Land and Environment Court
New South Wales

Medium Neutral Citation:

Fivex Pty Ltd v Valuer-General [2013] NSWLEC 114

Hearing dates:

22, 23 July 2013

Decision date:

23 July 2013

Jurisdiction:

Class 3

Before:

Craig J

Decision:

1. Stand over the applicant's notice of motion filed on 14 June 2013 for final orders to be made on Friday 9 August 2013.

2. Direct that the respondent identify in writing and provide to the applicant by 5.00pm on Friday 26 July 2013 the tenancy documents that it seeks to have produced for the purpose of preparing its valuation evidence.

3. Direct that the applicant provide the documents so requested for inspection by 5.00pm on Wednesday 7 August 2013.

4. In the event of there being dispute as to the documents required to be produced, any notice of motion directed to that issue, must be filed and made returnable on Friday 9 August 2013.

5. By consent, the notice of motion filed by the applicant on 23 April 2013 is dismissed.

6. By consent order that the applicant pay the respondent's costs of the notice of motion filed on 23 April 2013, agreed in the sum of $600.

Catchwords:

PROCEDURE - motion to set aside subpoena - whether documents requested for a legitimate forensic purpose - whether it is likely that the documents the subject of the subpoena would materially assist on an identified issue - whether documents sought are relevant to valuation method proposed and to assessment of comparable sales - reasonable basis beyond speculation that documents will materially assist on the issue of valuation - subpoena has the hallmarks of a fishing expedition - subpoena not upheld in its present form - documents to be identified and provided

Legislation Cited:

Civil Procedure Act 2005
Uniform Civil Procedure Rules 2005
Valuation of Land Act 1916

Cases Cited:

Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110
Commonwealth Custodial Services Limited v Valuer-General [2007] NSWCA 365; 156 LGERA 186
ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307
Toohey's Ltd v Valuer-General [1924] 25 SR (NSW) 75

Category:

Procedural and other rulings

Parties:

Fivex Pty Limited (Applicant)
Valuer-General (Respondent)

Representation:

I Hemmings (Applicant)
M R M Carpenter (Respondent)
Susan Hill & Associates Lawyers (Applicant)
IV Knight, Crown Solicitor (Respondent)

File Number(s):

31101, 31102 and 31103 of 2012

EX TEMPORE Judgment

1Fivex Pty Limited (Fivex) has appealed to this Court pursuant to s 37 of the Valuation of Land Act 1916. Fivex is dissatisfied with the determination by the Valuer-General of its objection to the land value assessed for land known as 376-382 New South Head Road, Double Bay (the property) as at base dates of 1 July in each of the years 2009, 2010 and 2011. The appeals have not yet been fixed for hearing.

2There are presently two notices of motion before me for determination. The first was filed on 23 April 2013 and seeks a review of the decision of the Acting Registrar given on 28 March last in which she declined to set aside a subpoena issued at the request of the Valuer-General. That subpoena required Fivex to produce a tenancy schedule for the property for the period from 1 January 2009 to 31 December 2011. The motion seeking a review of that decision is no longer pressed. I will address that notice of motion later in these reasons.

3The second notice of motion is one filed by Fivex on 14 June 2013 in which it seeks an order setting aside a subpoena issued at the request of the Valuer-General, requiring that Fivex produce a number of documents (the second notice of motion). It is the order sought in the second notice of motion that has been debated before me by the parties.

4The subpoena that is the subject of the second notice of motion was issued on 4 June 2013. The documents required to be produced were identified in the Schedule to the subpoena in the following terms:

All documents or things you must produce are as follows:

1. All files, documents and records, whether electronic or otherwise, relating to the property at 376-382 New South Head Road, Double Bay, which contain the following information for the period 1 January 2009 to 31 December 2011:

(a) The names and number of tenants;

(b) The demised area or vacant area (m2);

(c) The floor level of the tenants;

(d) The net lettable area (PCA measurement);

(e) The term of the lease including the start & expiry date;

(f) The Option Term, if any;

(g) The passing rent per annum (pa) for each tenancy;

(h) The level of outgoing contributions by the Lessee pa;

(i) The total level of outgoings for the whole building pa;

(j) The date of the last and next rent review for each tenant;

(k) The total net lettable area of the building;

(l) The total gross and net income for the building;

(m) The total number of car parking spaces and the rent passing for each space pa;

(n) Full details of the income derived from signage pa;

(o) Full details of the income derived from any other roof top or external building areas;

(p) Full details of any naming rights.

5Fivex submits that there are two bases upon which the subpoena should be set aside. First, it contends that there is no legitimate forensic purpose to be served by production of the documents sought. Second, it contends that the terms in which the documents sought are expressed constitute a fishing expedition, as the subpoena fails to identify the documents sought in the manner required by Pt 33 r 33.3(4)(a) of the Uniform Civil Procedure Rules 2005. As a consequence of this failure, so Fivex submits, uncertainty attends the content of the documents required to be produced rendering attempts at compliance "oppressive".

6Ordinarily, it would be appropriate first to address the second basis advanced by Fivex for setting aside the subpoena. If the terms in which the material required to be produced do not comply with the rule, that generally would be sufficient to dispose of the motion in favour of Fivex without the necessity to address the first basis of challenge.

7Notwithstanding the apparent attraction of that course, both the history of the proceedings and the arguments advanced before me render it appropriate that the first basis upon which Fivex seeks to set aside the subpoena should first be determined. I will shortly explain my reasons for so concluding.

8As I have earlier indicated, the subpoena that was the subject of decision by the Acting Registrar was one seeking production by Fivex of the tenancy schedule for the subject premises. In seeking to have that subpoena set aside, Fivex argued unsuccessfully that production of the tenancy schedule served no legitimate forensic purpose. That same argument is the argument described by Fivex as its "principal argument" for setting aside the subpoena that is the subject of the motion debated before me.

9Further, Mr I Hemmings, who appeared on behalf of Fivex, candidly stated that any further subpoena directed to his client, requiring production of what might generically be described as current tenancy documents for the property in the period to which the land value determinations relate, would serve no legitimate forensic purpose and would again be the subject of an application of the present kind. In that circumstance, it is appropriate that I determine that "principal argument" in an endeavour to avoid its repeated agitation.

Legitimate forensic purpose

10The parties are not in dispute as to the relevant principle to be applied. They both accept that a document will have a legitimate forensic purpose if it is likely that the document or documents will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the document will materially assist on such an issue (ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307; Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110 at [20]).

11At a level of generality, the "issue" for determination in the principal proceedings is the land value of the property on each of the base dates for which a determination has been made and which is the subject of appeal to the Court. That "land value" is required to be determined in accordance with s 6A of the Valuation of Land Act 1916. Fivex contends that the land value is to be determined solely by reference to s 6A(1) of that Act. The Valuer-General contends that the land value is to be determined by applying the assumptions that are the subject of s 6A(2) of the Act.

12Mr Hemmings acknowledges that the issue between the parties as to whether s 6A(2) is relevant to the valuation exercise required in the present case is a matter to be determined at the final hearing and not upon the determination of the present notice of motion. However, he submits that the tenancy documents for the property can have no bearing upon the valuation, even applying s 6A(2), as those documents can bear only upon the value of the improvements on that property which, conformably with s 6A(1), must be ignored and be assumed never to have existed (Commonwealth Custodial Services Limited v Valuer-General [2007] NSWCA 365; 156 LGERA 186 at [111]).

13Ms M Carpenter, who appears for the Valuer-General submits that the approach of Fivex is misconceived. She accepts that when determining land value in accordance with s 6A of the Valuation of Land Act, present authority proscribes a process of valuation by attributing a value to present improvements, however undertaken, to enable the latter value to be deducted from an improved site value in order to arrive at a land value (Commonwealth Custodial; Toohey's Ltd v Valuer-General [1924] 25 SR (NSW) 75). That is not the purpose for which the tenancy documents are sought. However, she submits that the documents sought in the subpoena issued on 4 June last are relevant to the valuation method proposed to be addressed in evidence by the Valuer-General.

14The valuation exercise called for by s 6A required that the land value be determined having regard to the "highest and best use" of the land being valued. The tenancy documents current at each relevant date are relevant, so it is submitted, to the use of the land in order to determine whether that use reflects the "highest and best use" of the property. That assessment, in turn, has a nexus with the provisions of s 6A(2) which, the Valuer-General submits, is necessary to be applied in the present case. The provisions of that subsection are said to be engaged because the present retail/commercial building erected on the subject property has a floor space which exceeds that which could be achieved under the provisions of the planning instrument applicable to the property at each base date.

15It is further submitted that the tenancy documents sought by the subpoena also have relevance to the comparability of improved sales transactions used to arrive at a land value of the subject property.

16As will be apparent, the documents sought are intended to inform a valuation method proposed to be incorporated in the valuation evidence to be tendered on behalf of the Valuer-General. That valuation evidence, in the form of a report, has not yet been prepared for the obvious reason that its completion depends upon receipt of the documents sought. Precisely how the information obtained from those documents, if produced, will be reflected in that evidence is not presently known.

17Generally, courts will be slow to deny to a party the use of a valuation method that appears rational to be applied to the valuation task at hand (Commonwealth Custodial per Spigelman CJ at [3]). Even as a means of checking the comparability of sales used to derive land value of the subject property, the methodology proposed by the Valuer-General, utilising the information obtained from tenancy documents, would not appear to me to be devoid of rationality. Further, the purposes of using the material sought would not, on the basis of the submissions made by Ms Carpenter, appear to offend the principle articulated by Tobias JA in Commonwealth Custodial at [111].

18In that case, his Honour did not eschew the use for any purpose of tenancy information relevant to the site being valued. Indeed, the methodology adopted in that case by the Valuer-General, not found wanting by his Honour, involved the use of rental information for the purpose of adjusting values derived from comparable sales (at [34] - [36]). Moreover, his Honour noted at [86] that where land value is to be determined by applying the provisions of s 6A(2) of the Valuation of Land Act, the height and floor space of the building erected on the land being valued are not necessary to be ignored for any purpose relevant to the determination of land value.

19The critical proscription identified by Tobias JA is expressed in [92] where his Honour indicated, in accordance with the authorities there cited, that it was impermissible to determine land value "by a method which, as a first step, assesses the improved value of the relevant land and, as a second step, deduces its 'land value' by deducting the added value of the improvements from that improved value." As I have indicated, the Valuer-General has indicated that it does not intend, by the evidence it proposes to prepare, to offend the proscription so articulated.

20Whether the evidence ultimately prepared on behalf of the Valuer-General posits a land value that accords with the provisions of s 6A must necessarily be determined at trial. Nothing that I have said is intended to pre-empt that determination. However, having regard to the nature of the documents sought and the manner in which the material obtained from them is intended to be used, there is, so it seems to me, a reasonable basis beyond speculation that those documents will likely provide material assistance on the issue of valuation proposed to be addressed by the Valuer-General.

21How and in what amount the land value should be determined is the central issue in the proceedings. Accordingly, I would not uphold the first ground of challenge to the subpoena issued on behalf of the Valuer-General.

Documents not appropriately identified

22The Valuer-General seeks to sustain the list of documents sought in the subpoena by reference to the history of its dealing with Fivex. Having succeeded before the Acting Registrar in sustaining its earlier subpoena for the production of a tenancy schedule, over the challenge of Fivex, the Valuer-General was subsequently informed that such a schedule did not exist. The absence of such a schedule for a retail/commercial building is, so it is submitted, somewhat extraordinary. However, that response by Fivex seems to have been accepted by the Valuer-General as no further action seeking to have the document produced has been taken. Nonetheless, Ms Carpenter has submitted that given the response that he received, the Valuer-General was careful to identify by description those documents that would appear to reflect the tenancy arrangements for the building during the relevant period. Thus the form which the Schedule currently takes.

23I accept that the Schedule to the June subpoena is inadequate to identify documents sought as required by r 33.3(4). It has the hallmarks of a fishing expedition, as that expression has been identified in the authorities. The terms in which the documents are sought would be more appropriate to discovery. I would not uphold the subpoena in its present form.

24However, that determination is not the end of the matter. The subpoena is directed to a party. It is incumbent upon the Court and the parties to the appeal to have the proceedings determined in a just, quick and cheap manner conformably with s 56 of the Civil Procedure Act 2005. This requires that the dispute concerning the tenancy documents be resolved promptly and once and for all.

25Mr Hemmings, on behalf of Fivex, indicated that if required to produce leases, tenancy agreements and other specific documents relating to the existing building and its occupancy, he would not foresee that such a request would be resisted once the legitimate forensic purpose issue had been determined.

26Accordingly, I propose to afford the opportunity for the Valuer-General to request and for Fivex to produce such documents as are identified by the former as falling within the generic description of tenancy documents. The proceedings proper are next listed for directions before the Court on Friday 9 August 2013. The process of request and production that I have contemplated must be completed by that date. These proceedings were first returned before the Court in November 2012. They have not proceeded beyond a s 34 conference and arguments directed to the notices of motion that are presently before me. The matter must now be prepared for hearing.

Disposal of the first Notice of Motion

27I referred earlier to the notice of motion that had been filed on 23 April 2013, seeking a review of the decision of the Acting Registrar. As I have also recorded, that notice of motion is no longer pressed. The parties have agreed that the notice of motion should be dismissed and that the applicant should pay the costs of the respondent agreed in the sum of $600. I propose to make orders accordingly.

Orders

28In light of the matters that I have addressed, the orders that I propose are as follows: