Palm Cove Nominees Pty Ltd v Cairns Regional Council
[2023] QSC 289
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- Notable Unreported Decision
- Palm Cove Nominees Pty Ltd v Cairns Regional Council[2023] QSC 289
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Palm Cove Nominees Pty Ltd v Cairns Regional Council[2023] QSC 289
Palm Cove Nominees Pty Ltd v Cairns Regional Council[2023] QSC 289
SUPREME COURT OF QUEENSLAND
CITATION: | Palm Cove Nominees Pty Ltd v Cairns Regional Council & Anor [2023] QSC 289 |
PARTIES: | PALM COVE NOMINEES PTY LTD ACN 005 775 495 (Applicant ) v CAIRNS REGIONAL COUNCIL (First Respondent) and WESLEY COATES (Second Respondent) |
FILE NO/S: | 437 of 2023 |
DIVISION: | Trial |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court of Queensland at Cairns |
DELIVERED ON: | 15 December 2023 |
DELIVERED AT: | Cairns |
HEARING DATE: | 10 November 2023 |
JUDGE: | Henry J |
ORDERS: |
|
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – where land and works contributions were required by an infrastructure agreement entered into between a developer and Cairns Regional Council– where the infrastructure agreement provided for a process of valuation of the land contribution which would be binding on the parties – where there is disagreement over an independent valuation of the market value of the land – whether the valuation’s timing or methodology mean it was not a valuation as required by the infrastructure agreement Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, cited Downer Engineering Power Pty Ltd v P&H Minepro Australasia Pty Ltd [2007] NSWCA 318, cited Holt v Cox (1997) 23 ACSR 590, cited Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314, cited McArthur v Mercantile Mutual Life Insurance Company Ltd [2002] 2 Qd R 197, cited Nathanson v Minister for Home Affairs (2022) 96 ALJR 737, cited Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, cited Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305, cited |
COUNSEL: | M Jonsson KC for the applicant J Horton KC for the respondents |
SOLICITORS: | Holding Redlich for the applicant Corrs Chambers Westgarth for the respondents |
- [1]A developer and Cairns Regional Council are at odds over the independent valuation of the market value of land. That land will accommodate a transport link next to the developer’s residential property development. The land was contributed by the developer to Council to secure approval for reconfiguration of much of the developer’s land at Cedar Road, Palm Cove into 36 residential lots. The infrastructure agreement which regulated that process provided for a process of valuation of the land contribution which would be binding on the parties. The developer is disappointed by the valuation and seeks a declaration to avoid being contractually bound by the valuation which occurred.
- [2]The developer contends the valuation was not a valuation as required because of its timing and methodology. For the reasons which follow, the valuer’s methodology was a matter for his expertise, which is what the parties contracted to enlist, and the Court should not interfere in connection with it. However, it was the value of the land six weeks before the contribution of it which was determined, with the consequence the valuation’s timing was not as required by the agreement.
What valuation process was required?
- [3]Land and works contributions were required by the infrastructure agreement. For those contributions the developer is entitled, pursuant to cl 7.1 of the infrastructure agreement, to an offset or refund against levied charges in an amount referred to as the “relevant amount”. The parties accept under clause 7 the relevant amount for land contributions is the market value of the land contribution.
- [4]Clause 7.3 provides for the parties to agree to the market value of the land contribution or to submit to an independent valuation process, stipulated by cl 7.3(d) as follows:
“Where the parties fail to agree on the Market Value of the Land Contribution after each having obtained independent valuation reports, the Market Value of the Land Contribution is to be determined by a third independent Valuer agreed between the parties. The third independent Valuer acts as an expert, not as mediator or determinator for clause 12.6 of this agreement, and his/her valuation is binding on the parties.” (emphasis added)
(Clause 12.6 relates to a dispute determination process that is not presently relevant.)
- [5]The parties having failed to agree on the market value of the land contribution, a third independent valuer was engaged by the parties pursuant to cl 7.3(d). Part of the valuation process included the parties’ joint obtaining of counsel’s advice regarding the date on which the market value of the land contribution was to be determined. The effect of counsel’s advice was that the relevant market value of the land contribution was its value as at the date of its transfer. The parties accept that is correct. I agree. Land values can change over time. The time of the land’s relevant market value must logically be the time of its actual contribution.
Did the valuation’s timing mean it was not a valuation as required by the infrastructure agreement?
- [6]The date of the land contribution, that is, its transfer, was 19 October 2022. It is common ground, however, that the second respondent assessed the valuation as at six weeks earlier, on 2 September 2022. As it turns out, that was merely the date of the surveyor’s endorsement upon the survey plan.
- [7]The developer is therefore correct to complain that it did not get what it bargained for, namely a determination by a third independent valuer of the market value of the land contribution, that is, of the market value of the land as at the date of its contribution by the developer to Council. It accordingly seeks a declaration that the second respondent’s market value determination was not a determination of the market value of the land contribution within the meaning of cl 7.3(d) of the infrastructure agreement.
- [8]Council meets the developer’s complaint in two related ways. The first is to argue that the six week temporal difference is a trivial one, a complaint of form rather than substance, so that despite it the valuation ought be characterised as the market value of the land contribution. That characterisation is a mere guess. It is unknown whether the valuation given was the same as the market value of the land contribution because it was of the market value of the land six weeks before it was contributed.
- [9]This leads to Council’s second argument, which is that there would have been no material change in the land’s value in the six week period between the date of the assessed market value and the actual date of the land contribution. This is a contract case. Caution should be exercised in drawing on administrative law principles, as Council did, to suggest the developer carries an onus of proving the materiality of the valuer’s temporal error.[1] Nonetheless, the remedy sought here is a declaration and it is well-established that declaratory relief should not be given unless there is utility in giving it.[2] In the present context there appears to be little practical difference between that test of utility and the administrative law test of reasonable conjecture.[3] That is because it is doubtful there would be utility in making a declaration here if there were not a realistic possibility of a materially different value being determined but for the temporal error of the valuer.
- [10]Ultimately, none of this assists Council’s second argument. The prospect of a material change in value within the six period must here be regarded as a realistic possibility, rather than merely theoretical or remote. As much follows from the following qualification added to the second respondent’s determination at page 2:
“This assessment is current at the date of assessment only. The value assessed herein may change significantly and unexpectedly over a short period of time (including as a result of general market movements or factors specific to the particular property).” (emphasis added)
- [11]Council did highlight the actual date upon which the valuation exercise was retrospectively carried out was in early 2023 and that the valuer might be thought to have been aware of any recent transactions that would have materially altered the value as at the assessment date. However, his report contains no reference to any valuations of comparable properties after the date of assessment. The result is that his report is silent as to what extent, if any, the value may have varied after the assessment date and, by its above qualification, acknowledges there may have been a significant variation in a short time. It cannot be inferred any potential difference in value as between the assessment date and the contribution date would be so minor as to cause this Court to conclude there would be no utility in intervening to provide declaratory relief.
- [12]The parties were both entitled to the valuation they bargained for. They did not get it. If they had, the possibility that the determined value would have been materially different from the value actually given here is sufficiently realistic to justify the Court’s intervention by declaration.
- [13]The valuation determination was not a determination of “the market value of the land contribution” within the meaning of cl 7.3 because it assessed the market value as at a date, namely 2 September 2022, prior to the date the land was contributed, namely 19 October 2022. I will so declare.
Did the valuation’s methodology mean it was not a valuation as required by the infrastructure agreement?
- [14]I have found to this point that the valuation does not come within the meaning of cl 7.3(d), but only by reason of the assessed market value date being six weeks too early. Setting that issue to one side and assuming, for the sake of argument, that the valuer’s determination was of the market value of the land as at the date it was contributed, the developer nonetheless complains it still would not come within the meaning of a determination of the market value of the land contribution within the meaning of cl 7. This complaint goes to the methodology adopted by the valuer.
- [15]The genesis of the argument lies in the valuer’s report where its “Brief Description” mentions that as at the date of his inspection, which was in early 2023, the land had already been subject to development per the approved reconfiguration but explains that his determination “considered the value of the land to the parent site in its englobo form”. The developer submits that approach was wrong and the valuer should have valued the land by reference to the reconfigured parent site – that is to say, by reference to the future value of the multiple lots of land to which the reconfiguration would give rise.
- [16]Such a valuation methodology would presumably be more generous to the developer’s position than the methodology applied. That is because, as the developer’s counsel accepted, the premise of the development is the making of profit following the developer’s land becoming more valuable consequent on its reconfiguration into many lots, the collective value of which would likely be greater than the value of the parent block of land. One of the prices the developer paid for securing Council’s approval of the development was the contribution of its land to accommodate the transport link. The developer would have it that the value of the land it was giving up in order to proceed to reconfigure the lots ought be valued by reference to the future value of the lots created and remaining in the developer’s possession after the contribution of the lot from the parent parcel.
- [17]One of three obstacles to the developer’s complaint is that the developer and Council made a choice to adopt a commercially expeditious method of calculating the relevant amount for land contribution. The confining principles which apply in such a situation are well settled, their seminal explanation by McHugh JA in Legal & General Life of Australia Ltd v A Hudson Pty Ltd,[4] having been followed with approval in various Australian courts since,[5] including by the High Court in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd:[6] In summary those principles are:
- Parties to an agreement to refer a valuation decision to an independent valuer and to be bound by that decision cannot avoid being bound merely on the basis of some mistaken application of the principles of valuation or some discretionary error in the application of the valuer’s expertise.
- The fact of such agreement will not preclude a party’s potential remedy in negligence as against the valuer by reason of such mistake or error.
- However, as between the parties, their agreement precludes their escape from the agreed binding effect of the valuation, unless the valuation was not made in accordance with the terms of that agreement.
- [18]The infrastructure agreement between the parties allowed each to secure a valuation report and each to, in turn, agree upon a market value. Failing that, it allowed each to agree upon the identity of a third independent valuer who would be engaged to proceed to make the valuation determination acting as an expert, which valuation was agreed to be binding upon them. That expert’s valuation methodology falls squarely within the province of the valuer applying the expertise he was contracted to provide.
- [19]The second obstacle to the developer’s complaint is that the argument it necessarily relied upon to avoid the confining effect of the above principles was premised upon an unsustainable construct. That construct was to frame the methodology adopted as a failure to meet the temporal requirement of cl 7.3(d), discussed earlier, that the determination is of market value at the time of the contribution. It was in effect argued that the valuation was not of the value of the land at the time of the contribution because at that time it became a piece of land neighbouring a newly configured array of many residential lots. The argument is an invitation into error. The hair-splitting debate it prompted in submissions, about whether the valuation in truth sought by the developer is one based on market value after the time of contribution rather than at the time of contribution, was a diversion from the reality of the valuer’s task under cl 7.3(d).
- [20]That task was to determine the market value of the property at the time it was contributed, by applying the expertise of a valuer. The way in which the dynamic of before and after considerations influenced his expert assessment of value at the time of contribution was a matter for his valuation expertise. It would not follow merely from the fact regard was had either to before or after considerations that the resulting valuation was not a valuation of the land at the time of its contribution.
- [21]This heralds the third obstacle to the developer’s complaint, which is that having regard to the value of the land at the parent site in its englobo form was not all the valuer did. It was but one component of the expert methodology applied. As much can be immediately demonstrated by quoting the following passage from his report on the specific topic of his methodology:
“5.1 Methodology
The subject property “Highest and Best” use is considered to be for redevelopment in accordance with the established approval for a reconfiguration of lot as a residential subdivision. In my determination, I have utilised the “Before and After” approach. As highlighted, the impact of the land dedication for the scheme includes the loss of land and severance which relates to an impact to the lot yield achievable.
I consider that the scheme also presents Injurious Affection where a number of the developed lot will be impacted by then fronting a higher hierarchy road then [sic] that which would likely be sought in the absence of the scheme.
Given the above, I am of the opinion that the most appropriate approach to assessing the respectively [sic] losses and consequently the value of the land would be to consider such on a rate per potential lot with due regard to sales evidence of englobo land analysed on the same basis. It is recognised that the valuers engaged by the respective parties had each applied a rate per square metre (or hectare) and considered the Injurious Affection on a similar basis though in the latter case the impact is applied to the whole of the balance land rather than directed to the portions which are in fact impacted by the scheme. In such respects, I consider the approach I have adopted is a more consistent and specified approach in addressing the Market Value of that Land Dedication under the Before and After Methodology.”
- [22]That passage makes it clear the valuer applied a “Before and After Methodology” which involved more complex considerations than the narrow consideration complained of by the developer’s argument. This further exposes that the developer’s second complaint is not in substance of a failure to meet the terms of the agreement. It is no more than a complaint about the process of the valuer’s application of expertise to make an expert determination, a process by which the developer agreed to be bound.
- [23]The above reasons amply explain why the developer’s second complaint must fail. They also make it unnecessary to explain, or express a concluded view on, the merits of the rival submissions of counsel for each side as to how the so-called Pointe Gourde principles,[7] applicable in cases of compulsory acquisition under a scheme, could by parity of reasoning be applied in support of their arguments about the valuation methodology applied here. This was not a compulsory acquisition. The land was contributed in an exercise of free commercial choice. In that context the Pointe Gourde principles could do no more than potentially inform the valuer’s choice of methodology, a choice which the parties’ agreement left to the valuer’s expertise.
Conclusion and orders
- [24]In circumstances where I have been persuaded to make a declaration as a result of the success of the developer’s first argument but not its second, it is appropriate that declaration be couched in such a way as to specifically reflect that outcome. That is preferable to merely leaving it to the perusal of these reasons, to ascertain why I will be declaring that the second respondent’s determination was not a determination of the market value of the land contribution within the meaning of cl 7.
- [25]Submissions were also directed to potential orders additional to a declaration. In my conclusion, additional orders would involve a higher level of intervention by the Court in the parties’ contractual relations than appears necessary. A declaration should be sufficient to quell the controversy between the parties and the terms of the agreement can be left to do their work. To cater for the unlikely event further curial guidance is required, my orders will make provision for liberty to apply.
- [26]The parties having endured mixed success in this application, it will be necessary to hear them as to costs if costs are not agreed.
- [27]I order:
- It is declared the second respondent’s purported market value determination provided as a result of joint instructions from the applicant and the first respondent pursuant to cl 7.3 of their infrastructure agreement dated 18 January 2022 was not a determination of “the market value of the land contribution” within the meaning of cl 7.3 because it assessed the market value as at a date, namely 2 September 2022, prior to the date the land was contributed, namely 19 October 2022.
- Liberty to apply on the giving of two clear business days notice in writing.
- I will hear the parties as to costs, if costs are not agreed in the meantime, at 9.15am 7 February 2024.
Footnotes
[1] See for example the call for such caution by McPherson JA in McArthur v Mercantile Mutual Life Insurance Company Ltd [2002] 2 Qd R 197, 203 and by Basten JA in Downer Engineering Power Pty Ltd v P&H Minepro Australasia Pty Ltd [2007] NSWCA 318, [17].
[2] Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 582.
[3] As to the latter see Nathanson v Minister for Home Affairs (2022) 96 ALJR 737, 748 [33].
[4] (1985) 1 NSWLR 314, 335-336.
[5] See for example Holt v Cox (1997) 23 ACSR 590, 595-597.
[6] (2011) 244 CLR 305, 315-316 [26].
[7] Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565.