Bruce Small Estates Pty Ltd v Chief Executive, Department of Natural Resources [1997] QLC 174

LAND COURT BRISBANE 29 October 1997 Re: Appeals against Various Valuations Valuation of Land Act 1944 Local Government: GCCC-Gold Coast (AV96-292,293, V95-471-478) Bruce Small Estates Pty Ltd v. Chief Executive, Department of Natural Resources DECISION ON COSTS On 17 December, 1996, the appellant, Bruce Small Estates Pty Ltd (“BSE”), succeeded in relation to the ten appeals which it had lodged against the decisions of the respondent, the Chief Executive, disallowing its objections to the unimproved valuations of certain land located in the local authority of the Gold Coast City Council and the subject of Valuation No. 129-11504/160080 (“subject land”). Each of the ten appeals related to one of three valuation dates: 30 June, 1993, 1 January, 1995 and 1 January, 1996. Rather than considering each valuation, the parties agreed that only one matter in respect of each year should be argued as test cases. Following the judgement and on 24 January, 1997, BSE lodged an application for the costs of its appeals in relation to the valuation dates 1 January, 1995 and 1 January, 1996. 2. Written submissions in support of its application were lodged by BSE on 24 January, 1997. The Chief Executive lodged its submissions as to costs on 17 February, 1997 and these were followed by BSE’s reply on 11 March, 1997. POWER TO AWARD COSTS [1997] QLC 174 -- 1 of 10 -- 2 3. In general terms, the Land Court’s power to award costs is found in sub- section 41(9) of the Land Act 1962. That sub-section, which has been preserved by section 521 of the Land Act 1994, provides that “(9) The Court may make such order as it thinks fit as to the costs or incidental to any matter that it has jurisdiction to hear and determine including, without limiting the generality of this subsection, the costs of an adjournment or application made in a pending matter, allowances to witnesses attending for the purpose of giving evidence at the hearing and the costs of any survey of boundaries.” 4. In relation to valuation matters, the Valuation of Land Act 1944 (“the Valuation Act”) makes specific provision for costs. Section 66 provides that, subject to section 70, the Land Court may “... make such order as it deems fit with respect to the payment of costs.” The modification in section 70 is expressed in the following terms: “(1) Where the value of the land as finally determined upon an appeal against the valuation is the value stated by the owner in the owner’s notice of appeal against the valuation, or is nearer to that value than to the valuation appealed against, costs shall not be awarded against the owner. (2) Otherwise costs shall not be awarded against the chief executive.” 5. It is, therefore, relevant to set out BSE’s contention in its Notices of Appeal and its contention at the hearing of those appeals together with the valuations appealed against and the value contended for by the Chief Executive at the hearing. Also relevant are my determinations in relation to the valuation dates of 1 January, 1995 and 1 January, 1996. In addition, I will also set out the same information in relation to the valuation date of 30 June, 1993 for, although BSE does not seek costs in relation to the appeals relating to that date, it does make reference to them in its submissions. Valuation date - 30 June, 1993 Value in BSE’s Notice of Appeal BSE’s contention at hearing Valuation appealed against Chief Executive’s contention at hearing Court’s determination $3,300,000 $7,680,000 $8,300,000 $8,300,000 $7,430,000 -- 2 of 10 -- 3 Valuation date - 1 January, 1995 Value in BSE’s Notice of Appeal BSE’s contention at hearing Valuation appealed against Chief Executive’s contention at hearing Court’s determination $3,300,000 $8,460,000 $15,350,000 $13,250,000 $8,225,000 Valuation date - 1 January, 1996 Value in BSE’s Notice of Appeal BSE’s contention at hearing Valuation appealed against Chief Executive’s contention at hearing Court’s determination $3,300,000 $7,690,000 $14,950,000 $12,400,000 $7,440,000 6. As the value of the land as determined in relation to the valuation date of 30 June, 1993 was closer to the valuation appealed against than the value stated in BSE’s Notice of Appeal, costs cannot be awarded against the Chief Executive in those matters. BSE has quite properly not applied for costs in relation to those appeals. In relation to the remaining two valuation dates of 1 January, 1995 and 1 January, 1996, the values stated by BSE in its Notice of Appeals were much closer to those finally determined than were the valuations appealed against. In relation to those, costs may not be awarded against BSE (sub-section 70(1)). 7. Apart from the modifications in section 70, section 66 of the Valuation Act gives the Land Court an unfettered discretion in relation to the award of costs. Over the years, the Land Appeal Court and the Land Court have adopted various principles guiding the manner in which its discretion will be exercised and, in doing so, they have been guided by other courts exercising similar statutory based powers. 8. In Wyatt v Albert Shire Council (1986) 61 LGRA 116, for example, the Full Court of the Supreme Court of Queensland considered section 31 of the City of Brisbane Town Planning Act 1964 which provided that the Local Government Court had power to “... make such order as it thinks fit as to the costs of any proceedings before it.” The Full Court described that power as “complete” or “full” (at page 488) and continued: -- 3 of 10 -- 4 “... To say that, however, is not to say that the discretion may be exercised in an arbitrary manner. In England, where since 1890 the discretion of the High Court over costs is also acknowledged to be unfettered by statute, it continues to be recognized that the discretion must be exercised judicially: see Knight v. Clifton [1971] Ch.700. As the judgments in that case show, such a power does not exclude resort to the “settled practice” of a court where such a practice has evolved; but, to refer once again to what was said by Macrossan J. in Assignment Pty. Ltd v Kirby, supra [[1981] QdR 129], a purported exercise of discretion `which fails because the mind is closed to relevant considerations through a rigid adherence to preconceptions’ involves an error of law that is open to correction on appeal.” (page 119-120) 9. As well as being required to act judicially, it is also important to note that the “ordinary rule” that costs follow the event is a rule that is not “ordinary” in the context of Land Court proceedings. The rule is “ordinary” in the context of proceedings in, for example, the Supreme Court of Queensland. In that court, Order 91, Rule 1(1) of the Supreme Court Rules states that subject to the Judicature Act 1876 and the rules themselves, the costs of and incidental to all proceedings in the Court and in the discretion of the Court or Judge. Generally speaking, costs follows the event unless the Court or Judge otherwise orders (Rule 3(1)). 10. The underlying principles in exercising the discretion to award costs was set out in Appeal by W.H. Bowden v The Valuer-General (1980-81) 7 QCLR 138 when the Land Appeal Court (Dunn J, Mr Smith and Mr Carter) said: “We think, in dealing with questions of costs, that it is an important consideration that there be ease of access to the Land Court and the Land Appeal Court. There are no provisions in the Rules of either of those courts for proceedings by and against ‘paupers’, as there are in the Rules of the Supreme Court (Order 13). The procedure for which Order 13 provides has, since the advent of Legal Aid schemes, fallen into disuse. However, the philosophy which underlies the Order is that all, including the needy, should have access to the Supreme Court; and it is interesting to note that those who framed the Order appear to have thought that it was just, in granting such access, to place a ‘special’ constraint upon a pauper’s right to recover costs from any other party (see Order 13, Rule 10). Fear of an adverse order with respect to costs may deter citizens with just complaints from resorting to the courts; that has in the past occurred, as will appear. It seems to us unjust to adopt a restrained attitude towards awarding costs against citizens without adopting an equally restrained attitude towards awarding costs against the Valuer-General. That is not to say that, in a proper case, the Land Court or the Land Appeal Court will not award costs against either a citizen or an authority subject to the provisions of the statute which governs the matter.” (page 146) -- 4 of 10 -- 5 11. If it is established that the then Valuer-General (now the Chief Executive) has acted arbitrarily or capriciously, it is clear from the Land Appeal Court’s judgement in Bowden that there may be grounds for awarding costs against him (see page 149). That is clear also from the judgement of the Land Appeal Court (Thomas J, Mr Barry and Mr White) in Hymix Industries Pty Ltd v The Valuer-General (1990-91) 13 Q.C.L.R. 173. In that case, it is clear that an award of costs may follow in an appropriate case where “... either party has approached the valuation in an arbitrary, frivolous or vexatious manner or has completely disregarded principles which given certain facts, should be applied.” (page 186). Similar views were expressed by the Land Court (Mr White) in Queensland Landmark Developments Limited v Valuer-General ([1992-93] 14 Q.C.L.R. 168 at 171). 12. The Queensland Landmark Developments case also illustrates that consideration will be given to the care and attention which has been given to a case by the parties. The Land Court made an award of costs as it found that “... it was a case which did not receive the care and attention it deserved at the outset and through expediency or lack of participation and guidance generally available to an assessing officer by those who oversee the valuation process, the matter remained cemented to the value of $1.9 million which Mr Skinner obviously found when preparing to answer the appeal could not be sustained. Had that action been taken sooner and an ear made available in conference to the evidence proposed to be led by the appellant, the appeal may have been determined without resort to the Court or in the least the margin for argument considerably narrowed.” (page 171) So too in Beedell Farms and Grazing Pty Ltd v The Valuer-General ([1979] 6 Q.C.L.R.322, the Land Court (Stable S.P.J., Mr Smith, Mr Heffernan) made an award of costs against the Valuer-General when he had given very late notice of a jurisdictional issue necessitating the adjournment of the substantive hearing (at page 324). 13. Both Bowden and Hymix illustrate a further aspect to be taken into account in considering whether an award of costs should be made. That aspect concerns the complexity of the case. That complexity may relate to the law or to the facts and to the extent to which they may be within the knowledge of the landowner. In Hymix Industries Pty Ltd, the Land Appeal Court concluded that “... The evidence has demonstrated that some complexity was involved and in our opinion there still remains some doubt as to the correct value of this land. In the circumstances we are of the opinion that no order should be made.” (page 186) -- 5 of 10 -- 6 14. A similar approach was adopted in Bowden where the Land Appeal Court concluded: “We are satisfied that the Valuer-General did not arbitrarily or capriciously adopt the interpretation of section 11(1)(vii) [as it then was of the Valuation of Land Act] upon which he based his valuation. There seems to have been an enquiry and a supply of information from the appellant. Having regard to the complexities of section 11(1)(vii) and its difficulty of application in the subject case we feel it was not unreasonable for the judicial process to be invoked by the parties as provided by the Act. This placed a statutory onus of proof on the landowner. We think it desirable in a case of the subject nature that the access to this Court be such that neither party should be apprehensive that it will be required to pay the other’s costs. In all the circumstances we consider that there are no features of this case which warrant an award of costs.” (page 149) 15. Before leaving this brief summary of the principles guiding an exercise of the discretion to award costs, I note that the Land Appeal Court observed in Bowden’s case that “Within our knowledge there have not been many valuation appeals where a party has obtained an order of costs in his or its favour.” (page 146) Although that observation was made in 1980, my reading of the authorities, including those to which I have referred above, indicates that it still holds true today. SUBMISSIONS 16. In the case with which I am concerned, BSE has submitted that it should be awarded costs. In essence, its submission is that there was no proper basis for the 1995 and 1996 valuations. In its submission, BSE stated that the Chief Executive’s valuer, Mr Grennan, had himself considered those valuations to be unfounded. When he reviewed them, he reduced them to a figure which was still very much higher than those contended for by BSE and as found in the determination. BSE submitted that both approaches used by Mr Grennan as the basis of his valuations were rejected by the court. It continued that “The `comparable’ sales were rejected by the Court as of not sufficiently similarity and the hypothetical development exercises were rejected by the Court on the basis that the profit and risk allowance used by Mr Grennan was, in effect, an arbitrary figure and was not based upon any analysis of sales for `comparable developments, in -- 6 of 10 -- 7 comparable markets over comparable time spans’ - decision paragraph 71.” (submissions lodged 24 January, 1997, paragraph 10) BSE concluded by submitting that it was the arbitrary approach with respect to the valuations which forced the appellant to resort to the court. 17. The Chief Executive contended that BSE instituted and maintained appeals which contended for a value substantially less than those ultimately determined. BSE, he continued, did not amend its Notices of Appeal. While BSE succeeded in persuading the court to accept valuation evidence led at the hearing, the Chief Executive was entitled to resit the appeals at least up to that point because the Notices of Appeal sought to establish values well below those ultimately adopted by the Court. In conclusion, the Chief Executive submitted “In circumstances where the appellant has no entitlement to any costs with respect to the 1993 appeal and where the other appeals which the Chief Executive was entitled to resist, there being no finding that the Chief Executive acted arbitrarily or capriciously, there are no `special circumstances’ sufficient to displace the general rule of practice in this Court that there be no order as to costs.” (submissions lodged 17 February, 1997, paragraph 34(d)) CONSIDERATION 18. In this case, the issue to be resolved turned upon the appropriate method to adopt in valuing the subject land. Three different valuation methodologies were explored at the hearing by both BSE and the Chief Executive. The Chief Executive relied on the direct sales (or comparable sales) method and the hypothetical development method (“HD”). BSE rejected both of these methods and proposed that the discounted cash flow (“DCF”) method should be adopted. 19. Both the direct sales (or comparable sales) method and the HD method have been recognised by the courts as appropriate methods of valuation. By way of contrast, DCF has not yet gained universal recognition as an appropriate method of valuation. The High Court in Albany & Ors v The Commonwealth of Australia (1976) 12 ALR 201, had not accepted DCF “... in the present case ...” before Jacobs J (page 210). His Honour clearly stated, however, that he did not express an opinion as to whether or not the DCF would be a proper method of valuation in other circumstances and in other cases. The High Court had, therefore, left the way open to argue the application of DCF in another case. Until the present -- 7 of 10 -- 8 case, I am not aware of any cases before or after the Albany case in which the DCF method has been accepted. 20. The lack of acceptance is an important background against which to consider the question of costs in this case. Its importance is not lessened by the fact that the Australian Institute of Valuers considers that the DCF is an appropriate method of valuation and analysis for income producing property, development projects and land subdivisions (Practice Standard No.2 issued on 1 September, 1996, paragraph 3.2). The Chief Executive was faced with a method which was proposed by BSE but which had not been endorsed by the courts. 21. In relation to the direct sales (or comparable sales) method relied upon by the Chief Executive, I found that none of the sales put forward by the parties was directly comparable with the subject land. Although I found that they could not be used alone, they were one of the sources by which the result might be checked in the manner alluded to by Dixon CJ in Turner & Anor v The Minister of Public Instruction (1956) 95 CLR 245 (judgement, paragraph 59). 22. BSE has submitted that I rejected HD on the basis that the profit and risk allowance used by Mr Grennan was “... in effect, an arbitrary figure” (paragraph 71). While I did not accept Mr Grennan’s evidence on this aspect, I do feel that the word “arbitrary” to describe his evidence is a little harsh. It conveys the meaning that the figure was “... Derived from mere opinion or random choice; capricious; un-restrained; despotic; ...” (The Concise Oxford Dictionary, sixth impression, 1978). Mr Grennan’s evidence was based on what he said was an “industry standard” which I understood to be based on his long experience in the field of valuation and was made in good faith. It was not based on “mere opinion” or “random choice” or that it was capricious. 23. I found in the judgement “... that the profit and risk factor is one whose percentage in any particular project will be determined by a number of factors. Some of those will be directly related to the state of the market at any particular time including the demand for that type of development, the buoyancy of the market in that area and the expected rate of sale of such a subdivision. These in turn will be affected by other factors including the size and nature of the property to be developed. The costs of the development will also be relevant. -- 8 of 10 -- 9 70. In addition to these factors, which largely relate to the risk, an allowance needs to be made for the developer to achieve an acceptable level of return from the capital invested in the project. The latter relates to the profit aspects of the profit and risk factor and will again be dependent upon various factors including the length of time before the developer can recoup its capital investment. 71. The best way in which the profit and risk factor can be assessed is by considering comparable developments in comparable markets over comparable time spans. ...” 24. While neither Mr Grennan, nor any other valuer on behalf of the Chief Executive, had analysed comparable developments in this way to determine these factors, I am not satisfied that the failure to do so is evidence of capriciousness or arbitrariness. It is suggestive only of Mr Grennan’s apparent understanding that a figure based on his experience would be sufficient. That is so even though I noted in the judgement that Mr Wenck had not accepted similar evidence in Dreamworld Productions Pty Ltd v Chief Executive, Department of Lands (unreported, 21 September, 1994, V94-23, AV94-79 and AV94-80). 25. It seems to me that the case needs to be viewed from a little distance. The direct sales (or comparable sales) evidence was not satisfactory but that is not to say that any more satisfactory evidence could have been obtained. Mr Grennan’s manner of applying HD was not accepted. It is difficult, however, to go to the next step and say, as BSE does at paragraph 8 of its submissions lodged on 10 March, 1997, that it was Mr Grennan’s manner of application of HD that forced it into litigation. It seems to me that the parties were equally forced into litigation by BSE’s reliance on DCF which had not, to that time, been accepted by the courts. In view of DCF’s non acceptance by the courts, it seems to me that the Chief Executive was entitled to decide, as he did, not to accept it as an appropriate method of valuation. That is so even though his stand contributed to the matter’s having to be litigated. It was a difficult and contentious matter and it was not unreasonable for the Chief Executive to decide that he would not make concessions in that regard but invoke the processes which are available to him under the Valuation Act to have the matter determined by the court. 26. Whether or not efforts to determine a profit and risk figure on the basis of the factors I identified at paragraph 23 above would have led to a settlement of the matter is a matter of conjecture. In the absence of any evidence, I have no way of knowing what valuation that profit and loss figure would have led to. -- 9 of 10 -- 10 27. The valuations as finally determined in relation to the valuation dates of 1 January, 1995 and 1 January, 1996 were closer to those contended for by BSE at the hearing than either the values stated in its Notices of Appeal or in the initial valuations. The Chief Executive has suggested that BSE never abandoned the value set out in its Notices of Appeal by seeking and obtaining leave to amend them (submission, paragraph 11). BSE has replied that the Land Court does not have power to amend a Notice of Appeal under the Valuation of Land Act. There would seem to be no specific power in the Land Act 1994 permitting the amendment of a Notice of Appeal to reflect the value which an appellant might wish to contend at the hearing. It is clear from the judgement of the Land Appeal Court in Cox v The Commissioner of Water Resources (1992-1993) 14 QLCR 304 that the court must find its power in specific statutory provisions and does not have any powers that might be described as inherent. In the absence of a specific power, the Land Court has no power to amend a Notice of Appeal. 28. I have not explored this aspect further as I have formed the view that, bearing in mind the complexity of the case, my conclusion that the Chief Executive’s has not been capricious or arbitrary and that the Chief Executive was entitled to invoke the processes of the court in this matter, this is not a case in which an award of costs is appropriate. 29. For the reasons I have given, the appellant’s application for costs is refused. S A FORGIE MEMBER -- 10 of 10 --