Land Valuation Appeal Upheld in NSW

The Court upheld an appeal against a statutory valuation of land, determining a new value based on expert evidence and statutory requirements under the Valuation of Land Act 1916.

Land and [ADDRESS] South Wales

Medium Neutral Citation: [COMPANY] [NAME] v [NAME] [2018] NSWLEC 50 Hearing dates: 26 to 29 March 2018 Date of orders: 13 April 2018 Decision date: 13 April 2018 Jurisdiction: Class 3 Before: Moore J Decision: (1) The appeal is upheld; (2) Pursuant to s 40(1)(b) of the Valuation of Land Act 1916, the value of Lot 5072 in Deposited Plan 878258 as at 1 July 2015 is determined as being $31,100,000; (3) The exhibits are returned; and (4) Costs are reserved. Catchwords: VALUATION - appeal against statutory valuation - [NAME] zoned B2 - Local Centre - highest and best use agreed to be a large mixed use development combining retail, commercial and residential elements - [NAME] agree on gross floor area (GFA) yield from hypothetical redevelopment of the [NAME] - differences between [NAME] as to the break-up of the GFA between the development types - rejection of portion of the Respondent's [NAME]'s evidence - agreement by [NAME] that comparative sales analysis to derive an analysed rate per square metre of GFA was appropriate valuation approach - [NAME] disagreed on application of valuation approach - Applicant's [NAME] derives a single analysed, derived rate from sales to be applied to total GFA for the [NAME] - Respondent's [NAME] derives separate analysed, derived rates from sales to be applied to different GFA components for the [NAME] - Respondent's [NAME]'s sales considered and rejected - piecemeal approach no longer relevant as a consequence - no need to resolve [NAME]' differences - Applicant's [NAME]'s sales considered - one previously rejected as in common with the Respondent's [NAME]'s sales - three remaining sales considered - two rejected - remaining sale provides sufficient basis for valuation comparison - Applicant's [NAME]'s sales adjustments to be preferred over those of the Respondent's [NAME] - resultant rate per square metre of GFA to be applied to the [NAME] shows lower base-date valuation - onus pursuant to s 40(2) of the Valuation of Land Act 1916 satisfied - lower valuation ordered in substitution for that subject of the appeal Legislation Cited: The Hills Local Environmental Plan 2012 Valuation of Land Act 1916, ss 6A and 40 Cases Cited: [COMPANY] v Commissioner of Highways (No 1) (1973-1976) 32 LGRA 170 Holcim (Aust) Pty Ltd v Valuer-General [2009] NSWLEC 225 Housing Commissioner of New South Wales v Falconer and Others [1981] 1 NSWLR 547 Leichhardt Council v [NAME] & Traffic Authority of NSW (2006) 149 LGERA 439; [2006] NSWCA 353 Category: Principal judgment Parties: [COMPANY] [NAME] (Applicant) [NAME] (Respondent) Representation: Counsel: [redacted] [NAME] and [NAME], barristers (Respondent)

Solicitors: [redacted] [NAME] (Respondent) File Number(s): 321056 of 2016 Publication restriction: No

TABLE OF CONTENTS– Introduction The contested valuation The statutory framework The challenged value The relevant planning framework The evidence 87-[ADDRESS] and [ADDRESS], Beecroft Objections to [NAME]'s evidence The inspection The town planning evidence Valuation methodology Introduction The use of comparable sales and the extent to which they might be adjusted The piecemeal approach or a global mixed use valuation? Introduction The piecemeal approach A single mixed use development rate per square metre of GFA Addressing the competing approaches of the [NAME] The same market test [NAME] Introduction Consideration [ADDRESS] Consideration The fate of [NAME]'s piecemeal approach Introduction [NAME]'s comments on [NAME] in the joint report An initial consideration of [NAME]'s approach to this sale Conclusion on the piecemeal approach The sales relied upon by [NAME] Introduction The adjustment process generally The remaining three sales relied upon by [NAME] 70 [NAME], Kellyville Introduction Consideration 131-139 [NAME], Kellyville Introduction [NAME], [ADDRESS] [NAME]'s approach to this sale [NAME]'s approach to this sale Comparing the two proposed adjustment regimes Evaluating the positions of [NAME] and [NAME] on this sale Conclusion on the [NAME] sale Conclusion on [NAME]'s valuation approach The role of the judicial [NAME] The validity of the [NAME] sale comparison Applying the [NAME] sale Conclusion Orders

Judgment

Introduction 1. [NAME] conducts a regular programme of statutory valuations of land in New South Wales. The valuation process is regulated by the Valuation of Land Act 1916 (the Valuation Act). These statutory valuations provide the basis by which rates and taxes can be levied on [NAME] in a fashion calculated by reference to the unimproved value of the land. The statutory scheme in the Valuation Act, the relevant provisions of which are later set out, permits a [NAME] to object to the valuation determined for a parcel of land. Upon consideration of such an objection, [NAME] can confirm the initial valuation or make some adjustment to it in response.

2. If an [NAME] is dissatisfied with the result of [NAME]'s review (whether the review rejected the objection or reduced the valuation but not to the extent for which the [NAME] contended being immaterial), the Valuation Act gives the [NAME] the right to appeal to this Court against the determined statutory valuation. That is what has occurred to give rise to these proceedings.

The contested valuation 1. [COMPANY] (the Company) owns, relevantly, a parcel of land located on [NAME] in the [NAME] in The Hills local government area. The legal description of this land is Lot 5072 in Deposited Plan 878258 (the [NAME]). The [NAME] has an area of 44,010 square metres and is the location of a shopping centre known as [NAME].

The statutory framework 1. The process pursuant to the Valuation Act earlier described has been invoked by the Company with respect to the valuation determined by [NAME] for the base date of 1 July 2015. There are two provisions of the Valuation Act which are relevant to these proceedings. The first is s 6A of the Valuation Act, the provision which sets out the valuation basis upon which the challenged land value is required to be determined. The provision is in the following terms: 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. (3) …. (4) ….

1. The second relevant provision is that which sets out the powers of the Court in disposing of any appeal and assigning the burden of proof in any proceedings conducted on an objection to a statutory value. This provision, s 40 of the Valuation Act, is in the following terms: 40 Powers of Land and [ADDRESS] on appeal (1) On an appeal, the Land and [ADDRESS] may do any one or more of the following: (a) confirm or revoke the decision to which the appeal relates, (b) make a decision in place of the decision to which the appeal relates, (c) remit the matter to the [NAME] for determination in accordance with the Court's finding or decision. (2) On an appeal, the appellant has the onus of proving the appellant's case.

1. It is appropriate to note, particularly, that s 40(2) can be seen, in terms, expressly to place the burden of proof in these proceedings on the Company to demonstrate that the value determined by [NAME] and challenged by the Company is incorrect.

The challenged value 1. The value determined by [NAME] for the base date of 1 July 2015 for the [NAME] was $75,000,000. After the Company objected to this value, it was reduced to $51,370,000. Being dissatisfied with the limited extent of the reduction, the Company commenced these proceedings, contending for a value of $25,340,000.

2. As later discussed, the Company and [NAME] have retained expert consultant [NAME] for the purposes of these proceedings and the values calculated for the [NAME] by each of these experts in their individual expert reports are set out in my later discussion of the valuation evidence.

The relevant planning framework 1. The [NAME] is zoned, for the most part, B2 - Local Centre under The Hills Local Environmental Plan 2012 (the [NAME]). A small portion of the [NAME], in its north-eastern corner, is zoned SP2 - Special Purposes. This portion of the [NAME] forms part of the major trunk drainage system running through the locality. The [NAME] forms but part of the B2-zoned land at this location. The relevant portion of the Land Use Table in the [NAME] applying to the B2 zone, as at 1 July 2015, is in the following terms: 1 Objectives of zone To provide a range of retail, business, entertainment and community uses that serve the needs of people who live in, work in and visit the local area. To encourage employment opportunities in accessible locations. To maximise public transport patronage and encourage walking and cycling. 2 Permitted without consent Home businesses; Home occupations 3 Permitted with consent Attached dwellings; Boarding houses; Building identification signs; Business identification signs; Child care centres; Commercial premises; Community facilities; Educational establishments; Entertainment facilities; Function centres; Home-based child care; Information and education facilities; Medical centres; Multi dwelling housing; Passenger transport facilities; Recreation facilities (indoor); Registered clubs; Residential flat buildings; Respite day care centres; Restricted premises; [NAME]; Service stations; Shop top housing; Tourist and visitor accommodation; Any other development not specified in item 2 or 4 4 Prohibited Agriculture; Air transport facilities; Animal boarding or training establishments; Boat building and repair facilities; Boat sheds; Camping grounds; Caravan parks; Cemeteries; Charter and tourism boating facilities; Correctional centres; Crematoria; Depots; Eco-tourist facilities; Electricity generating works; Environmental facilities; Exhibition homes; Exhibition villages; Extractive industries; Farm buildings; Forestry; Freight transport facilities; Heavy industrial storage establishments; Home occupations (sex services); Industrial retail outlets; Industrial training facilities; Industries; Marinas; Mooring pens; Moorings; Mortuaries; Open cut mining; Recreation facilities (major); Research stations; Residential accommodation; Resource recovery facilities; Rural industries; Sewerage systems; Sex services premises; Signage; Storage premises; Transport depots; Truck depots; Vehicle body repair workshops; Warehouse or distribution centres; Waste disposal facilities; Water recreation structures; Water supply systems; Wharf or boating facilities; Wholesale supplies 1. Amongst the material tendered in the proceedings is an extract of the zoning map covering the area where the [NAME] is located, with the [NAME] itself outlined in red. A portion of that extract of the zoning map showing the [NAME] is reproduced below:

1. The more fine-grained, detailed planning prescriptions relevant to the [NAME] are contained in The Hills Development Control Plan 2012 (the THDCP). Some relevant provisions of this document might have required to be referenced later but, given the conclusions I have reached, were not. Finally, State Environmental Planning Policy 65 (the SEPP) - and the Apartment Design Guide (the ADG) springing from it - were also potentially relevant (but have not been required to be considered).

The evidence 1. A range of documentary evidence was tendered (two elements of which were the subject of objections, later discussed). Individual expert reports were provided in the disciplines of town planning and land valuation. For the Company, expert evidence was given by: * [NAME] (town planning); and * [NAME] (valuation).

1. For [NAME], evidence was given by: * [NAME] (town planning); and * [NAME] (valuation).

1. Each of the experts had prepared an individual expert report and, in each discipline, the relevant experts had conferred and produced a Joint Expert Report. The experts gave concurrent oral evidence, grouped in their area of expertise.

87-[ADDRESS] and [ADDRESS], Beecroft 1. [NAME] sought to rely on the sale of 87-[ADDRESS] and [ADDRESS], Beecroft, a sale which had come to his attention after the conclusion of the joint reporting process. At the commencement of the hearing, I ruled on this proposed reliance and rejected it. I gave the following reasons for so doing: The application Class 3 was filed on 27 October 2016. The first directions were made by me on 25 November 2016, there were further directions made in March and in July 2017. Final relevant directions were made by me on 29 September 2017. My [NAME]'s statement of expert evidence was filed on 8 September. The Joint Expert Report of the [NAME] was filed on 16 October 2017. I am satisfied, under the circumstances, where direction 10 of the directions made by me on 29 September 2017 permitted the matter to be relisted on three working days' notice, if required, that [NAME] became aware of the possibility of relying on the sale of the land at 87 to [ADDRESS] and [ADDRESS], Beecroft on 20 March. Had the Respondent wished to rely on it, it would have been appropriate to have exercised the liberty to relist, bring the matter back to make an application to do so under the circumstances. That is particularly the case when, by consent, there was an online court communication seeking a variation of the directions by me to accommodate the manner of starting the [NAME] inspection this morning. There is no sufficient explanation as to why the matter did not come back immediately upon [NAME] being made aware of the sale. There is no explanation given to me as to how [NAME] first became aware of a sale that took place in January 2015, some more than three years after that sale. Information that is contained in folio 95 of the Court book provides no utilitarian value in these proceedings, reliance on that sale is rejected.

Objections to [NAME]'s evidence 1. [NAME] SC, counsel for the Company, objected to [NAME]'s individual statement of evidence and, flowing from that objection, to portions of the Joint Expert Report prepared by [NAME] and [NAME]. [NAME] proposed that I should reject outright the totality of [NAME]'s report. However, if I was not to do so, she advocated significant deletions be required to it.

2. I ruled on these objections during the course of the hearing. I declined to reject the entirety of [NAME]'s report. However, I did uphold the [NAME] basis upon which [NAME] founded her objection. [NAME], barrister for [NAME], had had a marked up copy of [NAME]'s report, with strikeouts through those portions which it was conceded would not be relied upon if I upheld the objection (for some portions) and some others which he conceded it was not appropriate to be relied upon. 3. [NAME] proposed not to read some portions of [NAME]'s evidence, other portions remained in contest. The essential dispute was the extent to which he relied upon planning proposals that had been lodged or were in contemplation as at the base date where those planning proposals sought potentially significant increases in development yields for the sites to which they related. 4. [NAME] submitted that, as such planning proposals were required to go through a "Gateway" process and were not a matter of public record until after a preliminary assessment process had been undertaken, knowledge of them could not have been in the public domain as at the base date.

5. Although I was prepared to accept, on the basis of the more [NAME] evidence of the two [NAME], that there was a market expectation that greater development yields might be anticipated (thus admitting anything in [NAME]'s evidence expressing this [NAME] view), I was not satisfied that the extent of detail he set out in his evidence could be regarded as being based on foresight (in the permissible Housing Commissioner of New South Wales v Falconer and Others [1981] 1 NSWLR 547 sense) as at the base date. The precision of the detail exposed in his evidence was not of a nature able to be predicted merely from any [NAME] expectation that increased development yields might be contemplated to be permitted in the future.

6. The consequence of this was that objections remained to elements of the joint report, which [NAME] and [NAME] had prepared, as portion of the former's material in this report reflected material I had rejected in his individual report.

7. The parties presented me with competing versions of how this joint report should be amended to reflect my earlier ruling on [NAME]'s individual statement of evidence. I was provided with a copy of the joint report, marked‑up on behalf of the Company to reflect those matters which it was submitted should be excluded. For the Respondent, much of that proposed to be excluded was accepted to be treated in that fashion, but I was provided with a copy of the Company's version, marked-up on behalf the Respondent and identifying those portions that the Respondent submitted should not be excluded.

8. The parties were content that, in my consideration of the matter after I reserved my decision, I rule on those differences; provide the parties with a copy of the joint report marked-up by me to reflect my rulings; give the resultant version of the joint report an exhibit number; and have regard to it in my deliberations. I undertook this course and provided a colour marked-up copy of the joint report (now Exhibit E). Some of the material proposed by the Company for deletion but sought to be retained by the Respondent, I permitted to be retained (but not all of it). The material objected to by the Company but permitted to be retained dealt with matters of [NAME] expectation of future increased development potential (consistent with my rulings on [NAME]'s individual statement), but excluded material which I considered was derived from material I had rejected in his individual statement.

9. I have had regard to Exhibit E in that amended form in reaching the conclusions set out in this decision.

10. I should also record that, during [NAME]'s questioning of him, [NAME] was unable to explain, convincingly, a number of what seemed to me to be obvious omissions from, or errors in, his evidence. On the other hand, [NAME]'s evidence was generally plausible and, when a concession was required, he made it without hesitation. In noting this comparison, I am not to be taken to be rejecting, outright, [NAME]'s evidence - merely that I have approached it with some caution when it was in conflict with that of [NAME].

The inspection 1. The hearing commenced with an inspection of the [NAME] and of five other sites relied upon by the [NAME] as comparable sales considered by them in their valuation analyses in their individual and joint expert reports. Those analyses are later described in my consideration of the valuation evidence. During the course of these inspections, I was accompanied by the advocates for the parties and those instructing or advising them.

2. Although we stopped at the [NAME], our inspection of it was a superficial one, confined to the exterior of the main building. It is, however, appropriate to note that the [NAME] of the Northwest Metro Line is currently under construction directly opposite the [NAME] across [NAME].

3. All of the additional locations viewed were inspected on a drive-by basis. The other locations viewed, and the [NAME](s) who had adopted the sale of that location for primary analysis purposes, are set out below: [NAME], Kellyville ([NAME]) [ADDRESS], Bella Vista ([NAME] and [NAME]) 133-139 [NAME], North Kellyville ([NAME]) 70 [NAME], North Kellyville ([NAME]) [NAME], [ADDRESS] ([NAME])

The town planning evidence 1. [NAME] and [NAME] agreed that the highest and best use for the [NAME] was as a mixed use development comprising three elements. This development mix would encompass retail space; commercial space; and residential apartments. Although they were in agreement as to this mix, they disagreed as to the proportions of the development potential of the [NAME] for these combined purposes (described as "gross floor area" (GFA) – 63,353m2) that should be attributed to the varying elements within the mix.

2. In addition, with respect to the residential development potential, there was also a dispute between them as to what would be the mix of apartment types and their expected floor-space areas in any hypothetical redevelopment of the [NAME].

3. Because of the conclusion I have reached concerning the outcomes to fall from consideration of the various sites relied upon for valuation analysis, and the result that those determinations mandated for the valuation methodology to be adopted, I do not need to undertake a detailed consideration of the differences between [NAME] and [NAME].

Valuation methodology

Introduction 1. There are three matters of valuation methodology that arise for consideration in these proceedings. For the first, the controversy is not as to the broad comparative sales methodology but it is to how that methodology is to be applied in these proceedings. The second is a choice between two specific but different methodologies advocated by the parties' [NAME]. The third, only to be noted, is a matter of valuation theory arising out of s 6A of the Valuation Act. It is appropriate, first, to set out the nature of the methodologies before, later, turning to their application in the present proceedings.

The use of comparable sales and the extent to which they might be adjusted 1. [NAME] and [NAME] use, in differing fashions, a commencing comparable sales analysis for the purposes of deriving a single analysed rate (in [NAME]'s case) or rates (in [NAME]'s case) per metre of GFA to be applied to the total available GFA able to be yielded by a hypothetical development on the [NAME]. The use of comparable sales is, in [NAME] terms, entirely uncontroversial - both in [NAME] valuation theory and in these proceedings.

2. As the [NAME] have, with one exception, relied upon different sales, the first matter arising is whether I accept any or all of these sales as being validly engaged as genuinely comparable.

3. The second controversy that arises in these proceedings concerning the comparable sales is the extent to which adjustments may be made to any sale accepted by me to be appropriate for comparability purposes before those adjustments become so great as to render the sale of no utility in the present proceedings.

4. In his written submissions, [NAME] referred to the decision of Wells J in [COMPANY] v Commissioner of Highways (No 1) (1973-1976) 32 LGRA 170 ([NAME]). It is appropriate to set out precisely what his Honour wrote about the use of comparable sales in that decision. He said, at 179-180, the following: It is [NAME] valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the [NAME] must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in [NAME] v. The Commonwealth of Australia and in later cases to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the [NAME] must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive. What I am concerned to emphasize is that, as I understand the evidence, and according to the inferences that I feel I can safely draw from it, there is no hard and fast rule by the application of which a [NAME] may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert [NAME] to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill. The [NAME] must use his skill to winnow out the element of comparability if it is there, and us it with discretion.

1. Utilising this process, the sales relied upon by [NAME] and [NAME] are to be considered as to whether they can truly be regarded as comparable for analysis and, if they are not to be so regarded - as I have determined is the position with respect to all but one sale relied upon - how that impacts on the valuation methodology to be applied.

2. It will then be necessary to consider, specifically, the adjustments proposed by [NAME] to the sole one of his comparable sales which I consider is relevant. It will also be necessary to address the alternative adjustments proposed by [NAME] as applicable for utilisation of this sale. Having determined the appropriate adjustment approach, I will turn to whether the extent of the adjustments proposed be made to that sale for the various factors engaged renders that remaining sale unacceptable.

The piecemeal approach or a global mixed use valuation?

Introduction 1. The [NAME] agreed that the highest and best use for the [NAME] would be for a mixed use development combining retail, commercial and residential elements. [NAME] and [NAME] agreed on the GFA of 63,353 square metres able to be achieved on the [NAME] in a hypothetical redevelopment, they were not in agreement as to how realisation of that highest and best use would be achieved in distributing the GFA available across the three development elements within that highest and best use.

2. For the purposes of this present discussion, the numbers that should be notionally allocated to each of these development types within that highest and best use is immaterial. What is material is the nature of the valuation approach to be adopted in light of the fact that there are the three uses to which, in a hypothetical development model, the [NAME] would be put.

3. To understand, better, the broad nature of the development typology potentially envisaged, [NAME]'s Figure 7, in his individual expert report, proposes one possible broad development scenario consistent with the typology. A copy of that image appears below:

1. In reproducing this image, I am not to be taken to be adopting [NAME]'s model, it is simply an example that demonstrates the necessary nature of the interrelationship that would be required between the three types of development within the agreed highest and best use typology.

The piecemeal approach 1. [NAME] has adopted a piecemeal approach for the purposes of deriving an overall analysed valuation for the [NAME]. To do this, he considers that it is appropriate to derive an analysed value for the notional residential element of the highest and best use typology by analysing a sale of a residential [NAME] in comparatively close proximity to the [NAME]. The residential sale upon which he relies for this analysis is at [NAME]. It is necessary, later, to consider this sale in some detail, but it is sufficient, for the present purposes, to record it as being relied upon by [NAME] for part of his piecemeal approach.

2. The second element relied upon by him in his piecemeal approach is the analysis of a sale of an allotment zoned B7 - [ADDRESS] for commercial development. He analyses this sale (of [ADDRESS]) in order to arrive at what he considers to be the appropriate rate per square metre of GFA, where that GFA is to be applied to the commercial development element in the highest and best use typology earlier described.

3. It is to be observed that [NAME] has not provided any analysed sales' evidence to derive a specific rate per square metre of GFA for that portion of the highest and best use typology that would be given over to retail space in such a mixed use development. His explanation, which I accept, is set out below.

4. On the topic of whether there is any difference in value between retail GFA and office GFA, [NAME] concluded in his individual expert report: Whilst it appears that retail rents are higher than office rents, indicating that the GFA for the retail component of the Subject Property on a $/m2 should also be higher, it is difficult to accurately measure the difference in rent, and value, between retail GFA and office/commercial GFA.

Accordingly, I have resolved in favour of the [NAME] to adopt the same rate on a $/m2 of GFA basis, I have considered the following Market Sales Evidence.

1. In discussing this mixed use typology, I need not turn to resolving the differences between [NAME] and [NAME] about how the total potential GFA yield for the [NAME] would be distributed between these three types of development.

A single mixed use development rate per square metre of GFA 1. In comparison to the piecemeal approach adopted by [NAME] relies on an approach of analysing four sales for the purpose of deriving a single, global rate per square metre of GFA to be applied to the whole of the GFA to be derived from what the [NAME] agree is the highest and best use hypothetical development typology for the [NAME]. By adopting this approach, [NAME] renders it unnecessary, for his valuation purposes, to resolve the differences between [NAME] and [NAME] as to how the available theoretical GFA would be distributed amongst the three uses accepted by them as being the components of the highest and best use typology development for the [NAME].

2. In undertaking his valuation approach, [NAME] has analysed and adjusted sales of four properties. These properties are located at: 1. 133-139 [NAME], Kellyville 2. 70 [NAME], North Kellyville 3. [NAME], [ADDRESS] 4. [ADDRESS], Bella Vista 1. It will be necessary to consider each of these sales in more detail, both as to the question of whether or not they are appropriate to be relied upon, in a validity sense, in light of the earlier quoted comments in [NAME] and, if they are acceptable when tested on this basis, whether or not they are, by their nature, appropriate to be relied on as generally comparable when tested against the [NAME].

Addressing the competing approaches of the [NAME]

1. During the course of the hearing, I foreshadowed that the approach to be taken would be one which first determined which valuation method was appropriate (Transcript, 28 March 2018, page 148, lines 7 to 22).

2. However, on reflection, whilst rereading the various elements of expert evidence with respect to the sales relied upon by each of the [NAME], I concluded that it would be more appropriate to commence with the question of whether or not I accepted each of the sales relied upon by either of the [NAME] as genuinely comparable.

3. Doing so, on the basis of the opinions I had formed concerning the various sales, resulted, necessarily, in my adopting the approach proposed by [NAME] (of a single rate per square metre of GFA to be derived from analysis of the sole sale I considered to be comparable) because I was satisfied that only that single sale (at [NAME]) had sufficient reliability to derive an analysed value for the [NAME] for the purposes of these proceedings.

The same market test 1. During the course of closing submissions, I put a proposition to [NAME] in the following terms (Transcript, 28 March 2018, page 172, lines 1 to 47): HIS HONOUR: You don't say to me that the hypothetical purchaser of [NAME] would not be competing in the same market as they hypothetical purchaser for the [NAME], do you? Doesn't that underlie the proposition of leaving aside what adjustments you have to make, you've got to have somebody who's prepared to be in the hypothetical concept, in the market for the properties are the subject of the proceedings and are relied upon for comparative purposes. [NAME]: I accept that, but they're not in this case. They cannot be because someone who's in the market to build 60,000 square metres in the middle of [NAME] is not in the market to build 6,000 square metres of mixed use development in the RU1 [NAME] rural zone location, which is where [NAME] is located. The markets are fundamentally different and that's what this annexure is telling your Honour. That's why you can't use [NAME]'s B2 sales because I think your Honour actually may have now captured the point, that it's not the same market. It may be a B2 zone, but the market is so different from what is going on in the [NAME] location from the market which is in the suburbs, you know, surrounded by a few McMansions and yes, a couple of small bits of retail and maybe a sort of a dentist and small local business premises. They're just so fundamentally different that the purchaser of the sales are not in the same market as the purchaser for 60,000 square metres in the middle of [NAME]. Your Honour has also identified other problems with [NAME], can I just remind your Honour what is at issue between the experts in relation to [NAME], if I could ask your Honour to turn to the joint report at para 83 and the second line, [NAME] sets out what the analysis is and he says that [NAME] has analysed it to be 205 square metres, then he says, "This is a very low rate even compared to the balance of the sales included in [NAME]'s report." He returns to that theme over the page at the end of 85 and beginning of 86 saying that it's a sale which is out of line with the balance of the market evidence. The concern that [NAME] relates to overall is a concern as to the rate utilised by [NAME] for the [NAME] portion of the land, so it has put in issue by [NAME] that there is a contest between the parties as to what the as to his concern over that chosen rate and as your Honour has correctly observed, the chosen rate is reached at by a process of reasoning which has not been exposed by [NAME]. That would be another reason for rejecting the [NAME] sale as unsafe but fundamentally, our fundamental proposition, your Honour, is it's unsafe because it's in the wrong location, secondly in the wrong market and thirdly simply too many adjustments need to be made to these sales for them to be reliable as far as your Honour is concerned.

1. I have always understood it to be the position that, in undertaking a hypothetical valuation in the fashion prescribed by s 6A of the Valuation Act, it was necessary that, when considering comparable sales, an essential element of that comparability was that the hypothetical vendor and the hypothetical purchaser envisaged to be undertaking the hypothetical statutory sale would also fit the nature of a vendor and a purchaser of any [NAME] used for comparative purposes.

2. To give an extreme example, I do not see that it would be appropriate to compare, by adjustment to derive an analysed value, a waterfront residential allotment in Point Piper with a residential allotment in a significantly less socio-economically advantaged area of Sydney - as the hypothetical vendor could not have the same attributes and expectations in each of these circumstances and nor could the hypothetical purchaser.

3. However, given my conclusion concerning the sale at [NAME], [ADDRESS] remaining sufficiently comparable to be analysed to derive a value per square metre of GFA to be applied to the [NAME], it is not necessary to explore the "same market" issue as it does not arise.

[NAME]

Introduction 1. [NAME] is a large residential development [NAME] zoned R4 for high density apartment development. It is located in close proximity to the [NAME] and, although a little further from the [NAME] of the nearby Northwest Metro Line Station, shares this proximity as an attractive feature to a purchaser.

2. This [NAME] is relied upon by [NAME] to derive an analysed value per square metre of GFA to be applied to the residential portion of the hypothetical redevelopment of the subject [NAME]. The analysed value he derives from this [NAME] is unrelated to the amount of GFA to which [NAME] would apply it on the [NAME].

3. Acceptance of the utility of this [NAME], for the derivation of an analysed rate per square metre of GFA, when that GFA is to be applied for residential purposes to the hypothetical development on the [NAME], is essential to acceptance of the piecemeal valuation approach adopted by [NAME]. This is because [NAME] is the only [NAME] initially relied upon by him to derive an analysed rate per square metre of GFA for the residential component of the hypothetical redevelopment of the [NAME]. 4. [NAME] does not rely on this sale for any purpose and considers it to be unreliable and of no utility (even if [NAME]'s piecemeal valuation approach was to be adopted).

Consideration 1. As I have earlier noted, the base date for the purposes of the statutory valuation challenged in these proceedings is 1 July 2015. The [NAME] at [NAME] was the subject of two separate transactions in [NAME] temporal proximity to the base date. Uncontroversially, both [NAME] accept that, amongst the range of adjustments to be made as part of the analysis of any sale, an adjustment for time may be necessary. Indeed, in the extract from [NAME] earlier set out, Wells J expressly acknowledged that time was potentially a necessary adjustment factor for the analysis and value derivation from a sale. 2. [NAME], himself, conceded, with respect to his analysis of the sale he used for this [NAME], that an adjustment for time would be warranted, although he had not made such an adjustment in his original analysis of the sale of this [NAME] utilised by him.

3. As noted above, this [NAME] was the subject of two separate transactions in, generally, the same temporal proximity to the base date. The first of them, in December 2014, was seven months prior to the base date and was for a sale price of $29,612,500. The second sale, in November 2015, some four months after the base date, was at a sale price of $200 million. Although self-evident from this recital, the time differences relative to the base date (but on either side of it) are somewhat similar and the total timespan between the first sale and the second sale is only 11 months.

4. There is no suggestion by the [NAME] that either of these transactions was not carried out as a genuine transaction between unrelated parties or that there was any particular constraint in the market, either generally or specific to [NAME], with respect to either of these sales. Although equally self‑evident, it is appropriate to observe that [NAME] benefited from an increase in value of approximately 675% over the period between the two sales (to reinforce the dramatic nature of this increase in value, when translated, roughly, to a daily increase in value over the period between sales, this increase was roughly 1.86% per day - calculated from 1 December 2014 to 30 November 2015).

5. For the purposes of his derivation, for his piecemeal approach, of an analysed rate per square metre of GFA to be applied to the residential component of the hypothetical redevelopment of the [NAME] analyses only the second sale of [ADDRESS]. He ignores, in its entirety, the first sale. He was questioned as to why he had not done so, with the relevant transcript extract being (Transcript, 27 March 2018, page 60, lines 30 to 38 and Transcript, 28 March 2018, page 108, line 9 to page 110, line 19): [NAME]: This is your sale-- [NAME]: Yes. [NAME]: --and you've chosen to ignore the first sale in time and rely entirely on the second sale, correct? [NAME]: Yes, that's correct because it was closest to the base date. … [NAME]: Okay, so when you said to his Honour yesterday that you had confirmed your understanding that the sale only related to the land because you had had this conversation with [NAME], if that's what you said that would be incorrect? [NAME]: That would be incorrect. [NAME]: Okay, let me ask you this question, you accept do you not that there was a contract entered into in December 2014 which was completed for, in round numbers, $30 million? [NAME]: I am aware of that, yes. [NAME]: And you accept, do you not, that at no point until the matter was raised with you by [NAME], did you mention in your statement of evidence in chief or the joint report that there had been that sale in December 2014? [NAME]: That's correct. [NAME]: Now, you rely on the second sale in 2015 for $200 million? [NAME]: Yes, that's correct. [NAME]: Now, there is nothing that occurred in the market between December 2014 and the contract date in 2015 that would explain the vast difference in value ascribed to this piece of land between 30 million and 200 million? [NAME]: Well, yes, they obtained-- [NAME]: No, market? [NAME]: Market? Well, that's generally correct. [NAME]: And the only difference that has occurred between the first sale and the second sale is that at the time of the second sale the amendment to the LEP had been made? [NAME]: That's correct. [NAME]: But at the time of the first sale, the amendment of the LEP was well advanced? [NAME]: But there's still no guarantee, but yes, that's correct. [NAME]: And you're not suggesting to his Honour that the difference between a draft LEP and a final LEP is in the order of $170 million, are you? [NAME]: Well, yes, I am saying that because that's what occurred. [NAME]: Well, [NAME], have you any other example from your experience where a property is sold for an amount with the draft LEP as a draft, so well advanced, no market change but the LEP being made, where there is a differential of this size? [NAME]: No, I'm not. [NAME]: And as an experienced [NAME] the difference in this differential between the first sale and the second sale would indicate to you that at the very least more research needs to be done to explain the difference? [NAME]: I think the difference is clear. I think that's what the market was willing to pay at that particular point in time with a property that has LEP amendments to allow such a large development on the [NAME]. [NAME]: [NAME], that's just nonsense, isn't it? [NAME]: No, it's not. [NAME]: There is no explanation based upon any valuation rationale, logic or common sense that would dictate that the mere change between a draft, which has been exhibited and out in the market place and a final LEP and no other change, would account for $170 million increase in value in - is it six or eight months between the two sales? [NAME]: [NAME]: Is it six or eight months between the two sales? [NAME]: It's probably eight months. [NAME]: Eight months. In eight months? [NAME]: Going back, the 2014 sale was by terms agreed back in 2012 so we're talking about a 2012 price versus a 2015 versus. [NAME]: Yes? [NAME]: There was a significant amount of time, risk still associated with the earlier sale versus the later sale. That was [NAME]: That accounts for $170 million? [NAME]: If that's the number then that's the number. HIS HONOUR: A sixfold increase in value? [NAME]: It was a significant increase to the GFA. [NAME]: Now, you accept, do you not, that it was a share transfer not a contract for sale of land? [NAME]: It was 100% company transfer, yes. [NAME]: Yes and that of itself leads one to consider the need to investigate in some detail the corporate structure and what was in fact being transferred? [NAME]: Yes.

1. It is also to be observed that, in his enquiries concerning the transaction for [NAME], he made no enquiry whatsoever concerning the first transaction, nor did he make any enquiry that would explain why there had been such a dramatic increase in the value of [NAME] over such a comparatively short period of time.

2. There is, however, a matter of some considerable significance that occurred prior to settlement of the second transaction for [NAME]. That factor was finalisation of an amendment to the [NAME] which had the effect of significantly increasing the potential development yield (GFA) from this [NAME]. Indeed, the evidence discloses that the settlement on the second transaction was contingent on the coming into effect of these amendments to the [NAME] ([NAME]'s comment - Exhibit E at [76]): This sale property did not sell with approval for development however the sale was conditional upon amendments being made to the LEP (which occurred on 29 April 2016) to increase the maximum building height and Floor Space Ratio (FSR). 1. [NAME] sets aside, absolutely, consideration of the first transaction concerning [NAME]. He observed (Exhibit E at [80]): I am also aware that there is a recorded sale of 47 Spurway on 22 October 2014 for $21,950,000. In my discussion with [NAME], a 50% owner of [COMPANY], the (then) purchaser, I was advised that the terms of the sale were agreed before the Planning Proposal was lodged by them in 2013. Accordingly this earlier sale is not considered to be of any assistance in determining the residential GFA value of the Subject Property.

1. His failure to consider this earlier sale means that I am unable to know any analysed rate per square metre of GFA which would have arisen as a consequence of the development yield which would have been applicable pursuant to the potential GFA yield from the unamended [NAME] as at the date of the first transaction. How this might stand in comparison to the rate per square metre of GFA to be derived from the application of the post amendment position of the [NAME] when applied to the $200 million transaction for this [NAME] is unknowable on the evidence before me.

2. Moreover, [NAME]'s approach to consideration of this [NAME] in circumstances where, on the stark difference between the two sale transactions, there was at least the potentiality for a position less advantageous to his client being the result of a proper analysis of the earlier sale causes me significant reservations as to the extent which I can have confidence, generally, in his evidence.

3. As [NAME] submitted I should do, I reject [NAME] because, under these circumstances of significant information deficiency, a clearly potentially highly relevant aspect of this [NAME]'s transaction history has been ignored by [NAME] and I have no evidence that could explain or rectify the omission.

[ADDRESS]

1. The property at [ADDRESS] was relied upon by both [NAME] and [NAME], albeit for differing purposes. It is zoned B7 - [ADDRESS] pursuant to the [NAME], a zone which, unlike the B2 zone of the [NAME], does not permit residential development. This [NAME] is located across the road from the [NAME] Hospital, a major private hospital complex, which has been developed on the land immediately to the north-west of [ADDRESS]. 2. [ADDRESS] has been developed for serviced apartments, a permitted commercial use. It is but one of the range of uses permitted in the B7 zone.

3. At the time of its sale, as vacant land, it had an approved development application for the development which has now been constructed on it. The existence of that development application for a specific, narrow purpose (albeit a commercial one) is a factor that the [NAME] both acknowledge needs to be taken into account in considering this sale.

Consideration 1. As [NAME] submitted, with respect to this property, the nature of the commercial development for which it was transacted would lack the necessary elements (for example, a loading dock) that would be essential features of the retail/commercial element of the hypothetical redevelopment of the [NAME].

2. In addition, the fact that this sale was for a specific and narrow commercial purpose, severely limits its utility (assuming it was to be accepted). This is because the range of commercial purposes capable of being incorporated in the hypothetical redevelopment of the [NAME] is constrained only by the restrictions which might arise from the wide and different range of uses permitted in the B2 zone under the Land Use Table of the [NAME].

3. Because of the zoning difference (with a different range of potential uses) and the very specific nature of the development approval arising from its proximity to the hospital, I am unable to accept the utility of [ADDRESS] as being appropriate for any comparative valuation purposes - whether by [NAME] or [NAME].

The fate of [NAME]'s piecemeal approach

Introduction 1. As I have rejected the only primary sales relied upon for [NAME]'s piecemeal approach, there would, ordinarily, remain no evidentiary basis upon which I could continue to consider it.

2. However, during his cross-examination, [NAME] said he had embraced [NAME]'s [NAME] sale in the [NAME]' joint report (Transcript, 27 March 2018, page 90, line 29 to page 91, line 29): [NAME]: So, in your valuation experience you would reject this sale as being a comparable sale for the purposes of determining the commercial component in the piecemeal exercise that you've undertaken? [NAME]: Ordinarily, yes. [NAME]: Well, is there anything out of the ordinary in this case, apart from the fact that you now find yourself without a sale-- [NAME]: Without a sale. [NAME]: --that would lead you to take a different approach in these proceedings? [NAME]: Yes. [NAME]: Is there? [NAME]: Yes. [NAME]: And what is that? [NAME]: I would have to look at a sale like [NAME] and start dissecting that to give the appropriate rates. [NAME]: Well, [NAME], you've rejected [NAME] as a comparable [NAME]? [NAME]: In my initial report, yes, I did. [NAME]: And in the joint report? [NAME]: No, in the joint report I attempted to embrace the sale. [NAME]: You looked at it, but you did not embrace it as your comparable sale? [NAME]: I thought I did, I thought I embraced it as part of my overall rate that I adopted on a square metre basis. [NAME]: Show me where? [NAME]: From page 102. HIS HONOUR: Paragraph 102. [NAME]: Sorry, paragraph 102.

[NAME]'s comments on [NAME] in the joint report 1. There are two aspects of the joint [NAME]' report where [NAME] deals with the sale of [NAME]. Although the above questioning elicited [NAME]'s reference to (102) of the joint report, this was, in fact the second aspect of the joint report where he had dealt with the [NAME] sale. The reference in (102) was merely his inclusion of a "blended" rate for the [NAME] sale in a table of sales relied upon for the derivation of an analysed residential rate to be applied to the [NAME].

2. He had, earlier, set out in a first reference to the [NAME] sale in his contribution to the joint report, a more expansive consideration of this sale. The first reference is one applicable to both possible methodologies - this appears at (93) to (96) of the joint report. It is appropriate to reproduce these paragraphs here in full. [NAME] wrote: Sale GJ3, [NAME], [ADDRESS] ([NAME]) 93 The sale at [NAME] as analysed by [NAME] is generally correct. [NAME] has analysed this sale to reflect a "blended" residential and non-residential GFA rate of $698/m2 of GFA however from review of the development consent architectural plans, the GFA mix is as follows: Component GFA (m²) Percentage Residential 4,172.4m2 75% Non-residential 1,357.4m2 25% TOTAL 5,529.8m2 100%

94 I have further analysed the sale of [NAME] as set out in the following table: Component GFA (m²) Percentage $/m² GFA $ Residential 4,172.4m2 75% $837/m2 $3,492,780 Non-residential 1,357.4m2 25% $300/m2 $407,220 TOTAL 5,529.8m2 100% $705/m2 $3,900,000

95 In my opinion, the Subject Property enjoys a superior location in comparison to [NAME], sold with the benefit of development approval and is smaller in GFA. The adjustments I have made to [NAME] are as follows: - An upwards adjustment of 5% to reflect market movement. - A downwards adjustment of 10% for [NAME]. - An upwards adjustment of 50% to reflect its inferior location, and - A downwards adjustment of 30% to reflect its smaller GFA potential, which usually equates to a higher rate on a $/m2 of GFA basis. 96 The total upwards adjustment to the sale of [NAME] is an upwards adjustment of 15%. which would show a residential potential GFA rate of $963/m2, a non-residential rate of $345/m2 and a blended rate of $810/m2.

An initial consideration of [NAME]'s approach to this sale 1. In [114] to [123], I explain why I reject [NAME]'s reliance on the sale at [NAME] because of his failure to provide internal analysis to justify the component values he discusses.

2. Exactly the same consideration arises with respect to [NAME]'s broad propositions concerning the [NAME] sale. There is absolutely no reasoning to explain how he derives the residential value which he has applied to the residential GFA in order to permit him to derive a rate per square metre of GFA for the commercial space.

3. Separating out these two different rates would be essential as a prerequisite to using the [NAME] sale for the purposes of his proposed piecemeal approach. Absent any internal analysis to justify the component values adopted by [NAME], it is inappropriate to accept his analysis for the purposes of its application to the piecemeal approach he advocates.

4. It is not necessary to express any preference at this point between his approach to analysis of the sale of [NAME] and that proposed by [NAME]. The two competing approaches to analysing this sale for the purpose of deriving a single rate per square metre of GFA are dealt with in detail between [124] to [149] where I conclude what is the appropriate rate per square metre of GFA to be applied to the whole of the potential GFA of the [NAME].

Conclusion on the piecemeal approach 1. For the reasons I have earlier set out, there remains no acceptable sales analysis appropriate to be used if a piecemeal approach was to have been adopted for deriving a value for the [NAME] as at the base date. The consequence of this is that this approach does not require further consideration.

2. The further consequence is that I do not need to address the differences between the approaches of [NAME] and [NAME] on the distribution of GFA between uses in the hypothetical redevelopment of the [NAME]. This distribution argument only arose for resolution if the piecemeal approach was to be applied.

The sales relied upon by [NAME]

Introduction 1. I have set out above why [NAME]'s piecemeal approach has no acceptable evidentiary support and thus is to be discarded. My rejection of his reliance on the sale at 24 [NAME] also necessitates rejection of this sale's use (albeit in a differing fashion) by [NAME]. This leaves [NAME]'s approach reliant on three remaining sales adopted by him for his final valuation analysis to derive a single value per square metre of GFA to be applied to the [NAME]. This analysis was set out in his table of adjustments which was Annexure 1 to Exhibit E. A copy of this table is reproduced at Annexure 1 to this decision.

2. The [NAME]' joint report included the following: 18 In this regard, we agree that buyers and sellers of high density residential and mixed use development sites typically ascribe a value, on a dollar/m2 potential GFA basis to the GFA which could be yielded from a development of a particular property. The basis for this market phenomenon is that the value of a development [NAME] is generally regarded as a function of the floor space which could be yielded from a development of that [NAME]. 19 [NAME] qualifies his agreement in this regard. He considers that (at (67) of his expert report-in-chief), as at the date of valuation, an intending purchaser of the subject property would be unlikely to construct the development of a scaling density on the subject land which would maximise the potential GFA of 63,353 square metres immediately. In particular, he highlights that it would be very unlikely that a substantial commercial office development would be contemplated at the base date of valuation given the prevailing commercial office market conditions. The full potential of the [NAME] would therefore be exploited over a period of time when market conditions were appropriate.

1. It will be later necessary for me to return to consider the comments of [NAME], quoted in (19) above, when determining what I should adopt as the appropriate rate per square metre of GFA to be applied to the [NAME].

2. It is also to be observed that, although the [NAME] itself sold in December 2014, the [NAME] agreed that that sale was of no significant assistance in determining a value for the [NAME] as at the base date (Exhibit E at (21)).

3. It is now necessary to turn to each of [NAME]'s remaining three sales; his analysis of them; [NAME]'s comment's concerning each of them; and what conclusion I reach as to the acceptability of each of them for application to the [NAME] through the valuation approach proposed by [NAME].

4. Having done these things, a conclusion can then be drawn about whether the Company has discharged the onus placed on it by s 40(2) of the Valuation Act and, if so, what new value for the [NAME], as at 1 July 2015, should be adopted.

The adjustment process generally 1. There are, at this point, two observations to be made concerning the adjustment process used by [NAME] as part of their analysis for the purposes of deriving a rate (in this case, per square metre of GFA) for the purposes of applying that rate to a [NAME] whose valuation is sought to be ascertained by the comparable sales approach. First, as is here the case, [NAME] may differ in their assessment, both as to the nature of the adjustments that need to be made and, for such adjustments, the percentage (positive or negative being immaterial) to be allowed for that adjustment.

2. Second, this is not an exact science. Indeed, for his analysis of the sale of 11 [NAME] concludes that, as a result of the adjustments he proposes have the effect of cancelling each other out, this sale requires no adjustment to be directly comparable for application to the [NAME]. [NAME] disagrees and proposes different adjustment factors. For reasons I later set out, I reject this sale for comparability purposes. For the present time, it is sufficient to note that it is, prima facie, difficult to see how this [NAME] could be regarded, on a rate per square metre of GFA, as perfectly aligned with the [NAME].

3. Finally, as a matter of [NAME] observation, it is clear that the greater the extent of the adjustment needing to be made, the more caution that should be taken in adopting a [NAME] as being appropriate to be used for such a comparability process. As stated by Biscoe J in Holcim (Aust) Pty Ltd v Valuer-General [2009] NSWLEC 225 at [31] (emphasis added): The basis for the [NAME]' valuation assessments is the sales comparison method. Accepted valuation practice permits adjustments for differences, such as in location, area and time to enable [NAME] to have comparable values which, following adjustment, account for the various differences with the subject property. Such adjustments are generally based on a reasoning process drawing on the skill and experience of the [NAME] and are undertaken to derive an opinion of value through a deductive process. Because properties are rarely identical, adjustments for differences are obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property. Too many adjustments potentially render the comparable sale unsafe to rely upon. Caution is therefore required where large adjustments are to be made. Reflecting the significant roles of skill, experience and personal assessment in the adjustment process, the scope for differences in the quantum and direction of adjustment between [NAME] can be considerable. Third, the Court should then apply these adjusted values to the subject property. The purpose of this is to determine, based on comparable sales and as best it can, what value the subject property would obtain if it were to be sold on the market.

1. In closing, [NAME] and [NAME] made submissions as to the approach to be taken to considering whether or not the extent of any adjustments might render a sale inappropriate to be utilised. 2. [NAME] submitted (Transcript, 28 March 2018, page 170, line 22 to page 171, line 20) that it was appropriate to aggregate the total of the adjustments, without having regard as to whether they were positive or negative, to achieve an overall indication of the extent of adjustments to be considered as to whether or not caution or rejection should be the fate of a particular sale: [NAME]: Not only are the location disadvantages so significant but a glance at annexure A will show your Honour why there are many problems with the uses of the comparable sales relied upon by [NAME]. And just to take, for a moment, [NAME], we see that there are a number of adjustments that need to be made. Now, if your Honour could just step back for a moment, remember what adjustments are. Adjustments are to reflect differences between the sales and the subject property. So, all of these things listed by [NAME] here are differences. There's a difference for size, there's a difference for height, that's the height potential that one can gain, there's a difference for commercial, there's a difference for [NAME], there's a difference for location and there's a difference for time. Those are all adjustments that need to be made for differences. And when one adds all those differences together, having regard to the adjustments, one gets to, for example, [NAME], 10% plus, sorry, 20% plus 10% plus 10% plus 10% plus 10% plus 15%, gives you a total adjustment not of 25% as is being suggested there, but of 105%. Your Honour, this is why I say it's important to understand what adjustments are, they are differences. So, where it's a minus 20, what that means is it's a difference between the sale and the subject property which is a difference in favour of the [NAME], but it's still a difference which needs to be accounted for. The height difference means that the subject property has better height potential than [NAME], but it's still a difference. It's a difference which has to be added to the difference for size. Again, the difference for commercial use needs to be added to it. One doesn't take 20 differences, ten in favour of the subject, ten against the subject and then say because those balance out and the total adjustments comes to nought therefore one gets to a sale which is comparable. And that point is best made by the analysis of 70 [NAME] which in my submission is the worst sale because it doesn't have any residential potential at all on it. But using [NAME]'s analysis of adding up the differences and balancing out one in favour of the other he gets to a total adjustment of zero. So, on that basis that's an absolutely comparable sale, having done all of his adjustments, it's the most comparable sale to [NAME] and the subject property, but just one glance at that and just looking at the two sites on the [NAME] visit, one can just say that is absolute nonsense and poppycock. Those sites could not be more different in their potential for development as a whole in their potential in particular for capturing residential components. So, it would be quite wrong, in my submission to look at those adjustments and say well, 40% for location, well that's a lot isn't it gosh, I'm a bit worried about that but then that's okay because you get 10% back for a commercial difference, you get 20% back or 40% back or 50% back in some cases for size differences and say, well they balance out and therefore, yep, it's okay, it works out, it's comparable. But it's not. Those differences are so significant when looked at in the totality and particularly when one analyses 70 [NAME] which on [NAME]'s analysis it requires no adjustment and to say that is a comparable sale. 1. [NAME] submitted that, in these circumstances, whether or not the extent of any adjustments might render a sale inappropriate was dependent on the nature of the adjustments, rather than net resultant adjustment figure (Transcript, 28 March 2018, page 176, lines 18 to 32): [NAME]: Now, we're told that the number, because there are numbers in these columns somehow make the sales unsafe or difficult. [NAME] accepts that you will never find a perfectly comparable property, even in my Oriental Bar case in the Court of Appeal where [NAME] appeared as my junior, where the sale that was relied upon by Justice Pain was the sale of the very same property, adjustments still had to be made. So, the fact of adjustments is not the issue. The question is whether the nature of the adjustments, it's not their quantum so much in this case but the nature of the adjustments, what you're adjusting for render them unsafe and we say the important elements are not needing to be adjusted because we're comparing like with like. But we are making adjustments for the fact that the very zoning of this land, the B2 zone is disparate in locations and therefore adjustments need to be made for that, but the underlying potential, the price that's been paid for that potential, appropriately adjusted can be reflected.

1. Although I do not recollect [NAME] being questioned on this point, specifically, it was my understanding from the tenor of his evidence that he did not favour this approach, but considered that the overall net amount of the adjustments, after adding them having regard to the fact that they were positive or negative, was appropriate. Under these circumstances, questions of caution would only arise if the net resultant adjustment factors were excessive.

2. I agree, generally, with [NAME]'s approach, with one, minor reservation - a reservation not arising in any extreme form in these proceedings, but one which does require later comment in my derivation of my final conclusion. I would accept the [NAME] proposition that, if a small resulting adjustment flowed from a series of positive and negative adjustment factors that were toward the upper level of acceptability but cancelling each out, that might be a circumstance where a particular sale being analysed might warrant being treated with considerable caution.

The remaining three sales relied upon by [NAME]

70 [NAME], Kellyville

Introduction 1. [NAME]'s description of 70 [NAME], Kellyville was set out in his individual expert report. His description is reproduced below: The property comprises a rectangular-shaped development [NAME] situated on the corner of [NAME] in North Kellyville. The property is located in a rapidly developing residential area undergoing substantial housing construction. The land is zoned B2 - Local Centre and was sold by [NAME] with an existing development approval and pre-commitment to lease the supermarket and liquor store as part of the development of the neighbourhood shopping centre. The development comprises a full line, 4,400 square metre supermarket, a BWS liquor store and 2,120 square metres of specialty stores and commercial space. The total GLA approved for the neighbourhood shopping centre is 6,713 square metres. The land had a total area of 15,590 square metres but was reduced with the acquisition of land for a roadway along the southern and western boundaries. The [NAME] will benefit from the construction of the [ADDRESS] railway station, situated at the [ADDRESS] Centre approximately 2.5 kilometres to the west.

1. His more [NAME] commentary on this sale was (at page 17 of his statement): • The property is situated within The Hills Shire Council, approximately five kilometres to the north of the subject property. • The [NAME] comprises land zoned B2 - Local Centre. • The land has been developed with retail shopping centre. • The location is inferior to the subject property being an area undergoing rapid development and expansion. The [NAME] locality is also continuing to undergo development expansion but is more advanced. • The date of sale being November 2014 approximately eight months prior the base date of valuation. • The land area and overall potential floorspace of the subject property is larger. • The sale property sold with the benefit of a development approval ([NAME]). • Overall an upwards adjustment to the sale is required for comparison purposes. The location of the subject property is superior being situated in a more prominent locality. The sale requires a downward adjustment for the existing [NAME], the requirement to incorporate a considerable component of commercial floor space at the subject property and the larger scale of development of the subject property with a discount for size required.

Consideration 1. This transaction was between a company in the [NAME] Group ([NAME]), [COMPANY], and a purchaser who proposed to undertake a retail development on the [NAME]. It was [NAME]'s evidence that [NAME] had entered into a pre-lease commitment for the operation of a supermarket and a BWS liquor outlet on the [NAME] when the development had been constructed. [NAME] did not know the precise term of the period for which the future lease would be expected to run, he acknowledged that this was likely to be a long-term lease of between 15 to 20 years. 2. [NAME] also accepted that the development anticipated for the [NAME] (and actually constructed, as was able to seen during the course of the inspection) did not envisage any residential component. Whilst he proposed that, in the long-term, the option existed for potential incorporation of some form of residential development on the [NAME] above the retail development, there was not now, and nor was there in any likely relevant future period, any prospect of such residential component. In effect, [NAME] acknowledged that this [NAME] was transacted as a "purely retail play".

3. Given that there was agreement between the town planning experts that the hypothetical development for the [NAME] would be one of a mixed use development incorporating the three elements earlier set out, I am not satisfied that this [NAME] provides a supportable basis for deriving a rate per square metre of GFA to be applied to the [NAME]. The transaction, given the nature of the vendor, supports the reasonable inference that the sale was for purely retail purposes and that it would only be appropriate to seek to derive a value from this transaction on the basis of retail GFA realised (rather than from the maximum GFA potential of the [NAME]) and with that value only reasonably available to be applied to a comparison for other GFA for retail purposes elsewhere. Given the earlier failure of the piecemeal approach advocated by [NAME], a purely retail value, on any basis, can have no utility in these valuation proceedings.

131-139 [NAME], Kellyville

Introduction 1. [NAME]'s description of 131-139 [NAME], Kellyville was set out in his individual expert report. His description is reproduced below: The property comprises a development [NAME] with extensive frontage to [NAME] and [NAME]. The property is located in a rapidly developing area with substantial development taking place. The [NAME] comprises two separate lots with a total land size of 39,500 square metres. The [NAME] was sold with an existing development approval for construction of a retail and shop-top housing development on the area of the land zoned [NAME], comprising a supermarket and specialty shops, McDonalds pad [NAME] restaurant and 209 residential apartments. The total floor space of the [NAME] component is 25,517m2. The retail area comprises 3,498m2 and the 209 residential apartments comprise 22,019m2. The components of the land zoned R1 [NAME] and R2 Low Density Residential were approved for a subdivision of 36 residential housing lots. In analysing the sale, the area of the land in the different zones has been calculated and an appropriate value assigned. The apportionment of value over the three different zones is set out as follows: Zone Assessment Value R1 [NAME] 18,242m2 @ $300/m2 = $5,472,900 R2 Low Density Residential 3,254m2 @ $400/m2 = $1,301,600 [NAME] 18,003m2 @ $290/m2 = $5,225,500 Total $12,000,000

The value assigned to the R1 [NAME] and R2 Low Density Residential land is derived from sales evidence in the immediate area around the time of sale. A parcel of land immediately opposite the property at 23-29 [NAME] zoned R1 [NAME] and R2 Low Density Residential, sold in June 2015 for $5,100,000. The land size of the property was 10,440 square metres, reflecting $489/m2 of land area. I have added a conservative rate of $300/m2 to the larger R1 - [NAME] area of the subject property, the higher rate of $400 per square metre to the small component of R2 Low Density Residential land. The [NAME] component of the land had many similarities to the potential of the subject property, in that a retail development has been constructed at ground-floor level with residential apartments situated above. The [NAME] does not have the requirement for an extensive commercial element within the [NAME] land compared to the subject property. Therefore, the land has been able to be developed with a greater density of residential apartments in comparison to the commercial development. The residential apartment ratio of the development represents 86% of the entire development with 14% comprising retail development. The [NAME] also benefits from the future construction of the Kellyville Railway Station, situated approximately 2.5 kilometres to the west along [NAME]. The apportioned value to the [NAME] land of $5,225,500 derived a GFA of 25,517m2 which reflects a GFA analysis of $205/m2.

1. His more [NAME] commentary on this sale was (at page 16 of his statement): The property is situated within The Hills Shire Council, less than four kilometres to the north of the subject property. The [NAME] comprises land zoned [NAME], R1 [NAME] and R2 Low Density Residential. The [NAME] land has been developed with retail and residential apartment development consistent with the form of development anticipated for the subject land. It does not comprise a commercial office component. The analysis of the sale has isolated the [NAME] zoned land from the remainder of the [NAME]. The location is inferior to the subject property, being an area undergoing rapid development and expansion. The [NAME] locality is also continuing to undergo development and expansion, but is more advanced. The date of sale being July 2015 is close to the base date of valuation. The land area and overall potential floor space of the subject property is larger. The sale property sold with the benefit of a development approval ([NAME]). Overall, an upwards adjustment to the sale is required for comparison purposes. The location of the subject property is superior being situated in a more prominent locality. The sale requires a downward adjustment for the existing [NAME], the requirement to incorporate a considerable component of commercial floorspace at the subject property and the larger scale of development of the subject property with a discount for size required. 1. [NAME]'s comments concerning [NAME]'s adjustments for this [NAME] were set out in Exhibit E. He did not propose different adjustments for this sale as he proposed that this sale should be rejected. He opined that the sale of 133-139 [NAME] was not comparable, saying: 84 In my opinion, this analysis is misleading as the sale price was agreed between the parties in early 2014. The town planning controls which applied to 133-139 [NAME] as at the date of the Option Agreement (and still as at the current date) included a maximum FSR of 0.5:1. 85 The development consent, which was subsequently granted, achieved a total GFA which is 284% greater than the maximum floor space which could have been yielded on the basis of the actual town planning controls which applied as at the date the transaction was "struck". The resultant analysed $/m2 GFA rate is significantly out of line with the balance of the market evidence, inlcluding [NAME]'s other sales. This may be due to the significant increase in the GFA which was ultimately achieved by the development consent. … 89 In my opinion, the analysis and application of the sale of 133-139 [NAME] as set out by [NAME] in his original report and in this Joint Report, does not provide for a "like for like" comparison. Having regard to the aforementioned considerations, I have not placed any weight on the sale of 133-139 [NAME], Kellyville.

1. He also made comment concerning this [NAME] in his oral evidence, when he observed (Transcript, 27 March 2018, page 93, lines 22 to 35 and Transcript, 28 March 2018, page 137, lines 19 to 31): [NAME]: My concern with this sale is looking at the title there were two option agreements, in January 14 and February 14 which is when the agreement to sale took place. When I spoke with the [NAME] he advised me that the purchase of the property was on the basis of existing town planning controls, at the time. Those existing town planning controls differ from what was actually sorry, let me rephrase that, what ended up being built on the [NAME] differed from what was in the DCP, noting that the development application did not there was no development application on this [NAME] until September of 2014, being nine months after the agreed option to purchase. It was deemed refusal in June 2015 and was later given development consent afterwards. There was no monetary recompense to the [NAME] as a result of any uplift that resulted from I think I used the right word, any uplift from the bigger building. … [NAME]: Overall, what assistance do you say that the Court gains from the sale at 133 139 [NAME]? [NAME]: I don't think it has any support. [NAME]: Why is that? [NAME]: I think the analysis is incorrect, it's location is incorrect and it's just too difficult to analyse. [NAME]: When you say it's location is incorrect, what do you [NAME]: Sorry, location is far inferior is what I meant, sorry.

Consideration 1. Quite apart from the mandatory steps for an expert witness's report (setting out the facts; describing the assumptions made with respect to those facts; and explaining the conclusions that the expert draws through this process), it is also necessary, as part of this chain of reasoning, that there must be sufficient explanation given of the various steps along the way, to enable a decision-maker to be satisfied that the conclusions upon which the expert proposes reliance should be placed are able to be understood clearly.

2. With respect to this sale, the [NAME] comprised three distinct elements. A portion of the [NAME] was zoned R1 - Low Density Residential; portion of the [NAME] was zoned R2 - Medium Density Residential, whilst the majority of the [NAME] was zoned B2 - Local Centre. It was the portion of the [NAME] with this latter zoning that [NAME] relied upon for his analysis and derivation of a rate per square metre of GFA to be applied to the [NAME]. To permit this, he isolates a value for the mixed use development element upon which he wished to rely. He did this by deriving separate rates per square metre of GFA for the two different residential elements forming part of this sale. The terms in which he undertook this process can be seen clearly from the reproduction of the extract from his expert report earlier reproduced in this decision.

3. The two matters which arise from [NAME]'s evidence concerning this [NAME] that are of concern are:

1. His valuation analysis is done on a piecemeal basis (albeit a "horizontal one" rather than the "vertical one" as proposed by [NAME] for the [NAME]); and 2. He provides no evidentiary basis, whatsoever, to enable me to understand how he reached the separate rates per square metre of GFA that he proposes be applied to each of the residential elements of this [NAME] so that they can be deducted to give him a sales price for the mixed use portion of the [NAME] to be analysed for the purposes of application to the [NAME].

1. Whilst my first concern is made in a semi-facetious fashion and needs no further exploration, this is not the position with respect to my second concern. During the course of closing submissions, I raised with [NAME] the absence of any supporting explanation for how [NAME] arrived at these two residential rates per square metre of GFA for the purpose of excluding these elements from the mixed use analysis. The exchange was in the following terms (Transcript, 28 March 2018, page 158, line 8 to page 161, line 10): HIS HONOUR: Well, with respect to [NAME], if I could take you to p 13 of [NAME]'s statement, exhibit C, please. [NAME]: Yes, 13 did you say, your Honour? HIS HONOUR: Page 13, yes. Under the grey bar for total, in the next paragraph he says, "I have applied a conservative rate of $300 a square metre to the larger R1 [NAME] residential and 400 to the smaller R2." [NAME]: Yes. HIS HONOUR: But there is no reasoning exposed for that, is there. [NAME]: No, there is not in this document but if your Honour goes to annexure 1 at p 30 of the joint report. HIS HONOUR: Yes, I'm there. [NAME]: The number in the first row, the $5,225,500-- HIS HONOUR: Yes. [NAME]: --is the [NAME] neighbourhood centre land. HIS HONOUR: Yes, I understand that. [NAME]: So, he hasn't - to the extent that he's identified a differential rate for the R1 it doesn't come into his determination of the rate for the [NAME] that he then applies to determine the rate. HIS HONOUR: No, but I understand that but his determination of the [NAME] value-- [NAME]: Yes. HIS HONOUR: --is contingent on my acceptance of his valuation of the R1 and R2 zone values because they need to be deducted from the overall value to give the residuum to derive a rate per square metre GFA for the 18,000 [NAME]. [NAME]: Correct. HIS HONOUR: Now, he has not - the concern that I have about this sale is that he has not exposed his reasoning for that and his disaggregation approach is inconsistent with what he says is the overall approach to be taken to giving a single GFA rate where there are multiple uses available on a particular [NAME]. Now, in this case the multiple uses are perhaps I could say distributed horizontally rather than vertically, but-- [NAME]: Well, in relation to this matter you'll remember we drove through the middle and there were single dwelling house-- HIS HONOUR: I know, I understand what was there, I remember turning the corner and looking at the stuff over the road before we turned left onto the main road some argument with the bus driver about what direction we were going. [NAME]: Your Honour, in relation to this the only reservation I have is this, firstly I didn't understand [NAME] and I don't want to rely on him to support me when I'm telling you to discount everything he says but there was no dispute between the two experts that this was an appropriate way to do it. In relation to the cross examination there was no challenge to this approach. Whilst your Honour may be discomforted in relation to your Honour's analysis, it is not a matter which was covered because it wasn't a matter in dispute between the two. The concern that [NAME] had was not with the utilisation of the base 400 but rather the fact that it looked odd when he compared it to 11 [NAME] in an unadjusted way. That was the only criticism of the analysis of the [NAME], Kellyville sale that was raised by [NAME], so the Court would have to assume that to the extent that there are other issues that arise, they were not issues with which [NAME] took issue. HIS HONOUR: There does not appear to be a dispute about the GFA that applies to [NAME]. [NAME]: Correct and in relation to the complaint of [NAME] he had two-- HIS HONOUR: Well, no-- [NAME]: Sorry, your Honour. HIS HONOUR: --I just want to put this proposition to you. If I were to be uncomfortable assuming I otherwise accept [NAME]'s evidence [NAME]: Yes. HIS HONOUR: --if I were to be uncomfortable with his approach to [NAME] by not treating it as, if you like, a horizontally mixed use parcel [NAME]: Yes. HIS HONOUR: --do you say to me that for some reason I would be in error if I were to take the sale price for [NAME] and simply apply the GFA to it which would give $470 per metre GFA? [NAME]: To the 5225 or to the 12 million? HIS HONOUR: The sale price of 12-- [NAME]: No, that would be in error your Honour because everybody at the very least accept that there needs to be a higher return for residential floor space and the [NAME] residential and low density residential is pure residential floor space albeit in a different market, that's-- HIS HONOUR: But the [NAME] was sold for a mix of uses. [NAME]: The [NAME] was sold for a mix of uses which included in that mix, mixed use development. HIS HONOUR: But I'm setting that aside, the [NAME] was sold for a mix of uses. If I am not satisfied that [NAME] has exposed his reasoning to the extent required that [NAME], sorts of points, that I could accept how he has divided the [NAME] for valuation purposes between the three uses in the mix permitted for the totality of the [NAME]. [NAME]: The only thing that I would say to your Honour is I have a discomfiture in relation to procedural fairness insofar as the matter was not raised by the [NAME], by [NAME], it wasn't raised in joint conferencing and to the extent that there may be an explanation, [NAME] and therefore my client was not given an opportunity to address that. HIS HONOUR: No, well it seems to me if I were to reach that point of discomfit-- [NAME]: But your Honour in any event that would get you to $29,861,450. HIS HONOUR: Sorry, I haven't gone to what it - would it result in a rate per metre GFA of $470? [NAME]: Correct. HIS HONOUR: I'm simply saying to you - if you say to me that that would be an impermissible path and I am not satisfied that [NAME]'s reasoning is adequately disclosed with the way he gets to the 300 and 400 per metre for the residential, my choices are these, are they not. If I have reached that conclusion my choices are these I either do the crude calculation that gets me to 470 or I reject [NAME]. [NAME]: Correct. HIS HONOUR: If I reject [NAME] I am then left with, on [NAME]'s evidence, one sale that he says is genuinely comparable and that's [NAME]. [NAME]: But I have the same concern in relation to your Honour's rejection of [NAME] in the context of, again, it not being an issue raised between the parties, it being a matter which was raised or is raised by the bench and apart from in submissions when I have no evidence to address it, I'm not being given an opportunity to answer the concern, that is the residual concern I have. So, either rejection or adoption of either approach, your Honour, is concerning. Your Honour, obviously, if your Honour wishes to take that approach can invite me to address your Honour in relation to that through evidence and that would be the course that we would embrace. 1. [NAME] responded to the position advanced by [NAME] on this point. He said (Transcript, 28 March 2018, page 161, lines 35 to 42): [NAME]: Yes, my learned friend has spent about two hours on Monday morning and afternoon telling you why under the [NAME] principles it was not fair for an opposing party to have to cross examine in order to expose reasoning. It's not appropriate for me to cross examine [NAME] as to where he gets those rates from precisely for the reasons set out in that judgment, because the cross examiner is put at an enormous disadvantage in that the answer will then be given by [NAME] which might have exposed his reasoning. Your Honour has correctly identified the legal vice in the reasoning which has been set out there. There's absolutely no procedural unfairness whatsoever to this. [ADDRESS] and the opposing party is fully entitled to take this point without the matter having been cross examined on since it simply goes to what his reasoning, which is not set out in the expert report.

1. As [NAME] correctly put it, in my view, it is not his responsibility to cross‑examine to rectify any defect that might lie in the primary evidence of the Company's valuation expert. I have earlier set out the terms of s 40 of the Valuation Act, a provision that expressly imposes the onus in these proceedings on the Company. That onus extends to providing proper and acceptable evidence of all relevant matters concerning any specific element of the Company's case. If there is not evidence of sufficiency on any particular element, then the Company has failed to discharge the statutory onus with respect to that element and, as a consequence, that element is to be set aside.

2. Evidence-in-chief from expert witnesses in proceedings such as these is given, unless leave is sought and granted for amplification or explanation, solely on the basis of the written evidence of the expert. Just as [NAME] submitted that it was not his role to cross-examine [NAME] in order to rectify any deficiencies in his written evidence, no obligation lies upon me to do so either. Indeed, if I was to have intervened in such a fashion, [NAME] might well have had legitimate cause for complaint. 3. [NAME]'s rate per square metre of GFA derived from his analysis of this sale to be applied to the [NAME] is significantly lower than that which is to be derived from an analysis of the [NAME], the fact that I can have no confidence in the rates that he uses to exclude the residential development means I cannot rely on this sale for comparative purposes.

4. I have concluded that, in the absence of any proper evidentiary basis for me to understand how [NAME] derived each of the intermediate values of the residential components prior to analysing and deriving a value per square metre of GFA for application to the [NAME], acceptance of this sale is not appropriate.

5. Although, intuitively, even if his residential component analysis for this [NAME] overstated their value to be used for determining the starting point for analysis of the B2 - Local Centre component, there might well remain an analysed rate potentially warranting some further reduction for the [NAME]. However, I simply have no basis upon which I could undertake such consideration. This, in my view, gives me no alternative but to disregard this sale.

6. In light of [NAME] telling me that he relied on this sale as his best comparable sale (Transcript, 28 March 2018, page 142, lines 9 to 12), the fundamental defects in his evidentiary basis for doing so are fatal to my acceptance of this [NAME] for the purposes of derivation of an analysed value per square metre of GFA to be applied to the [NAME].

7. I therefore reject the [NAME] as being appropriate for utilisation in a comparative sales analysis process.

[NAME], [ADDRESS]

1. This sale is the only one of those considered, by either [NAME], which was comprised of two elements (residential and commercial) and nothing else for the purposes of comparison with the [NAME]. As I earlier noted at [45] to [46], I accept [NAME]'s explanation as to why, in his piecemeal approach, he had not included any separate retail valuation element. That explanation is equally applicable here and is adopted for the purposes of my concluding that this sale does provide (subject to matters subsequently discussed) an appropriate sale for analysis to derive a value to be applied to the totality of the GFA of the [NAME].

[NAME]'s approach to this sale 1. [NAME]'s description of [NAME], [ADDRESS] was set out in his individual expert report. His description is reproduced below: The property comprises a rectangular-shaped development [NAME] situated on the corner of [NAME], with additional street frontage to [ADDRESS] in [ADDRESS]. The property is located within an established residential area and is immediately adjacent to [ADDRESS] Shopping Centre. [ADDRESS] Centre is located a short distance to the south of the property. The [NAME] is zoned B2 - Local Centre and was sold with an existing development approval for construction of a shop-top housing development. The development comprises retail space, childcare centre, gymnasium, medical centre and 48 residential apartments with basement and at-grade parking. The total GFA approved for the [NAME] is 5,585 square metres. The [NAME] will also benefit from the construction of the [ADDRESS] Station situated at the [ADDRESS] Centre, approximately 1.5 kilometres to the south.

1. His more [NAME] commentary on this sale was (at page 17 of his statement): The property is situated within The Hills Shire Council, approximately seven kilometres to the north-west of the subject property. The [NAME] comprises land zoned B2 - Local Centre. The land has been developed with a mixed use retail and residential apartment development. The location is inferior to the subject property, being an established area but not as prominent as the [NAME] locality. The date of sale, being July 2015, is close to the base date of valuation. The land area and overall potential floor space of the subject property is larger. The sale property sold with the benefit of a development approval ([NAME]). Overall, an upwards adjustment to the sale is required for comparison purposes. The location of the subject property is superior, being situated in a more prominent locality. The sale requires a downwards adjustment for the existing [NAME], the requirement to incorporate a considerable component of commercial floor space at the subject property and the larger scale of development of the subject property with a discount for size required.

[NAME]'s approach to this sale 1. [NAME]'s comments concerning [NAME]'s adjustments for this [NAME] were set out in Exhibit E. He proposed a different rate of adjustment for various factors but did not propose that this sale should be rejected. The different adjustments he proposed were (Exhibit E at (95)): • an upward adjustment of 5% to reflect market movement; • a downward adjustment of 10% for the development application; • an upward adjustment of 50% to reflect its inferior location; and • a downward adjustment of 30% to reflect its smaller GFA potential, which usually equates to a higher rate on a $/m2 of GFA basis.

1. He also made comment concerning this [NAME] in his oral evidence when he observed (Transcript, 28 March 2018, page 130, lines 21 to 28): … whilst it's zoned B2, its location is a significant disadvantage to this. It just doesn't have the same advantages as what the subject property has both from the B2 use which includes offices, medical centres, et cetera which could be done on the subject property. 1. [NAME] also gave a more [NAME] commentary on location adjustments in the joint report where he offered a criticism of the appropriateness of [NAME]'s selection of sales for analysis. [NAME] wrote: 10 Whilst I agree with the [NAME] approach [NAME] has taken in his assessment of the Land Value of the Subject Property (being the $/m² Potential GFA approach), I consider that [NAME]'s valuation does not adequately reflect the significant locational advantage which is enjoyed by the Subject Property in comparison to the six sale properties which were relied upon by [NAME] for the purpose of estimating the Land Value of the Subject Property. 11 It is my opinion that the Subject Property enjoys a significant locational advantage in comparison to the sale properties by reason of its location: - Being a town centre location which is located centrally in a well-established business park environment comprising commercial, retail and residential development, - Adjacent to the proposed [NAME] which forms part of the Sydney Metro North West Rail Line, and - In an area which had been demonstrated as being "ripe" and in high demand for high density, residential and mixed use development. 12 It is my opinion that the sale properties which were relied upon by [NAME] would require significant upward adjustment to bring into account their inferior location and that the extent of adjustment which is required is so great that it would render those sale properties unreliable indicators of the market value of the Subject Property. I have set out in "Issues in Disagreement" below an analysis which I consider to be of assistance in quantifying the necessary adjustment for location.

Comparing the two proposed adjustment regimes 1. [NAME]'s consideration of adjustments for this sale (see Annexure 1) adopted, at the same adjustment rate, the first and second points in [NAME]'s list of adjustments in his (95) above. For the third and fourth points, [NAME] also adopted an adjustment for the reason set out but proposes a different rate (-50% for size and +30% for location) in his individual report and in Annexure 1 to the joint report. [NAME] also proposes two further adjustments (ones not adopted by [NAME] (being of +10% for the greater development height potential on the [NAME] and -10% to reflect the differential in potential commercial use availability)).

Evaluating the positions of [NAME] and [NAME] on this sale 1. I have earlier set out the [NAME] concern [NAME] expressed about the utility of [NAME]'s sales as a consequence of their locations when compared to that of the [NAME]. Mindful of those comments, which I had noted in my pre-trial reading, I paid attention, during the course of the [NAME] inspection, to the relative locations of the various sales relied upon by each of the [NAME].

2. I have revisited that consideration by a further examination of the marked air photo showing the locations of the various sales (although not, strictly, in evidence, this air photo was relied upon by the parties during the course of the [NAME] inspection and was an agreed and non-controversial document). I am satisfied that [NAME]'s location comments concerning [NAME]'s sales (effectively a rejection of the sales for location reasons) is not justified on the facts. I also consider that the extent of the location adjustment proposed for this sale by [NAME] is not able to be supported as it is beyond that which I consider reasonable from that which was observed during the [NAME] inspection and from my consideration of the location showing marked air photo. [NAME]'s location adjustment is to be preferred.

3. The second difference between [NAME]'s adjustments and those of [NAME] for this [NAME] arises from the more modest percentage for size proposed by [NAME] (30%) in comparison to that of [NAME] (50%). The agreed realisable GFA for the [NAME] is 63,353 square metres whilst that, for the [NAME] is 5,562 square metres. This difference is one of considerable significance. The broad valuation principle (accepted by both experts) is that the smaller the [NAME], the greater the rate per square metre of GFA likely to be realised by it. Given the quite extreme differences in available GFA for the [NAME] when compared to the [NAME], I am satisfied that [NAME]'s adjustment (although, at the very edge of acceptability in a [NAME] sense) is to be preferred.

4. In addition, as I have earlier noted, [NAME] omits two adjustment elements proposed by [NAME]. Whilst, in [NAME]'s analysis, these two elements mathematically cancel each other out, it is their omission by [NAME], rather than the quantification by [NAME], that is significant. I am satisfied that it is appropriate that both of these adjustment elements were made by [NAME] and should have been made by [NAME].

Conclusion on the [NAME] sale 1. As a consequence, I prefer [NAME]'s analysis of the [NAME] sale over that of [NAME]. I am satisfied that this sale is the only validly available one capable of use to derive an analysed rate per square metre of GFA to be applied to the [NAME].

Conclusion on [NAME]'s valuation approach

The role of the judicial [NAME]

1. The role I perform as the judicial [NAME] in these proceedings is not confined by the opinion of the two [NAME] giving evidence. As was observed by Spigelman CJ, with whom Beazley, [NAME] J agreed, in Leichhardt Council v [NAME] & Traffic Authority of NSW [2006] NSWCA 353; (2006) 149 LGERA 439, at [83]: A judge of the Land and [ADDRESS] is perfectly entitled to reject the whole of the expert evidence and, drawing on the experience of the Court, to do as best s/he can to identify an appropriate level of discount or, relevantly, an appropriate quantum of adjustment to the comparable sales figure by reason of the existing use rights of some of those sales.

1. It is obvious that this discretion also extends to my determination of whether any particular sale is to be appropriate as be a validly comparable one for the purposes of deriving a value per square metre of GFA to be applied to the [NAME].

2. I now turn to exercise the wide scope of this role to set out, in summary, the outcome of the proceedings which must necessarily follow from my conclusions derived from [NAME]'s valuation approach and the sales to which he turned in support of it.

The validity of the [NAME] sale comparison 1. Even one sale can be sufficient for analysis to derive a rate to be applied to a [NAME] where a value is sought to be derived. In these circumstances, while I am satisfied that there is only one sale of sufficient validity to be utilised for analysis to derive a value to be applied to the [NAME], I have considered whether or not the 40% adjustment proposed by [NAME] for size in his analysis of [NAME] is so great as to cause me sufficient hesitation about this sale to warrant rejecting it. I am satisfied that that is not the position. 2. [NAME]'s adjustment for location is high, and probably is at the upper reaches of appropriateness, [NAME] does not reject it. Indeed, as earlier noted, [NAME] proposes upwards adjustment of 50% to reflect its inferior location.

3. Although, for the reasons set out in the next section of this judgment, I explain why I have altered one of [NAME]'s adjustment factors (an additional adjustment which I could have accommodated by adding an additional column to his analysis, a column which would be entitled "development timing/staging"), I am satisfied, nonetheless, that the [NAME] adjustment pattern proposed by [NAME] is appropriate to be adopted.

Applying the [NAME] sale 1. Having considered [NAME]'s sales and the evidence (written and oral) he and [NAME] gave concerning them, I am satisfied that [NAME]'s sale analysis for [NAME], [ADDRESS] is valid and reliable.

2. I accept, for the reasons set out above, that his adjustments for this sale are to be preferred over those advanced by [NAME].

3. I have therefore found the only reason to make any changes to the total net percentage of adjustment factors he applied for the purpose of deriving a rate per square metre of GFA to be applied to the [NAME] is that discussed below.

4. In his individual statement, [NAME] expressed his reservation about the likely timing of implementation of the hypothetical development of the [NAME]. He said (Exhibit C at [63] to [67]): Adopting a GFA analysis of $400 per square metre, in my opinion, is a relatively optimistic assessment in comparison to the sales evidence, but I have had regard to the superior nature of the subject land in comparison to the sales evidence and the future potential of the land with the future railway station and ongoing development and expansion of the [NAME]. In my opinion, adopting an analysis of $400 per square metre of GFA is optimistic, when comparing several constraints which the subject land is faced with. It is agreed by both [NAME], albeit to varying amounts, that the subject land must comprise a relatively substantial commercial office component. This form of development is not the preferred form of development in the locality, with limited demand for commercial office development in the area. As can be seen from the sales' evidence, the preferred form of development is either retail development or residential apartment development, with the sales exhibiting standalone retail development or a smaller proportion of retail development with a larger component of residential apartments. The subject land also suffers from the requirement to provide access through the land to the benefit of adjoining owners. Any development approval for the land would require the owner to continue to provide access to the adjoining owners on both sides of the property and, as indicated by the town planning experts, this would impact the siting of development on the land. The subject land also abuts the lake, which in part provides a pleasant aspect but also requires expenditure from the owner of the subject land in developing the property. In adopting an analysis of $400 per square metre of GFA, I also believe this is an optimistic assessment being applied to the total potential GFA of 63,353 square metres. It is highly unlikely, if not improbable, that as at 1 July 2015, a development of this scale and density would be contemplated on the subject land. Whilst a retail component would readily be established on the land, and potentially an apartment development of approximately 10 to 11 storeys, as outlined by the [NAME], it is likely that the overall GFA potential of the land would be exploited in the medium to longer term. A further residential apartment component may be undertaken at a later point in time, subject to market demand and a commercial development of the land would be entirely dependent on market conditions and a significant pre-commitment from a potential occupier.

1. I am satisfied that this limited demand for commercial space is appropriate to be accounted for by a further adjustment to the rate per square metre of GFA to be applied to the [NAME]. This is consistent with the comment also made by [NAME] that the overall development potential might not be realised for some time, not just with respect to the commercial development, but with portion of the residential apartment component also being deferred. These deferrals would accommodate the ability of the market to absorb the various elements of the hypothetical redevelopment.

2. Such an approach would also be consistent with the typology proposed by the [NAME] in which the residential development was likely to be above retail and/or commercial space in the hypothetical redevelopment.

3. As a consequence, although [NAME]'s calculations in Annexure 1 to the Joint Expert Report of the [NAME] discloses a derived rate per square metre of GFA of $526 to be applied to the [NAME], I am satisfied that a small, further downward adjustment is needed to account for the likely impact on the hypothetical sale of the market pressures discussed by [NAME] deferring realisation of the full potential of the [NAME].

4. Doing as best I can, as the judicial [NAME], I am of the opinion that this results in a further downward adjustment of 5%. This, therefore, results in an overall adjustment to the [NAME] sale of -30%, resulting in this analysis producing a derived value to be applied to the [NAME] of $491 per square metre of GFA rather than the $526 per square metre set out in Annexure 1.

5. Applying $491 per square metre of GFA to the total potential GFA of the [NAME] of 63,353 square metres results in a valuation (rounded to the nearest $100,000) of $31,100,000.

6. As this result is a reduction of the base-date valuation (although not by as much contended for by the Company), the Company has discharged the statutory onus imposed by s 40(2) of the Valuation Act. The appropriate outcome is that I should exercise the power in s 40(1)(b) of the Valuation Act and substitute the appropriate lower value for that determined by [NAME].

Conclusion 1. I have rejected the two primary sales relied upon by [NAME]. I have also rejected the analysis he proposed for the sale at [NAME] if it was to be used for his proposed piecemeal approach. These conclusions result in the piecemeal approach having no role to play.

2. Rejection of piecemeal approach also renders it unnecessary to address and resolve the differences between the [NAME] concerning the development mix in the highest and best use hypothetical redevelopment of the [NAME].

3. This means that [NAME]'s approach is to be applied by default. I have considered the sales relied upon by [NAME]. [ADDRESS] went as part of my rejection of sales proposed by [NAME]. I have rejected [NAME]'s sales at [NAME] and [NAME] for reasons earlier set out.

4. The only sale relied upon by [NAME] left standing is that at [NAME]. I am satisfied that this is sufficiently comparable to be able to be analysed to derive a rate per square metre of GFA to be applied to the [NAME]. For the reasons set out earlier concerning the [NAME]' competing positions about adjustments to derive an analysed rate per square metre of GFA, I am satisfied that the model of adjustments proposed by [NAME] is to be preferred (subject only to the further adjustment earlier explained).

5. I am satisfied that the Company has discharged the onus placed on it by s 40(2) of the Valuation Act. In doing so, I have also been satisfied, on the basis of the sole sale I consider appropriately to be regarded as comparable for the purposes of deriving an analysed value to the [NAME] - that of 2‑4 [NAME], [ADDRESS] - that the 1 July 2015 statutory value of the Company's [NAME] known as [NAME] should be reduced.

6. I have concluded, adopting from [NAME]'s analysis his derived rate per square metre of GFA for the [NAME] sale and applying it (subject to the single revision earlier discussed) to the [NAME], that the revised value for the [NAME] is to be $31,100,000 as at 1 July 2015.

Orders 1. It therefore follows that the orders of the Court are: 1. The appeal is upheld; 2. Pursuant to s 40(1)(b) of the Valuation of Land Act 1916, the value of Lot 5072 in Deposited Plan 878258 as at 1 July 2015 is determined as being $31,100,000; 3. The exhibits are returned; and 4. Costs are reserved.

********** Annexure 1 (222 KB, pdf) 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 April 2018