, there is no rational basis upon which the position adopted by Mr Duguid could be supported. Indeed, in our opinion, analysis of Tetzner must inevitably lead to the conclusion that the proposition advanced by Mr Hale (namely that the influence of the presence of the improvements on the valuation site are not to be disregarded) is, in fact, a necessary corollary that follows from a proper reading of Tetzner. Specific differences concerning location adjustments 88There were two other differences between the valuers that were specific to individual sites. 89The first of these concerned Sale 8, a development immediately across the road from the valuation site at 23-26 Station St, on the Rockdale side of the railway line. Mr Duguid adopts an adjustment of 0% for its location whilst Mr Watt proposes that there should be a positive adjustment of 2.5%. 90Although we are inclined (on fine balance) to adopt Mr Duguid's position on this, we consider it is unnecessary to deal with this matter by determining this disagreement. The resultant difference between them is $20 per square metre FSA - a difference which, as will be obvious from our final conclusions using Method 1, makes no material difference to the outcome that we have considered appropriate. 91The second difference concerns Sale 7, a sale at a considerable distance to the south of and isolated from the heart of the Kogarah commercial centre. Mr Duguid proposed that there should be a positive adjustment of 5% to this sale to recognise this whilst Mr Watt proposed a positive adjustment of 25%. 92We are of the view that the extent of the outlying location of this site is such that we should either discard it (on the basis that it is not reliably comparable) or that we should adjust by a significant percentage (but not to the extent proposed by Mr Watt). We consider that Mr Duguid's adjustment, however, inadequately reflects the disadvantage "enjoyed" by this site because of its location. 93Whilst, perhaps, the safer position might have been to disregard the sale, we have concluded that we should not do so - given that both the valuers, in their final analyses, considered it an appropriate sale for inclusion in the suite of comparable sales for Method 1. Although considerably removed from the Kogarah commercial centre, Sale 7 is, nonetheless, readily accessible from along Railway Parade and it is only a little further from the valuation site than Sale 1 (the furthest removed of the other comparable sales). We inspected the location of all eight comparable sales during the site inspection. Having seen all of the comparable sites and assessing Sale 7's removal distance from the valuation site compared to Sale 1 (and, to a slightly lesser extent, Sales 3, 4, 5 and 6) together with its being, at best, on the fringe of the Kogarah precinct, we consider that an adjustment of +12.5% would be appropriate to reflect these factors. Conclusion on Method 1 94As a result of our conclusions about the various adjustment factors, we used a spreadsheet, provided to us electronically by the parties, for the comparable sales to derive the relevant adjusted comparison land value per square metre FSA as at 1 July 2009 for each of the eight comparison sales. These appear in the table below with the rate for Site 6 reflecting the remaining difference between Mr Duguid and Mr Watt (which we have decided not to resolve). The sites are listed from the list adjusted comparison from highest to lowest in order to explain how we have treated them to reach a conclusion as to what should be the land value per square metre FSA as at 1 July 2009 to be applied to Lot 1 of the valuation site. The derived values as we have concluded to be appropriate are: Rank Site Adjusted land value 1 1 $1,130 per square metre FSA as at 1 July 2009 2 5 $800 per square metre FSA as at 1 July 2009 3 8 $739(AD)/$759(AW) per square metre FSA as at 1 July 2009 4 3 $673 per square metre FSA as at 1 July 2009 5 6 $609 per square metre FSA as at 1 July 2009 6 4 $534 per square metre FSA as at 1 July 2009 7 7 $491 per square metre FSA as at 1 July 2009 8 2 $374 per square metre FSA as at 1 July 2009 95We have considered what arithmetical approach we should take to derive an outcome form these comparatively divergent numbers. We understand that there is, as confirmed by Mr Watt in his evidence, a preference for using median values rather than the mean value for these purposes. Where there are, as is the case here, an even number of sales, the median value is derived by striking the mean of the sales ranked 4 and 5 as the median of the group of sales. Doing so results in a median value of $641 per square metre FSA. 96Taking the mean value derived from all eight comparable sales would result in a value of $670 per square metre FSA. 97Setting aside Sales 1 and 2 (on the basis that they are sufficiently significantly outlier numbers thus warranting consideration of being ignored), the mean of the remaining six sales is $642 per square metre FSA. Setting aside Sales 1 and 2 does not, of course, alter the derived median value for the remaining six sales. 98All four arithmetically values (the two medians and the two means) are sufficiently closely clustered to lead us to conclude that $650 per square metre FSA would be an appropriate derived value to adopt for Lot 1 for 1 July 2009. 99This results in a Method 1 derived value for Lot 1 as at 1 July 2009 of $4,622,800. Consideration of the Method 2 analysis 100Use of Method 2, as earlier explained, involves applying a derived value for each of the three separate uses (residential, commercial and retail) in the hypothetical highest and best use known as Haskew 4 and applying the relevant value to the known area of each of the five levels. 101We have earlier set out the process by which Mr Duguid raised this proposed methodology for the first time on April 16 this year as part of his position proposed for incorporation in the second joint valuers report. The circumstances that surrounded this are earlier set out and do not require repetition in general terms but two specific criticisms made by Mr Watt need now to be recorded. 102The first of these is that there is no comparable sales evidence to support the retail value proposed by Mr Duguid and the second that there is no appropriate and relevant comparable sales information to support his contended valuation of the residential component of Haskew 4. These two complaints are discussed in more detail below. 103We turned to consider, first amongst the three uses, the positions adopted concerning valuation of the retail areas. 104First, we observe that Mr Duguid conceded that there was no relevant retail data to be derived from the comparable sales. He said that he had derived his proposed retail values ($600 per square metre FSA for the ground level and $275 per square metre FSA for the lower ground level) from his general knowledge of retail rentals and his actual knowledge of retail rentals on the valuation site. With respect to this latter proposition, we observed that it is, in light of the express provisions of s 6A(1) of the Valuation Act, entirely inappropriate to pay any attention whatsoever to rents paid, at any time, on the valuation site. With respect to his general knowledge of such matters, Mr Duguid gave no specific examples in support of these rates and had not provided any information to Mr Watt in support of his position. 105Mr Watt indicated that he was prepared to accept, for the purposes of discussion, Mr Duguid's rate of $600 per square metre FSA for retail on the ground floor but could not accept that there was a necessity to apply a greater than 50% discount to that rate for the purposes of the lower ground floor valuation. 106In the valuation experts second supplementary joint report, they set out their competing views on this point in the following terms (Exhibit J page 5): A.D. believes that the lower ground floor retail component has a lower value than both the ground floor retail and first floor commercial areas. In A.D.'s opinion the lower ground floor would command a lower rental from the ground and first floor due to which reduced access and exposure. Accordingly a lower rate should reflect this rental potential differential. A.W. disagrees with A.D.'s comments for the following reasons; · the lower ground floor retail will naturally form part of a 2 level interconnected retail mall; · Prominent access from the mall adjacent to the railway station entry will be available linking through to the ground floor entry from Railway Parade; · The development will be placed above a 4 level carpark serving the whole development. 107We accept Mr Watt's position that the two retail levels should have the same value and that, for the purposes of this discussion, that value should be $600 per square metre FSA. We accept this position not only for the reasons that he has advanced (with which we concur) but also for reasons of topography on the valuation site (as earlier noted, lower ground floor is not a really a correct descriptor for the reasons earlier set out) and it is not necessary, as a consequence of this topography, to assume that there would be a single large lower rental tenancy (whether a supermarket, discount department store or some other bulky goods retailer) located on this level in the hypothetical development. Mr Duguid conceded that a wide range of access options from the car park were possible and ready access from the parking area with an at grade access to the pedestrian plaza at the foot of the station steps would also make this area more attractive for small-scale retail purposes if pedestrian volume were able to be encouraged. 108The valuers agreed that the relevant commercial sales for comparable purposes were Sales 2, 3 and 4 with Sale 2 being of most assistance with the sales to be considered, in order, 2, 4 then 3. The rates that each of them derived for these purposes were $325 per square metre FSA (Mr Duguid) and $375 per square metre FSA (Mr Watt). 109The rates that we have set out earlier, with respect to Method 1, showed that, for Sale 2, application of the appropriate adjustments applied to this commercial sale derives a rate of $374 per square metre FSA, a rate near identical to that proposed by Mr Watt. We therefore adopt $375 per square metre FSA. Sales 4 and 3 are at somewhat higher rates and we think are of considerably less assistance. However, the fact that they are higher provides comfort to us in adopting Mr Watt's rate for this component of Haskew 4. 110The final element that needs to be considered in Method 2 is the value to be given to the residential component. In this regard, there was agreement that Sales 5 and 8 were the relevant sales from amongst the comparable sales for consideration. On our analysis, they have a value of $800 per square metre FSA and $739/$759 per square metre FSA respectively. Sale 5 has 3,567 square metres FSA as its development potential and Sale 8 has 7,663 square metres FSA as its development potential. Both of these are significantly higher than the 1,382 square metres FSA of residential space in Haskew 4. 111The first thing to be observed is that the values from Sales 5 and 8, as we have determined that they should properly be analysed, provide strong support for the $800 per square metre FSA proposed by Mr Watt rather than the $650 per square metre FSA proposed by Mr Duguid for the residential element using Method 2 for Haskew 4. 112However, Mr Watt says, correctly, that there is no sales information about smaller residential sites in the Kogarah precinct and that, although he adopts $800 per square metre FSA as a "best guess" to be used in his discussion of Method 2, it was his response to a specific question that it could go up or down on better information. On the other hand, in response to a question on this point as to whether there was adequate residential sales information, Mr Duguid indicated that any further information from other residential sales (if there were any - which he did not know) would not give rise to any change in the result of his analysis of the sales that were known. 113In Exhibit F, the supplementary joint planning report, Mr Haskew said, in response to a rhetorical question he asked himself: The answer to this question revealed a relevant valuation principle, being fact that the larger the quantum of floor space within a single development, the lower as the value of that floor space on a weight per square metre basis. This creates a viability situation analogous to a cat chasing its tail. The more floor space one proposes, the less valuable each additional square metre becomes so that comparatively little economic viability improvement is accrued through the provision of comparatively large additional floor space. 114The proposition described by Mr Haskew as being a relevant valuation principle is one well known and, as we understand it, uncontroversial. In his evidence in Exhibit F, Mr Martin did not question the broad proposition raised by Mr Haskew about this valuation principle and it was not invited to reject it during his oral evidence. We also add that this proposition is also consistent with our own experience in other valuation cases. 115It is a proposition, in our view, that supports the position adopted by Mr Watt that there is no valid evidence derived from smaller scale residential sites sold in the Kogarah precinct (if there are any) that provides a basis for a rational valuation to be derived for the hypothetical residential space in Haskew 4. 116As we have no evidence whatsoever about the presence or absence of such sales at any relevant time, there is no basis upon which we can accept Mr Duguid proposition that additional information, if it were available, would not alter the conclusions to be drawn with respect to residential values on the hypothetical development on the valuation site. The enquiry has not been made. Put bluntly, absence of evidence is not evidence of absence. 117Although we have preferred, for the reasons we have enunciated, the various rates per square metre FSA advanced by Mr Watt on an apportionment basis, we do not consider that the fundamental inadequacies of the methodology that are revealed from the above discussion provide any basis, let alone an appropriate basis, for preferring this methodology over Method 1. We therefore are not prepared to adopt Method 2 and consider that the conclusions that we have reached from Method 1 are the appropriate ones in all the circumstances. The value of Lot 2 118In the original joint valuation report, with respect to Lot 2, Mr Watt said: Lot 2 will retain some future speculative development potential, subject to a suitably dense development proposal that addresses the additional cost penalty burden of the transfer slab, and therefore attracts a nominal value assessment as part of the whole of the subject property. 119Mr Watt adopted a figure of 10% to be applied to derived value of Lot 1 to reach a value for Lot 2 for undertaking the necessary calculations to apportion the resultant total value across the two local government areas through the use of a PID allocation as discussed at the commencement of this decision. 120Mr Duguid said, in that first joint report: I do not believe Lot 2, in isolation, is of any material value, given the substantial costs to create the transfer slab required to support any development upon it. 121Subsequently, as the proceedings unfolded, Mr Duguid modified his position to say that it would be appropriate to adopt a value of 5% of the derived value for Lot 1 to be applied to Lot 2. 122For reasons that we have given throughout this judgement, we have found Mr Watt's evidence to be generally more reliable in comparison to that of Mr Duguid. We consider that the reasons for preferring Mr Watt's evidence to that of Mr Duguid throughout for the reasons we have enunciated provide an appropriate basis why we should prefer Mr Watt's view on the value of Lot 2. 123We therefore accept that Lot 2 should be valued by applying to its FSA 10% of the derived rate per square metre FSA for Lot 1 to calculate an overall total value to be applied to the apportionment calculation to derive the relevant values to be applied to each PID. Conclusion 124We have rejected the proposed use of the apportionment method for these statutory valuations. We have, therefore, proceeded to determine the valuations as at each of the five base dates by the comparable sales method as to be applied in light of our decisions on various contested elements necessary for those determinations. 125For the reasons set out above, we have concluded that the appropriate rounded value as at 1 July 2009, for the valuation site, is $5,240,000. 126Given that there was agreement between the valuers as to how the derived 1 July 2009 total value should feed into a formula for rounding then apportionment for that base date and for calculation, rounding and subsequent apportionment for each of the other four base dates, we set out below what we understand to be the appropriate of orders to be made in each of the proceedings. 127We do not, however, make those orders at this time as we wish to provide the parties with the opportunity to check our calculations prior to making those orders. Therefore, we propose that the parties consult as to the correctness of the derived numbers set out below and the appropriateness of the orders we propose. 128If there is agreement between the parties that these proposed orders are correct or agreement that some settled corrections are required to be made, we will make orders in the agreed terms in Chambers and vacate the proposed further limited hearing. 129If there is disagreement, the matter is set down for a maximum of one hour before us at 8.30 am on Thursday, 22 May to deal with any areas of dispute about our arithmetic (but not to revisit any merit matters). 130The derived value in (125) results in values for Lot 1 for each of the base dates as follows: Base date year Lot 1 derived value 2007 $5,495,536 2008 $5,661,998 2009 $4,622,800 2010 $4,808,748 2011 $4,808,748 131Applying 10% of the derived Lot 1 rate as at 1 July 2009 ($65 per metre FSA) to Lot 2 gives the following values for Lot 2 for the various base dates: Base date year Lot 2 derived value 2007 $731,105 2008 $753,251 2009 $615,000 2010 $639,738 2011 $639,738 132When added to the derived values for Lot 1 for each of these base dates, the overall rounded derived values for the whole valuation site for each base date are: Base date year Whole site derived value 2007 $6,230,000 2008 $6,420,000 2009 $5,240,000 2010 $5,450,000 2011 $5,450,000 133Applying the apportionment required by s 28 of the Valuation Act, the derived PID values are: Base date year PID 1502216 PID1536207 2007 $3,748,591 $2,481,409 2008 $3,862,914 $2,557,086 2009 $3,152,908 $2,087,092 2010 $3,279,265 $2,170,735 2011 $3,279,265 $2,170,735 134As each of these derived values for PID1536207 exceeds the relevant base date's statutory valuation, the result of each appeal must be confirmation of the existing statutory value for PID1536207 as the Valuer General does not seek, as earlier noted, to have any higher derived value substituted for the rate in the statutory valuation notice. 135However, these results, as they are lower than each relevant base date's statutory valuation for PID 1502216 (although less so than sought in each appeal), require substitution of new statutory valuations for PID 1502216 for each base date. Having undertaken those calculations, the orders we propose are: 136In Matter No 31133 of 2012, the proposed orders are: (i)The appeal is upheld; and (ii)For the base date of 1 July 2007, the value of PID 1502216 is $3,748,591 and the statutory valuation for PID 1536207 of the Valuer General is confirmed. 137In Matter No 31134 of 2012, the proposed orders are: (i)The appeal is upheld; and (ii)For the base date of 1 July 2008, the value of PID 1502216 is $3,862,914 and the statutory valuation for PID 1536207 of the Valuer General is confirmed. 138In Matter No 31135 of 2012, the proposed orders are: (i)The appeal is upheld; and (ii)For the base date of 1 July 2009, the value of PID 1502216 is $3,152,908 and the statutory valuation for PID 1536207 of the Valuer General is confirmed. 139In Matter No 31136 of 2012, the proposed orders are: (i)The appeal is upheld; and (ii)For the base date of 1 July 2010, the value of PID 1502216 is $3,279,265 and the statutory valuation for PID 1536207 of the Valuer General is confirmed. 140In Matter No 31137 of 2012, the proposed orders are: (i)The appeal is upheld; and (ii)For the base date of 1 July 2011, the value of PID 1502216 is $3,279,265 and the statutory valuation for PID 1536207 of the Valuer General is confirmed. 141The exhibits will be returned when the orders are finalised. Tim Moore Senior Commissioner Graham Brown Commissioner of the Court 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: 13 May 2014