Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Valuer-General v Fivex Pty Ltd [2015] NSWCA 53 Hearing dates: 26 February 2015 Decision date: 17 March 2015 Before: Basten JA at [1]; Gleeson JA at [2]; Leeming JA at [3] Decision: (1) Appeal allowed. (2) Cross-appeal dismissed. (3) Set aside the orders made on 28 March 2014, and remit the proceedings to the Land and Environment Court for determination in accordance with law. (4) The respondent/cross-appellant to pay the costs of the appellant/cross-respondent of the appeal and cross-appeal. Catchwords: APPEALS - appeal confined to question of law - scope of appeal - no error of law in failing to address GST treatment of comparable sales where point not taken at trial STATUTORY CONSTRUCTION - primacy of legislative text - relevance of principles of planning law VALUATION - land value - unimproved value of fee-simple - highest and best use - s 6A(2) of Valuation of Land Act 1916 (NSW) - mandatory assumption as to existing uses and improvements - building exceeded maximum floor space ratio permitted under local environmental plan - actual use was highest and best use - whether s 6A(2) required regard to be had to maximum floor space permitted under local environmental plan or to actual floor space in building Legislation Cited: A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 38-325, 75-5 Land and Environment Court Act 1979 (NSW), s 57 Valuation of Land Act 1916 (NSW), ss 6A, 14G, and 37 Cases Cited: Abret Pty Ltd v Wingecarribee Shire Council [2011] NSWCA 107; 180 LGERA 343 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27 AMP Henderson Global Investors v Valuer General [2004] NSWCA 264; 134 LGERA 426 Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400 Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365; 156 LGERA 186 Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd [1981] HCA 4; 146 CLR 336 Hayes v Willoughby [2013] UKSC 17; [2013] 2 All ER 405 Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78 Minister Administering the Crown Lands Act v NSW Aboriginal Land Council [2008] HCA 48; 237 CLR 285 Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13; 91 CLR 610 Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58; 224 CLR 193 Toohey's Ltd v Valuer General [1925] AC 439 Trust Company of Australia v Valuer-General [2007] NSWCA 181; 154 LGERA 437 Valuer-General of New South Wales v In Adam Pty Ltd [2012] NSWCA 20 Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143; 74 NSWLR 700 Valuer-General v Perilya Broken Hill Ltd [2013] NSWCA 265; 195 LGERA 416 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259 Western Freight Management Pty Ltd v Roads & Maritime Services (NSW) [2014] NSWCA 132 Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50 Category: Principal judgment Parties: Valuer-General (Appellant/Cross-respondent) Fivex Pty Ltd (Respondent/Cross-appellant) Representation: Counsel: J Robson SC with M Carpenter (Appellant/Cross-respondent) I Hemmings SC with A Isaacs (Respondent/Cross-appellant) Solicitors: Crown Solicitor's Office (Appellant/Cross-respondent) Susan Hill & Associates Lawyers (Respondent/Cross-appellant) File Number(s): 2014/122271 Decision under appeal Court or tribunal: Land and Environment Court of New South Wales Citation: [2014] NSWLEC 27 Date of Decision: 28 March 2014 Before: Craig J File Number(s): 2012/31101; 2012/31102; 2012/31103 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] judgment 1. BASTEN JA: I agree with Leeming JA. 2. GLEESON JA: I agree with Leeming JA. 3. LEEMING JA: The primary judge determined three appeals, pursuant to s 37 of the Valuation of Land Act 1916 (NSW) (Act), brought by Fivex Pty Ltd, the owner of land at New South Head Road, Double Bay in eastern Sydney. Erected on the land is a four storey building providing retail space at street level and commercial office space on its upper levels. The building was found to achieve a floor space ratio of 3.66:1, which is greater than is permitted by the applicable local environmental plan. His Honour's judgment, delivered promptly after a three day trial, determined the land value in the sums of $4,665,400 as at 1 July 2009 and 1 July 2010, and $4,782,000 as at 1 July 2011. 4. The Valuer-General has appealed and Fivex Pty Ltd has cross-appealed. An appeal lies to this Court, but is confined to a question of law, because the primary judge had exercised Class 3 of the jurisdiction of the Land and Environment Court: Land and Environment Court Act 1979 (NSW), s 57(1). 5. The Valuer-General's appeal raises a question of law which was material to each of the three valuations. His Honour expressly determined the land value pursuant to s 6A(1) of the Act without making the assumptions stated in s 6A(2). His Honour did so by reason of the construction he gave to the section. 6. Section 6A(1) and (2) are as follows: "6A Land Value (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. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made." (Subsections 6A(3) and (4) deal with water rights and are inapplicable.) 1. By its cross-appeal Fivex submitted that there was error in the primary judge using a GST-inclusive sale price of a comparable property in the calculations. Senior counsel for Fivex candidly and properly acknowledged that the point had not been raised at first instance. Among other things, the Valuer-General submitted that no question of law arose on the cross-appeal. 2. For the reasons which follow, I have concluded that the appeal should be allowed and the cross-appeal dismissed. Background 1. The appeal being confined to a question of law, the following (abbreviated) recounting of the facts (which were uncontroversial) and the approach adopted by the parties and the primary judge will suffice. 2. The "land value" required to be determined initially by the Valuer-General, and by the Land and Environment Court on appeal, is defined by s 6A(1) of the Act. Speaking generally, it is the unimproved value of the "fee-simple", subject to certain assumptions. Improvements "were to be left entirely out of view": Toohey's Ltd v Valuer General [1925] AC 439 at 443. The absoluteness of that statement is, however, now qualified by s 6A(2). 3. Of course, the hypothetical sale contemplated by s 6A is a sale of something which does not exist in the real world: the "fee-simple", stripped of improvements other than "land improvements". (There were no "land improvements" on Fivex's land and in what follows I omit references to them.) The artificiality of the exercise required by s 6A, which contrasts with the determination of just compensation pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), has often been noted. The history of these provisions is summarised in Valuer-General v Perilya Broken Hill Ltd [2013] NSWCA 265; 195 LGERA 416 at [19]-[21]. 4. However, the hypothetical sale price for the land stripped of its improvements is determined by reference to market conditions in the real world at the relevant time. Section 14G(1) applies to land which is "heritage restricted" by a planning instrument. It is in these terms: "14G Valuation subject to heritage restrictions under EPI (1) Land that is heritage restricted on the date by reference to which its land value is to be determined is to have its land value determined on the basis of the following assumptions: (a) that the land may be used only for the purpose, if any, for which it was used when the value is determined, (b) that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued, (b1) that all improvements referred to in paragraph (b) on that land are new (without any deduction being made because of their actual condition), (c) that no improvements, other than those referred to in paragraph (b), may be made to or on that land, (d) that the cost of construction of improvements on that land has no effect on its land value, with the result that there is to be no reduction in land value because of any difference between the cost of construction of the improvements referred to in paragraph (b) as new improvements and the cost of construction of other improvements used as a basis for comparison in the determination of land value." 1. Section 14G(1) does not apply to the land owned by Fivex, but it will be seen that paragraphs (a) and (b) resemble s 6A(2)(a) and (b); I return to this below. Handley JA, with whom Allsop P and Tobias AJA agreed, said in Valuer-General of New South Wales v In Adam Pty Ltd [2012] NSWCA 20 at [24]: "Most of the assumptions in s 14G(1) modify the basic, but artificial, assumption in s 6A(1), that the improvements, other than land improvements, have not been made. Those assumptions introduce facts from the real world." 1. The same is true of s 6A(2). There can be no doubt that s 6A(2) introduces assumptions derived from circumstances in the real world which bear upon the artificial determination of "land value". The ultimate question in the appeal is the extent of the assumptions required to be made by s 6A(2). 2. That ultimate question arises very simply. The Woollahra Local Environmental Plan 1995 (LEP) permitted buildings on Fivex's land to have a maximum floor space ratio of 2.5:1, and permitted an increase to 3:1 with the council's consent. It is clear that the provisions in the LEP which imposed maximum floor space ratios of 2.5:1 and 3:1 are public laws of general application, to which regard may be had in determining land value, even though they in fact apply to a very small part of New South Wales: Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13; 91 CLR 610 at 624. 3. However, the primary judge found that the building, constructed in accordance with a development consent, in fact achieved a floor space ratio of 3.66:1. There was evidence that, in order to obtain that consent, the proponent incurred additional costs, including those associated with incorporating "Green Initiatives" within the building, and a longer development time. 4. There was controversy at first instance about the additional costs, and the extent to which (if at all) allowance should be made for them. But there was and is no controversy about the following arithmetic, which is central to the appeal. The site area of the land is 549.7m2. A floor space ratio of 3:1 permits a gross floor area (GFA) of 1,649.1m2. The building as in fact constructed, with a floor space ratio of 3.66:1, has a GFA of 2,012m2. Is regard to be had to the actual GFA in determining land value? As the primary judge observed at [11]: "It is this difference in GFA that, in its practical consequence, renders important the debate between the parties as to whether a single '6A(1) value' or a '6A(2) value' is to be applied." 1. The references to "6A(1) value" and "6A(2) value" are abbreviations for the different methodologies used by the parties' valuers. It is not necessary for present purposes to summarise those methodologies. In any event, the primary judge adopted an intermediate course. The reasons of the primary judge 1. It was ultimately common ground, and the primary judge found as a matter of fact, that the highest and best use of the land was its current use: for retail and commercial space. It was also common ground that land value could be determined by applying a dollar value per square metre to the maximum GFA of a building erected on the land, and that the dollar value per square metre could be derived from the actual price paid per square metre for comparable sales and relevant valuation principles. 2. The primary judge considered various sales identified by the valuers as more or less comparable and ultimately formed the view that the appropriate starting rate was $2,900/m2. That conclusion was principally based upon a sale at a site on the same road, at $2,867/m2, described by the primary judge as land "which most closely compares to the Land, albeit that the sale occurred several years after the relevant base dates". That sale, pursuant to contract dated 18 April 2013, was for $4,867,500 inclusive of GST. The primary judge also had regard to other sales of sites whose areas were very much smaller than the land, which yielded $3,300/m2 and two other sales at $2,900/m2. The latter sales did not include a component for GST. 3. Having identified a rate of $2,900/m2, his Honour applied it to an area of 1,694.1m2 (being the maximum area permitted by the LEP, with a floor space ratio of 3:1) to result in a land value of $4,782,390. His Honour thereafter made adjustments to achieve values for the other two years, the details of which are unnecessary to recount. 4. Had his Honour had regard to the actual floor space ratio of 3.66:1, the amount would have been greater. It was common ground that the greater amount would not be a linear extrapolation from the land values obtained by the primary judge, and could not be determined in this appeal. The unresolved question whether, and if so how, the additional cost of securing a development consent with a floor space ratio exceeding 3:1 should be accounted for was not the subject of any submissions, for it is outside the scope of this Court's limited appellate jurisdiction. 5. The primary judge applied the rate of $2,900/m2 to a GFA of 1,649.1m2 because he considered that s 6A(2) was not engaged. His Honour's reason was that the highest and best use was the use to which the land was, in fact, being put. His Honour said that it was "in the context of determining the 'highest and best use' of land that s 6A(2) is potentially engaged" (at [21]) and that the assumption in s 6A(2) was: "only required and permitted if the present use, having been lawfully commenced, represents a higher order of use in attaching value to the land than would be achieved by reason of a legal constraint imposed upon the present use subsequent to its commencement" (at [22])." 1. His Honour regarded that conclusion as consistent with the legislative purpose and authority. His Honour summarised the extrinsic materials which made it clear that the insertion of a new subsection in 1959 (the predecessor of s 6A(2)) had followed the decision in Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50. He also referred to statements made in this Court in Trust Company of Australia v Valuer-General [2007] NSWCA 181; 154 LGERA 437 and Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365; 156 LGERA 186. In the former, Campbell JA had said at [83] (there is a similar statement at [58]): "There has also been judicial recognition that the purpose of the former section 6(2) is to ensure that if land could not be newly developed for its present use under the relevant planning scheme, but can continue to be used for its present use by virtue of an existing use provision in the planning scheme, it can be valued on the basis of its existing use." In the latter, Tobias JA had said at [111]-[112]: "[A]s the assumptions in ss 6A(2) or 14G(1) do not replace the assumption in s 6A(1) for the purpose of determining the capital sum which the fee simple of the relevant land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, the improvements upon that land are to be ignored as if they had never been made. It follows, as Jagot J noted in Long Reach Capital Pty Ltd v Valuer-General [2007] NSWLEC 721 at [39], that the assumption in s 6A(2)(b) or the similar assumption in s 14G(1)(b) refers to the continuance of the improvements existing upon the land as at the date of valuation only for the purpose of enabling the land to be valued upon the basis, if it be the case, that its highest and best use is the continuation of its existing use as permitted by s 6A(2)(a) and as required by s 14G(1)(a). The foregoing propositions are not only supported by the dicta of Campbell JA in the Trust Company case but also by the observations of Sugerman J in Ritchie ... that s 6A(2) was introduced into the Act to overcome the difficulty illustrated by the decision of Hardie J in Wunderlich that the assumption required to be made by s 6(1) as to the absence of existing improvements could result in the land being valued on the footing that it was not available to be used for the very purpose for which it was in fact being used where that use, where it was an existing use, was its highest and best use." 1. It will be seen that all those statements were directed to the question which arises when an existing use of land is its highest and best use but is a use which would not be permitted but for existing use rights. The primary judge concluded at [31]-[32]: "Having considered the totality of the evidence, I find that the highest and best use of the Land at each base date was for retail and commercial office space purposes. As a consequence of that finding, the assumptions identified in s 6A(2) are not engaged. The use that I have determined was the permissible form of land use under the LEP at each base date. No assumption is therefore required to be made as to the continuance of that use when determining its land value under s 6A(1). The provisions of s 6A(1) together with the judicial recognition given to the legislative purpose of s 6A(2) support that conclusion. For these reasons, I do not accept the submission of the Valuer-General that the assumptions identified in s 6A(2) are to be applied in the present case." The construction of s 6A(2) – textual considerations 1. "[T]he task of statutory construction must begin with a consideration of the text itself": Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27 at [47] (emphasis added). It is wrong to approach the question of construction by confining attention to the legislative purpose and disregarding the text. No particular theory or 'rule' of statutory interpretation, including that of 'purposive' construction, can obviate the need for close attention to the text and structure of the relevant provision: Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58; 224 CLR 193 at [30]. An analysis of the text of s 6A(1) and (2) yields the following matters immediately. 2. First, in addition to the (often counterfactual) assumption that there be no improvements on the land, s 6A(2) requires further assumptions to be made. Subsection (2) is expressed in mandatory language ("it shall be assumed"). 3. Secondly, subsection (2) is expressed in general language ("in determining the land value of any land"). 4. Thirdly, the opening words of subsection (2) ("Notwithstanding anything in subsection (1)") are hierarchical words serving but one purpose, which is to make it clear that the subsection prevails over any inconsistent approach reflected in subsection (1). 5. It would be no small thing for other textual or contextual considerations to displace the ordinary grammatical meaning of the words referred to above. There are aspects of the reasoning of the primary judge that might be read to convey that there were times when the assumptions in s 6A(2) did not apply at all. I have in mind what was said at [29] ("For reasons earlier stated, the provisions of s 6A do not mandate application in all cases of the assumptions identified in subs (2)") as well as the conclusions in [31] and [32] reproduced above. As will be seen below, that is not the correct legal construction of the subsection. 6. However, it is one thing for the assumptions in s 6A(2) to apply; it is another for them to be operative in the determination of land value. 7. Subsection (2) draws an important and careful distinction between "may" and "shall". On the ordinary grammatical meaning of the subsection, certain assumptions shall be made. However, those assumptions are consistently expressed to be permissive. They are assumptions that the land may be used, or may continue to be used, and that improvements may be continued or made in order to enable the continuation of the use. 8. If there were doubt about it, the permissive nature of the mandatory assumptions is confirmed by the closing words of the subsection, whose purpose is to confirm that regard may be had to some other permissible use for a purpose. That is to say, the closing words of subsection (2) make it clear that although making an assumption as to how land and improvements may be used is mandatory, it is not exhaustive and if there be some other purpose for which the land may be used and which does not require the improvements to have been made, then regard may be had to it. 9. Hence, although in every case the assumptions in s 6A(2) are required to be made, it is clear that because they are permissive they need not be determinative or even material to the determination of land value. The largely unstated major premise of the section is that the value of the hypothetical sale of the "fee-simple" may be affected by the various ways in which it may be lawfully exploited, and that regard may be had to a range of possible uses in the determination of value, so as to select the "highest and best use": Trust Company of Australia Ltd v Valuer-General at [32]. 10. Finally, each of paragraphs (a) and (b) and the closing words of subsection (2) refers to the land being used. Moreover, the references to land being used in paragraph (a) and in the closing words expressly refer to the purpose of the use. The word "purpose" is absent from paragraph (b), however nothing turns on this. Paragraph (b) refers to enabling the land to "continue to be so used", and the word "so" refers back to the use for a purpose in paragraph (a). 11. The issue, ultimately, is whether the concepts of "use" and "use for a purpose" which recur in subsection (2) confine the meaning of the permissive assumptions which are required to be made. Fivex's submissions 1. "Use" is a familiar notion in planning law. Typically, the question is whether a use is prohibited, or prohibited without consent, or permitted, by reason of some planning law. Fivex emphasised basic principles of characterisation in planning law: that use must be for a purpose, and that purpose is not concerned with the nature of the improvements which serve that purpose. Authorities on those principles have been reviewed by Preston CJ of LEC in Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400 and summarised by Beazley JA in Abret Pty Ltd v Wingecarribee Shire Council [2011] NSWCA 107; 180 LGERA 343 at [50]-[53], although it should be borne in mind that "use" and "purpose" are protean words whose meaning is highly contextual: Minister Administering the Crown Lands Act v NSW Aboriginal Land Council [2008] HCA 48; 237 CLR 285 at [23] and [69]-[75]; Hayes v Willoughby [2013] UKSC 17; [2013] 2 All ER 405 at [9]. 2. In substance, Fivex submitted that the repeated references in s 6A(2) to "use" and "purpose" should be read construed in the context of an established body of law which distinguished "purpose" from "nature", and thus although actual facts in the real world as to "use" and "purpose" intruded into the assumptions required for the artificial calculation of land value, the assumptions should not be read more broadly so as to incorporate facts about the "nature" of the building erected in the real world. That is to say, once the highest and best use was determined, s 6A(2) had no further operation. That appears to have been the construction accepted by the primary judge. 3. Fivex's argument is strengthened by the legislative history. There can be no doubt that the antecedent of s 6A(2) was included to address the circumstance identified in Wunderlich, whereby the land value of the "fee-simple" was enhanced because of an existing use right; the extrinsic materials and authorities reproduced by the primary judge make this clear. 4. Finally, in terms of authority, Fivex embraced the reliance by the primary judge on the reasons of Tobias JA in Commonwealth Custodial Services at [111] that the assumption required to be made by s 6A(2) was made "only for the purpose of enabling the land to be valued upon the basis, if it be the case, that its highest and best use is the continuation of its existing use". 5. It may be said immediately that that aspect of the reasons of Tobias JA was not part of the ratio of his Honour's decision. What is more, Spigelman CJ and Santow JA expressly distanced themselves from it. Spigelman CJ's observation at [16] precisely captures the issue that arises in this appeal: "As Tobias JA points out and a number of authorities to which he refers have indicated, the purpose of the introduction of the predecessor of s 6A(2) was to overcome a particular problem that had arisen. However, the words chosen are not necessarily limited to that situation. The mischief rule is a valid approach to statutory interpretation so as to ensure that the purpose of the legislature is achieved. It does not necessarily lead to a reading down of general words, so as to confine the legislation to the mischief alone. Merely because a particular problem has been the trigger for a statutory amendment does not lead to the conclusion that the words are incapable of extending beyond the particular matter which caused the amendment." 1. Santow JA joined in "the reservations expressed by the Chief Justice": at [20]. Neither of those judges determined whether the words in s 6A(2) were confined in the manner indicated by Tobias JA; it was not necessary for their Honours to do so in that decision. But it is the point on which this appeal turns. Conclusion on construction of s 6A(2) 1. For the following reasons, I would reject the submissions advanced by Fivex. 2. First, I discount the extent to which principles from planning law provide assistance. Those are "principles" in the sense identified in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259 at [31], derived from a body of case law based on comparable legislative provisions. I acknowledge that they inform the legal meaning of "use" and "purpose" in the subsection. But they are far from determinative. They are of limited assistance in the different context of valuing the unimproved value of land, especially where, as here, the question is whether the subsection has a legal meaning which is narrower than its ordinary textual meaning. It is one thing to determine whether an actual use and an actual purpose in the real world complies with the applicable planning regime. It is a very different thing to make stated real world assumptions in order to value the hypothetical and highly artificial sale of the "fee-simple" of land, stripped of its improvements. 3. Secondly, if as Fivex submits and the primary judge held, the assumptions were only applicable to capture an "existing use", then it might be expected that s 6A(2) would incorporate that language. "Existing use" has long been a defined term in planning legislation. It is now reflected in Division 10 of Part 4 of the Environmental Planning and Assessment Act 1979 (NSW), and was present in cl 32 of the County of Cumberland Planning Scheme Ordinance which was central to the decision in Wunderlich Ltd v Valuer-General. Yet s 6A(2) uses different language which is capable of bearing a broader meaning. I acknowledge that those first two considerations are of relatively limited weight. 4. Thirdly, and to my mind critically, there is paragraph (b) of s 6A(2). Paragraph (b) goes beyond the use of the land, and speaks in terms of the improvements on the land. The paragraph refers at least in part to improvements in the real world, as appears from the verb "continued", a point noted by Handley JA in Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78 at [26]. If the operation of s 6A(2) were exhausted by ensuring that an existing use is one to which the valuation exercise may have regard, then it is difficult to see why paragraph (b) is needed at all. Conversely, the presence of s 6A(2)(b) requires, in particular, an assumption to be made that the improvements as they exist in the real world "may be continued". 5. In particular, it is difficult to reconcile the presence of paragraph (b) with Fivex's submission that the subsection proceeds on the basis of a distinction between the purpose of a use, and the nature of an improvement. A mandatory assumption as to an existing building in the real world continuing is inconsistent with the subsection applying only to use for a purpose and eschewing regard to the nature of the use. 6. None of this is to deny that what is to be determined is the unimproved value of the "fee-simple", stripped of those improvements. Necessarily, the task required by the statute is a highly artificial one. However, the statute refers in terms not merely to the purpose of the existing use, but also to the actual improvements in the real world that enable that existing use to continue. 7. Fourthly, only limited assistance is available from reasoning based upon avoiding anomalous results when the question of construction is as artificial as the present. Even so, there are difficulties with Fivex's construction. Suppose a five storey office block has been lawfully erected on land whose highest and best use is as commercial office space, but also that the current planning regime only permits buildings which are three storeys high. In the absence of s 6A(2), it is easy to see why the unimproved land value of the land on which the five storey office block has been erected would be identical to the neighbouring materially identical block which could only ever sustain a three storey office block. However, given the mandatory assumption that "such improvements [as exist in the real world] may be continued", it seems unlikely that the exercise should ignore the capacity of one lot, but not the other, to sustain a five storey office block. That example is not qualitatively different from the present case. 8. Fifthly, my conclusion is also consistent with what was held in Valuer-General v Commonwealth Custodial Services Ltd [2009] NSWCA 143; 74 NSWLR 700, where the Court unanimously held that heritage restricted land should be valued by reference to the improvements on the land in their actual condition, rather than in their pristine condition. That was a decision upon a determination of land value making the assumptions in s 14G(1), but it is clear that those assumptions are closely related to the approach required by s 6A(2). The operative words in s 14G(1)(b) which led to this construction were "that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued". There is not merely a close textual resemblance with s 6A(2)(b), but also a clear structural resemblance. In s 6A(2), there is a requirement to assume a particular use for a purpose, and then a further requirement to assume that improvements may continue in order to enable the continuation of the use. In s 14G(1) there is a requirement to assume that a particular use for a purpose is the only permitted use, and a further requirement, materially identical to that in s 6A(2)(b), that improvements may continue in order to enable the continuation of the use. The simple point is that if s 14G has been held to require attention to the actual condition of the building, why should not the same be true of s 6A(2), a provision in the same Act, and with much the same text and structure? 9. The conclusion that I have reached is consistent with the reservations expressed by Spigelman CJ and Santow JA in Commonwealth Custodial Services Ltd v Valuer-General, although I must acknowledge that my conclusion departs from what Tobias JA said in the same appeal. 10. Accordingly, I propose that the appeal be allowed, the orders made on 28 March 2014 be set aside, and the matter remitted for determination in accordance with law. Cross-appeal 1. The GST treatment of sales of commercial land in the real world is not free from complexity. A sale of commercial land may be a GST-free supply of a going concern: A New Tax System (Goods and Services Tax) Act 1999 (Cth), s 38-325. Alternatively, the vendor of commercial land in the real world may also choose to apply the margin scheme in order to determine the GST payable: s 75-5. It is not necessary further to explain the way in which GST is determined. It is sufficient to observe that the GST consequences of a sale therefore turn in part upon the personal circumstances of the parties. 2. Unquestionably, the tax treatment in the real world for the purposes of GST may affect the price actually achieved. So may other aspects of the tax treatment of a transaction. For example, a vendor of land acquired before 1985 may be prepared to receive a lesser price than the vendor of the same land if its sale would realise a taxable capital gain. 3. These considerations are well removed from the artificial exercise of determining the land value of the "fee-simple". In performing that task, the Court below drew upon the expertise of valuers, derived from actual sales in the real world, to which were applied a series of assumptions and adjustments in order to derive a value of the "fee-simple" in each year of assessment. Valuation is not an exact science, but an exercise in estimation: Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd [1981] HCA 4; 146 CLR 336 at 374. Inevitably there will be room for differences of opinion: AMP Henderson Global Investors v Valuer General [2004] NSWCA 264; 134 LGERA 426 at [54]. 4. The task of the primary judge was to reach a starting rate in terms of dollars per square metre, based on comparable sales and adjustments all of which were contestable. His Honour resolved the competing submissions and concluded that the starting rate was $2,900/m2. To do so, he used one sale which included GST and three sales (all of which he regarded as much less comparable) which did not include GST. Although the evidence and cross-examination were relatively extensive, it was not put to him that the different GST treatment should affect his approach. 5. Ordinarily there is no error of law in a court failing to address an argument that has not been made: see the authorities collected in Western Freight Management Pty Ltd v Roads & Maritime Services (NSW) [2014] NSWCA 132 at [62]. This is such a case. There was no error of law in the primary judge using a rate derived from sales some of which included GST, others of which did not, in circumstances where all required adjustment, and were adjusted, and where his Honour was not asked to perform adjustments by reference to their GST treatment. It is accordingly not necessary to say anything further about how the tax treatment of comparable sales influences a determination of land value of the fee simple pursuant to s 6A of the Act. The cross-appeal should be dismissed. Orders 1. For those reasons, I propose the following orders: (1) Appeal allowed. (2) Cross-appeal dismissed. (3) Set aside the orders made on 28 March 2014, and remit the proceedings to the Land and Environment Court for determination in accordance with law. (4) The respondent/cross-appellant to pay the costs of the appellant/cross-respondent of the appeal and cross-appeal. ********** 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: 17 March 2015