Valuer General of New South Wales v Esperia Court Pty Ltd

1. [1]

   PAYNE JA: I agree with the orders proposed by Preston CJ of the LEC and with his Honour’s reasons. These additional observations are not intended to qualify that agreement.

2. [2]

   The Valuation of Land Act 1916 (NSW) does not prescribe the use of any valuation method. Much less does that Act prescribe the “comparable sales” approach as the only or even the “preferred” method to determine the value of a parcel of land. If, in a particular case, the comparable sales approach is chosen as the valuation method, a particular methodology of conducting a comparable sales valuation is not prescribed by the Valuation of Land Act. When the comparable sales method is used, the question of whether sales are comparable is a question of fact that involves matters of degree and judgment.

3. [3]

   A judicial valuer is not required to apply the comparable sales method in the manner said to have been “prescribed” by Sheahan J Marroun v Road and Maritime Services [2012] NSWLEC 199. To be clear, the four “steps” suggested by Marroun as comprising the comparable sales method are not required as a matter of law and a failure to follow those steps does not amount to a failure to perform the task of valuing land under the Valuation of Land Act.

4. [4]

   McHUGH JA: I agree with the orders proposed by Preston CJ of LEC, and with his Honour’s reasons. I also agree with the additional observations of Payne JA.

5. [5]

   PRESTON CJ of LEC: The Valuer General of New South Wales (Valuer General) appeals against the decision of Robson J of the Land and Environment Court determining the values under the Valuation of Land Act 1916 (NSW) (Valuation of Land Act) of four parcels of land in Strathfield. The primary judge determined the values in an appeal by Esperia Court Pty Ltd (Esperia) under s 37(1) of the Valuation of Land Act against the disallowance by the Valuer General of objections to notices of assessment of land values as at the valuing years of 2021 and 2022 for the four parcels of land at 1 The Boulevarde, 3-9 The Boulevarde, 2-10 Churchill Avenue and 12 Churchill Avenue, Strathfield.

6. [6]

   The Valuer General’s appeal against the primary judge’s decision is under s 57(1) of the Land and Environment Court Act 1979 (NSW) (Court Act) and is limited to questions of law. The Valuer General raised in the notice of appeal three grounds on which the primary judge is alleged to have erred on a question of law:

7. [7]

   I find that the Valuer General has not established any of these three grounds. The appeal should be dismissed with costs.

The weight ground

1. [8]

   The weight ground is based on a particular phrase of the primary judge, “placing equal weight on all the sales evidence”, which he used when referring to the median and the average of the adjusted rates derived from the comparable sales for each of the four parcels of land for the valuing years of 2021 and 2022. The primary judge repeated the phrase eight times, two times (for the two valuing years) for each of the four parcels of land.

2. [9]

   The Valuer General’s argument on the weight ground was elusive. As the appeal under s 57(1) of the Court Act is limited to an erroneous decision on a question of law, the Valuer General needed to identify the question of law on which the primary judge made an erroneous decision: see Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66 at [139]; B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; [2008] NSWCA 187 at [57] – [59], [70]; Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority (NSW) [2006] NSWCA 314 at [27]; ISPT Pty Ltd v Valuer General (2009) 165 LGERA 25; [2009] NSWCA 31 at [3]; Kudrynski v Orange City Council [2024] NSWCA 33 at [39] – [50].

3. [10]

   The Valuer General had difficulty in identifying the question of law. The Valuer General argued that the primary judge “erred in valuation principle” and thereby “erred on a question of law”. This argument has three steps. First, the Valuer General needed to identify the valuation principle. Second, the Valuer General needed to establish that the primary judge erred on this identified valuation principle. Third, the Valuer General needed to establish that this error in valuation principle was an error on a decision on a question of law. The Valuer General did not establish any of these three steps.

4. [11]

   First, the Valuer General did not clearly articulate what was the valuation principle in respect of which the primary judge was said to have erred. At a level of generality, the Valuer General submitted that: “It is wrong as a matter of valuation principle to apply equal weight to the comparable sales” (Appellant’s Written Submissions, [18]). The Valuer General cited four authorities for this submission.

5. [12]

   The first was the decision of the High Court of Australia in The Commonwealth v Milledge (1953) 90 CLR 157 at 160-161; [1953] HCA 6. The Valuer General relied on this passage of Dixon CJ and Kitto J:

6. [13]

   This passage does not articulate a universally applicable “valuation principle” but rather articulates why the judge constructively failed to exercise jurisdiction to value the land concerned. The trial judge “put aside the evidence of sales” (at 161) and instead took an average of the valuations of the six expert witnesses as the value of the land concerned. That was to fail to engage in the statutory valuation task.

7. [14]

   The second decision was of the Supreme Court of South Australia in Brewarrana Pty Ltd v Commissioner of Highways (No 1) (1973) 6 SASR 541; (1973) 32 LGRA 170. Wells J said at 179 – 180:

8. [15]

   This passage provides helpful guidance as to how the judicial valuer’s task of valuing land using comparable sales might be undertaken, but it does not articulate a valuation principle that must be applied “whatever the circumstances”.

9. [16]

   The third decision was of this Court in Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409. The Valuer General relied on a passage in Hope JA’s judgment at 434 but the passage begins earlier on 433. Hope JA was considering whether the trial judge’s acceptance of one of the valuer’s evidence was open to challenge in an appeal on questions of law only. Hope JA stated:

10. [17]

    Moffitt P and Mahoney JA agreed with Hope JA (at 411 and 444 respectively).

11. [18]

    This passage is authority for the proposition that an appeal limited to questions of law can succeed in circumstances where it is shown that there is no evidence to support the finding of the trial judge (a no evidence ground); the trial judge’s finding that the sales were comparable was not reasonably open on the evidence (an unreasonableness or irrationality ground); or there was an error of law by the trial judge ignoring a principle of assessment or rejecting as wholly irrelevant, for grounds which were not rational, a matter which prima facie afforded some evidence of value (another irrationality ground). The passage does not, however, articulate a valuation principle independent of these established categories of errors of law.

12. [19]

    The fourth decision is that of Biscoe J of the Land and Environment Court of NSW in Holcim (Australia) Pty Ltd v Valuer General [2009] NSWLEC 225 at [31]:

13. [20]

    This passage succinctly summarises how the comparable sales approach might be used, but does not articulate any valuation principle.

14. [21]

    The four decisions relied on by the Valuer General do not, therefore, articulate a valuation principle that it is wrong, whatever the circumstances, to apply equal weight to the comparable sales. As a matter of practice, it might be accepted that differences between the land the subject of a comparable sale and the land to be valued might call for adjustments to be made to the comparable sale in order to derive a value of the land to be valued and that the greater the adjustments that need to be made to the comparable sale the less reliable that sale becomes. But these are matters of fact and are not of themselves valuation principles. They do not give rise to a valuation principle that it is always wrong to apply equal weight to the comparable sales.

15. [22]

    The Valuer General also sought to rely on the explanation of the comparable sales approach to valuation given by Sheahan J in Marroun v Roads and Maritime Services [2012] NSWLEC 199. The comparable sales approach involves deriving a value for the land to be valued from comparable sales of other land. Sheahan J identified four steps in what he termed the “direct comparison process”, which he alliteratively termed accumulation, analysis, adjustment and application: see at [197] – [208]. The parties in the court below submitted the primary judge should follow, and the primary judge did follow, these four steps to derive the value of the subject parcels of land.

16. [23]

    The Valuer General did not challenge the primary judge’s findings in the first three steps of accumulation, analysis and adjustment of the comparable sales, but only the primary judge’s placing of equal weight on the comparable sales in the fourth step of application of the adjusted rates to determine the value of the subject parcels of land. This confining of the challenge to the fourth step is important.

17. [24]

    The first step, which was not challenged, involved the task of deciding which of the sales selected by the parties’ valuers were comparable sales. This task is an evaluative one, a matter of fact and degree. As Wells J observed in Brewarrana Pty Ltd v Commissioner of Highways (No 1) at 180 “there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not”. Similarly, Giles JA in ISPT Pty Ltd v Valuer General at [23] observed:

18. [25]

    For this reason, no doubt, the Valuer General did not contend that the primary judge erred in valuation principle in deciding as a matter of fact that all of the sales selected by the parties’ valuers were comparable sales.

19. [26]

    The Valuer General’s challenge was to the primary judge’s application of the appropriately adjusted comparable sales to determine the value of the subject parcels of land, the fourth step of application. The Valuer General referred to the statement in Marroun v Roads and Maritime Services at [208] that:

20. [27]

    The Valuer General argued that this statement articulates a valuation principle that the valuer is to attribute “differing weight to different comparable sales”. The Valuer General submitted that the primary judge erred in valuation principle by instead placing equal weight on all of the comparable sales.

21. [28]

    I reject the Valuer General’s argument. First, the explanation in Marroun v Roads and Maritime Services of how the “direct comparison process” of valuation might be undertaken does not establish any valuation principle. The valuation of land using comparable sales need not involve a “process” and, although it can be undertaken sequentially through the four steps, it need not be so undertaken. The evaluation of what sales are sufficiently comparable and the analysis and adjustment of those sales to value the subject parcels of land can involve a blending of all four steps. There is no valuation principle that the judicial valuer must separately and sequentially undertake each of the four steps or that the assessment of the level of relevance of different comparable sales, and any attribution of weight to the sales, must occur at the fourth step.

22. [29]

    The Valuation of Land Act does not prescribe the use of any specific valuation method, such as the comparable sales approach, to determine the land value or, if the comparable sales approach is chosen as the valuation method, the particular method of conducting the comparable sales approach: Council of the City of Ryde v Azizi [2019] NSWSC 1605 at [130]. See also Blacktown City Council v Concato (No 4) [2020] NSWSC 9 at [87]. In particular, the Valuation of Land Act does not prescribe conducting the comparable sales approach by undertaking the four steps of accumulation, analysis, adjustment and application. Hence, any failure to apply the comparable sales approach in the manner prescribed in Marroun v Road and Maritime Services does not amount to a failure to perform the task of valuing land under the Valuation of Land Act: Council of the City of Ryde v Azizi at [130].

23. [30]

    The Valuer General has not, therefore, identified any valuation principle arising from the discussion in Marroun v Roads and Maritime Services.

24. [31]

    The second step in the Valuer General’s argument was that the primary judge, as a matter of fact, erred in valuation principle (whatever that be). The primary judge’s error is said to be evidenced by his statement in the paragraphs giving the median and the mean of the adjusted rates of his “placing equal weight on all the sales evidence”.

25. [32]

    The context in which the primary judge used the phrase is important and provides the answer to the Valuer General’s weight ground. This context needs to be explained.

26. [33]

    The parties agreed that the value of each of the four parcels of land in the two valuing years was to be derived from comparable sales of other parcels of land in Strathfield and nearby Burwood. The Valuer General’s valuer, Mr Kabok, selected three sales as being comparable sales: 5 Strathfield Square, Strathfield; 12 Churchill Avenue, Strathfield (one of the subject parcels of land) and 37A-39 Burwood Road, Burwood: at [29] of the judgment. Esperia’s valuer, Mr Hollinshead, selected six sales as being comparable sales: 54 The Boulevarde, Strathfield; 32-34 Burwood Road, Burwood; 81 Burwood Road, Burwood; 37A-39 Burwood Road, Burwood; 62-64 Burwood Road, Burwood; and 20-24 Railway Parade and 2-4 Burleigh Street, Burwood: at [30] of the judgment.

27. [34]

    The parties’ valuers disagreed with each other that the other’s selected sales were comparable sales. Nevertheless, the valuers analysed all of the selected sales and agreed on the deduced land value, the potential gross floor area (PGFA) and the land value on a value rate per square metre PGFA basis as at the respective sales’ dates: at [31] of the judgment. The valuers’ agreement for the subject parcels of land was set out by the primary judge in the tables in [32] – [36] of the judgment. These tables contained the valuers’ respective calculations of the applicable land value for each comparable sale. Each valuer applied explicit adjustments to the common unit of comparison ($/m2 PGFA) to create equivalence between them and each of the subject parcels of land: at [37] of the judgment.

28. [35]

    Each valuer then determined the respective land values for the subject parcels of land by applying the valuer’s derived rate ($/m2 PGFA) to the PGFA of the parcel of land. The primary judge set out the valuers’ respective calculations in [38] – [45] of the judgment.

29. [36]

    To decide this contest in valuation between the parties’ valuers, the primary judge needed to decide the issues that separated the valuers. The first issue was which of the sales selected by the valuers were comparable sales: see at [46] of the judgment. The primary judge decided that all of the sales selected by both valuers were comparable sales, being the three sales selected by Mr Kabok and the six sales selected by Mr Hollinshead: see for example, at [56] for 5 Strathfield Square; [66] – [67], [101] for 12 Churchill Avenue; [97] for the six Burwood sales; and [104] for 5 Strathfield Square, 12 Churchill Avenue and the Burwood sales.

30. [37]

    Once the primary judge decided that all of the sales selected by the parties’ valuers were comparable sales, he needed to decide the contested issues regarding the adjustments that should be made to each of the comparable sales to create equivalence with the subject parcels of land to be valued. The primary judge determined the adjustments to each of the comparable sales that should be made in the course of deciding the comparability of the selected sales and recorded his findings in the four tables annexed to the judgment, one table for each of the subject parcels of land: see at [103] – [107].

31. [38]

    The primary judge’s analysis and adjustment of each of the comparable sales yielded a range of adjusted rates (in $/m2 PGFA), which were set out in the four tables annexed to the judgment. The primary judge reproduced that adjusted rate range for each of the subject parcels of land for the two valuing years in the text of the judgment:

32. [39]

    It is at this point in the judgment that the primary judge refers to the median and the mean (average) of the adjusted rate range that he had calculated in the four tables annexed to the judgment. The primary judge reproduced in the text of the judgment the median and the mean (average) of the adjusted range in the tables annexed to the judgment:

33. [40]

    The idea of calculating the median and the mean (average) of the adjusted rates derived from the comparable sales was raised by Esperia’s valuer, Mr Hollinshead, in the joint reports of the parties’ valuers (there being one joint report for each of the four parcels of land). Mr Hollinshead selected the sales he considered to be comparable sales and derived an adjusted rate range (indicative rate for the subject land) from the comparable sales. He then calculated the median and the average of the adjusted rates. He expressed these values in language which the primary judge adopted in the judgment. For instance, Mr Hollinshead said in relation to the parcel of land at 1 The Boulevard:

34. [41]

    Mr Hollinshead provided the median and the average of the adjusted rates for each parcel of land to assist him in determining the value of each parcel of land, but not as the value of each parcel of land.

35. [42]

    The primary judge evidently adopted Mr Hollinshead’s approach and language in calculating the median and the average of the adjusted rates that the primary judge derived from the comparable sales that the primary judge had used. As Mr Hollinshead had done, the primary judge used the phrase “placing equal weight on all the sales evidence” when reproducing the median and the mean (average) of the adjusted rates derived from the comparable sales that he had set out in the tables for the four parcels of land.

36. [43]

    Notwithstanding this language of placing weight on the sales evidence, the calculation of the median and the mean of a set of numbers does not involve the assignment of weight to the numbers.

37. [44]

    The median is the middle number in a sorted data set of ascending or descending numbers. In this case, the data set was the range of adjusted rates that the primary judge determined from the comparable sales for each parcel of land for each valuing year set out in the tables annexed to the judgment. The primary judge identified the value in the middle of the adjusted rate range.

38. [45]

    The mean is the arithmetic average of a data set, calculated by adding all the numerical values and dividing by the total count of numbers. In this case, the mean was the sum of the adjusted rates for each parcel of land for each valuing year divided by the number of adjusted rates in the data set.

39. [46]

    The calculation of the median or the mean of the data set of adjusted rates for each parcel of land for each valuing year did not involve the assignment of weight to any adjusted rate in the data set. Each of the adjusted rates in the data set is used equally in the calculation of the median and the mean.

40. [47]

    The primary judge’s statement that calculation of the median and the average of the adjusted rates involved “placing equal weight on all the sales evidence” might be inapt but it is not inaccurate. The calculation of the median and the mean of the data set of adjusted rates did not involve assigning greater or lesser weight to any adjusted rate in the data set. Each adjusted rate was assigned equal weight.

41. [48]

    Once the context in which the primary judge expressed the phrase is understood, the Valuer General’s argument on the weight ground can be seen to be baseless. The Valuer General argued that the primary judge was saying that he had given equal weight to all of the comparable sales in determining the land value of each of the subject parcels of land and it should be assumed that this is what the primary judge did. The Valuer General submitted that it is wrong as a matter of valuation principle to apply equal weight to all of the comparable sales: the parcels of land the subject of the comparable sales were different to each other and to the subject parcels of land to be valued. That is why adjustments have to be made to the rates derived from the comparable sales to derive a value for the subject parcels of land. The primary judge’s decision to attribute equal weight to all comparable sales was therefore wrong in valuation principle.

42. [49]

    The primary judge did not, however, do or say what the Valuer General contended he did or said. The primary judge did evaluate the sales selected by the parties’ valuers and determined that all of them were comparable sales. On one view, the selection of sales as being comparable might involve a process akin to assigning weight, in that there is an evaluation of the comparability of the parcels of land that are the subject of the sales and the parcels of land to be valued as well as an analysis of the nature and features of the sale transactions. The selection of a sale as comparable might be seen to involve the giving of greater weight to that sale, while the rejection of a sale as not being comparable might be seen to involve giving less weight to that sale. On this view, the primary judge’s determination of the selected sales as being comparable might be described as giving equal weight to those sales insofar as they were all selected as being comparable.

43. [50]

    The primary judge then analysed and adjusted the rates derived from these comparable sales. The adjusted rates fell within a range. The primary judge set out that range and calculated the median and the mean of the range of adjusted rates. This process of analysis and adjustment of the adjusted rates did not involve assigning equal weight to all of the comparable sales. Each sale is analysed and adjusted differently, reflecting the differences in the parcels of land and sale transactions involved.

44. [51]

    In the present case, this differential analysis and adjustment led to the primary judge determining a range of adjusted rates derived from each of the comparable sales. The determination of this range of adjusted rates for each parcel of land to be valued did not involve assigning weight to the comparable sales. So too, the calculation of the median and the mean of the adjusted rates in the range did not involve assigning weight to the comparable sales.

45. [52]

    The primary judge did not, therefore, place equal weight on all of the sales evidence in his analysis and adjustment of the comparable sales to determine the adjusted rate range for each of the subject parcels of land. The primary judge’s statement in each of the paragraphs giving the median and the mean that he had calculated in the annexed tables, of “placing equal weight on all the sales evidence”, should not be construed as referring to this process of analysing and adjusting the comparable sales to derive a range of adjusted rates. Rather, it should be construed as referring to the process of calculating the median and the mean of the adjusted rates in the range. As earlier noted, this process of calculating the median and the mean of a data set treats each value in the data set equally.

46. [53]

    The Valuer General has not established that the primary judge erred on a question of law in doing or saying that he placed equal weight on all the sales evidence.

47. [54]

    The third step in the Valuer General’s argument was that an error in valuation principle is an error on a question of law. The Valuer General cited as authority for this proposition three decisions: The Commonwealth v Milledge at 160-161; Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 at 432; and Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8 at [8].

48. [55]

    Esperia challenged that proposition. Esperia submitted that there is no place in the statutory scheme for the valuation of land for the concept of a valuation principle that stands outside of the statutory scheme. The primary judge’s power on Esperia’s appeal under s 37(1) of the Valuation of Land Act against the Valuer General’s determination of its objection to the valuation of the subject parcels of land was to make one or more of the orders in s 40(1) of the Valuation of Land Act. Deciding which order to make involved the primary judge valuing the subject parcels of land in accordance with the valuation methodology prescribed by the Valuation of Land Act, including in Part 1B.

49. [56]

    The valuation methodology prescribed by the Valuation of Land Act is artificial in the sense that the valuation must be undertaken on certain assumptions that might not reflect the actual conditions of the land or the market. For example, the definition of “land value” in s 6A of the Valuation of Land Act requires land that has improvements on it to be valued “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”. Likewise, land that is heritage restricted, as that term is defined in s 14G(1) and (2), is to be valued on the assumptions stated in s 14G(1)(a) - (d) of the Valuation of Land Act: see also s 14G(1A).

50. [57]

    Esperia submitted that the primary judge’s task was to value the parcels of land in accordance with the valuation methodology prescribed by the Valuation of Land Act. If the primary judge were to fail to do so, that would be an error on a question of law. It would be an error of law. It would be an error of law falling within the judicial review category of illegality identified by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 at 410. But it would not be an error in valuation principle.

51. [58]

    Equally, if the primary judge were to exercise the function of determining the appeal under s 37(1) of the Valuation of Land Act, including valuing the parcels of land, in a manner that involved error of law falling within the other categories of judicial review of irrationality and procedural impropriety (see Council of Civil Service Unions v Minister for the Civil Service at 410-411), that too would involve error on a question of law. But that too would not be an error in valuation principle.

52. [59]

    There is considerable force in Esperia’s submission. The function the primary judge was exercising in hearing and disposing of Esperia’s appeal under s 37(1) of the Valuation of Land Act involved the valuation of the subject parcels of land in accordance with the valuation methodology prescribed by the Valuation of Land Act. The proper exercise of this function did not involve application of “principles” derived from decisions of courts of other jurisdictions in respect of other legislation.

53. [60]

    As the High Court held in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [31], caution is required in construing modern Australian legislation concerning the valuation of land by reference to “principles” derived from a body of case law built up in various jurisdictions where there are statutes on the valuation of land for different purposes, including determining compensation for the compulsory acquisition of land. Although in Melwood Units Pty Ltd v Commissioner of Main Roads at 432 and 435, the Privy Council spoke of principles of assessment of compensation for compulsory acquisition as part of the common law, the High Court in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority explained at [29] that there can be no “common law principle” which is engaged in cases involving the statutory valuation of land, such as compulsory acquisition cases, which is entirely a creation of statute.

54. [61]

    Just as the High Court held in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority at [35] that primary regard must be had to the terms of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) in valuing the acquired land for the purposes of determining compensation, so too primary regard must be had to the terms of the Valuation of Land Act in valuing the subject parcels of land for the purpose of determining the land values. There is no warrant to have regard to “principles” deriving from a body of case law built up in other jurisdictions on other legislation that do not control the meaning and application of the terms of the Valuation of Land Act.

55. [62]

    I have earlier noted that the Valuer General had difficulty in precisely articulating the “valuation principle” which the primary judge was said to have infringed in determining the value of the subject parcels of land. The best articulation the Valuer General could offer was that it was wrong as a matter of valuation principle to apply equal weight to the comparable sales. If that be the principle, it finds no basis in the terms of the Valuation of Land Act, either in the definition of “land value” in s 6A or in the valuation methodology in Part 1B.

56. [63]

    Accordingly, even if the primary judge were to have infringed this so-called valuation principle by applying equal weight to the comparable sales, this would not involve an error on a question of law, as it would not be in contravention of the terms of the Valuation of Land Act. For completeness, it should be noted that the Valuer General did not raise as a ground of appeal that the primary judge’s decision otherwise involved illegality, irrationality or procedural impropriety so as to be reviewable for these errors on questions of law.

57. [64]

    For these reasons, I reject the weight ground.

The averaging ground

1. [65]

   The Valuer General contended in the averaging ground that the primary judge, in determining the value of each parcel of land, appears to have averaged the values of the comparable sales. The Valuer General submitted that the authorities are clear in holding that a process of averaging sale prices is a fallacious or unsound approach to the valuation of land: see McCathie v Federal Commissioner of Taxation (1944) 69 CLR 1; [1944] HCA 9 at 15; The Commonwealth v Milledge at 161; Daandine Pastoral Co Pty Ltd v Commissioner of Land Tax (1943) 7 The Valuer 299.

2. [66]

   The Valuer General submitted that although the reasoning process is not disclosed, the primary judge appears to have “picked a round number somewhere between the mean and the median, which is something akin to taking the mean of the median and the mean” (Appellant’s Written Submissions, [30]). This involves an averaging of values. The Valuer General submitted that to do so involved an error in valuation principle, which is an error on a question of law: Melwood Units Pty Ltd v Commissioner of Main Roads at 432; Maurici v Chief Commissioner of State Revenue (2003) at [8].

3. [67]

   The Valuer General’s argument on the averaging ground involved the same three steps as its argument on the weight ground: first, the averaging of values involved error in valuation principle; second, the primary judge averaged the values; and third, this error in valuation principle is an error on a question of law. I find that the Valuer General has not established any of these three steps in its argument.

4. [68]

   As to the first step, the decisions cited by the Valuer General do say that the method of averaging the sales of properties that are comparable to the land to be valued is “unsound” (see Daandine Pastoral Co Pty Ltd v Commissioner of Land Tax at 299; McCathie v Federal Commissioner of Taxation at 15) and “rarely, if ever, … can be anything but fallacious” (The Commonwealth v Milledge at 161). To do so is, in effect, to constructively fail to exercise the statutory jurisdiction to value the subject parcels of land. That is in effect what Dixon CJ and Kitto J said in The Commonwealth v Milledge at 162. To simply take an average of the valuations of the six expert valuers in that case was not to discharge the function of the judicial valuer “to fix a sum satisfactory to the mind of the court as representing the value contained in the land”. To discharge this function of valuing the land the judicial valuer was required “to form an estimate which really satisfied his Honour’s mind as being the value of the property to the plaintiff on the material date”.

5. [69]

   To constructively fail to exercise jurisdiction is an error on a question of law. But it is not an error in valuation principle. There is no valuation principle proscribing, in every case, the calculation of the average of a set of numbers in a data set or having regard to the average so calculated in determining the value of the land. Care may need to be taken in how regard is had to the average in fixing the value of the land, in particular to avoid strict adherence to the average instead of considering all of the material before the court. But this is a caution on how to consider an average of values, not a proscription on considering an average at all.

6. [70]

   As to the second step in the Valuer General’s argument, the primary judge did not do what the Valuer General contended would be an error in valuation principle. The primary judge did not simply average the comparable sales to fix the value of the subject parcels of land. That was the approach criticised in Daandine Pastoral Co Pty Ltd v Commissioner of Land Tax and McCathie v Federal Commissioner of Taxation. The primary judge did not average the values of the parcels of land determined by the parties’ valuers to fix the value of the land, which was the approach criticised in The Commonwealth v Milledge. Instead, the primary judge calculated a median and an average of the adjusted rates he had derived from the comparable sales to assist him “to form an estimate which really satisfied his Honour’s mind as being the value” of the subject parcels of land in the relevant valuing years.

7. [71]

   The primary judge needed to settle on one adjusted rate (in $/m2 PGFA), derived from his analysis and adjustment of the comparable sales, to determine the value of each parcel of land to be valued for each valuing year. The primary judge’s analysis and adjustment of the comparable sales yielded a range of adjusted rates. This range was set out in the four tables annexed to the judgment. The primary judge gave the lowest and highest adjusted rates in the range for each parcel of land to be valued, as well as the median and the mean of the range of adjusted rates. The land value to be determined by the primary judge would be calculated using a rate (in $/m2 PGFA) which fell somewhere within the range of adjusted rates, as these rates were derived from the comparable sales. The primary judge’s task was to select a rate within this range of adjusted rates. To assist, the primary judge calculated the median and the mean of the adjusted rates in the range. These values were not selected by the primary judge as the rate to be used to determine the land value; they merely provided statistical information about the data set of adjusted rates to assist the primary judge in selecting the rate to be used.

8. [72]

   The primary judge determined a rate to calculate the land value that was within the range of adjusted rates but was neither the median nor the mean of the adjusted rates in the range. Nor was the rate the primary judge determined the average of the median and the mean, as the Valuer General submitted. The rates determined by the primary judge were as follows:

9. [73]

   The Valuer General’s submission that the primary judge engaged in a process of averaging to determine the land value is therefore factually erroneous. First, the primary judge did not average the values of the comparable sales and derive a final value based on that averaging. Secondly, the only averaging undertaken was of the adjusted rates derived from the comparable sales, which is a different exercise to averaging the values of the comparable sales before adjustment. Even then the average of the adjusted rates in the range for each parcel of land to be valued was merely a statistic to assist the primary judge in determining the rate to be used, but was not itself used by the primary judge to determine the rate. The rate the primary judge determined was in each case different to the average of the adjusted rates. Thirdly, the rate the primary judge determined was not an average of the values of the median and the mean of the adjusted rates in the range. The rate may have fallen between the values of the median and the mean, but it was not the average of those values.

10. [74]

    As to the third step in the Valuer General’s argument, the averaging process that the primary judge undertook did not involve an error on a question of law. As I have explained in dealing with the weight ground, the statutory task of valuation of land under the Valuation of Land Act does not demand consideration and application of valuation principles derived from a body of case law of courts of other jurisdictions on other legislation. The task of valuation of land is to be performed in accordance with the terms of the Valuation of Land Act. Those terms do not proscribe calculation and consideration of an average or a median of numbers in a data set in determining the value of land under the Valuation of Land Act.

11. [75]

    Accordingly, the primary judge’s calculation and consideration of the median and the mean (average) of the adjusted rates that he derived from the comparable sales to inform, but not to fix, the value of the parcels of land, did not involve performing the task of valuing the land not in accordance with the terms of the Valuation of Land Act.

12. [76]

    For these reasons, I reject the averaging ground.

The reasons ground

1. [77]

   The Valuer General advanced the reasons ground in the alternative to the averaging ground. The Valuer General submitted that if the primary judge did not determine the rate (in $/m2 PGFA) to be applied to determine the value of the parcels of land by averaging, then the primary judge failed to give reasons for his decision. A failure to give reasons is an error of law: Beale v Government Insurance Office (1997) 48 NSWLR 430 at 443-444.

2. [78]

   The Valuer General submitted that the primary judge was obliged to provide reasons for making the relevant findings of fact in determining the value of the parcels of land to be valued. This included providing reasons for determining the rate (in $/m2 PGFA) to be applied to determine the land value.

3. [79]

   Returning to its argument on the weight ground, the Valuer General submitted the primary judge needed to provide reasons for his finding that all the sales were of equal weight. The Valuer General submitted:

4. [80]

   I reject this ground. The primary judge gave more than adequate reasons explaining each step in his decision-making process. As I have earlier held, the Valuer General has misunderstood what the primary judge said and did regarding the weight to be given to the comparable sales.

5. [81]

   The primary judge explained why he decided that all of the sales selected by the parties’ valuers were comparable sales and how he analysed and adjusted each of those sales to derive rates (in $/m2 PGFA) that could inform his decision on the value of each of the parcels of land. The primary judge explained in the text of the judgment and summarised in the tables annexed to the judgment the adjustments that he found should be made to derive the adjusted rate from the comparable sales for each of the parcels of land. The primary judge provided the range of adjusted rates and their median and mean. The primary judge then determined the rate that he considered should be used to value each parcel of land for each valuing year.

6. [82]

   This detailed explanation of the primary judge’s decision-making process satisfies the obligation to provide reasons for the relevant findings of fact and conclusions regarding the value of the land parcels. I reject the reasons ground.

Conclusion and orders

1. [83]

   The Valuer General has not established that the primary judge erred on a question of law in any of the ways raised in the weight ground, the averaging ground or the reasons ground. The appeal should be dismissed with costs.

2. [84]

   I propose the Court makes the following orders:

   1. (1)

      The appeal is dismissed.

   2. (2)

      The appellant is to pay the respondent’s costs of the appeal.