Duffy v Minister for Planning [2004] HCATrans 414 (27 October 2004)

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Duffy v Minister for Planning [2004] HCATrans 414 (27 October 2004)

Last Updated: 4 November 2004

[2004] HCATrans 414

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P10 of 2004

B e t w e e n -

PATRICK JAMES DUFFY

Applicant

and

THE MINISTER FOR PLANNING

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 27 OCTOBER 2004, AT 2.00 PM

Copyright in the High Court of Australia

MR R.I. VINER QC: If it please the Court, I appear with my learned friend, MS L.E. ROWLEY, for the applicant. (instructed by McLeods)

MR G.T.W. TANNIN, SC: May it please the Court, with MR B.P. KING, I appear for the respondent. (instructed by Crown Solicitor’s Office Western Australia)

GLEESON CJ: Yes, Mr Viner.

MR VINER: If your Honours please, there are two questions which, in our submission, make this a special leave matter. They are at page 149 of the application book. The first, in what circumstances should an appellate court upon a rehearing, having found the trial judge to be in error, order a retrial rather than deciding contentious questions of fact and opinion – and I emphasise opinion – for itself in a case which is dependent for its outcome upon competing opinion evidence.

Formulated in that way, it is relevant to distinguish Duffy from Fox v Percy where the conflict in evidence was dependent upon the credibility of the witnesses and, to some extent, the demeanour of some of the witnesses compared to the written evidence of the police constable as to what was in his notebook. This case concerns conflicting opinion evidence as to the value of the land resumed.

The second special leave question is the correct legal principles which courts at first instance should apply to contemporary factors affecting valuation evidence when applying the broad principle in Spencer v The Commonwealth as to fair market value. Spencer v The Commonwealth, heard and decided some hundred years ago before sophisticated regulation of town planning considerations, today where those considerations impact fundamentally on the use to which land can be put and hence the market value of that land has a distinct bearing upon valuation and hence any restrictions, regulation and so on by those town planning considerations must be taken into account.

The question then is, when it comes to the application of those considerations to the comparable sales method of valuing the land, do such considerations go to questions of law, namely, the relevance of those considerations to determining which sales are and which sales are not comparable, rather than to matters of fact, as has been put in cases and indeed in the appellate court in this case, to weight or adjustment.

It is our contention that town planning considerations go to questions of law when the comparable sales method is being applied to valuation because the court is required to determine whether certain sales of land being subject to different town planning considerations renders them irrelevant as distinct from acceptable within a basket of sales simply to be given account by way of weight or adjustment. So they are the matters that we submit make the Duffy Case and the decision by the appellate court matters warranting special leave.

Your Honours will, of course, be familiar with the recent decision of the Court in Fox v Percy and it is submitted that Duffy gives to the Court an opportunity to restate and redefine in an area beyond that which was before the Court in Fox v Percy when appellate courts find the trial judge has been in error. As set out in the application book at page 130, those matters going beyond Fox v Percy go:

(i) to issues of fact (including opinion evidence) and questions of law when the appellate court proposes to decide the matter for itself by way of rehearing; and

(ii) to decide that a retrial –

or the circumstances in which an appellate court should decide that a retrial –

should be ordered rather than the appellate court deciding the matter for itself by way of rehearing.

The particular aspects of Duffy which give rise to those issues are to be found in what was said by Justice McLure writing the opinion of the appellate court in paragraphs 143 and 144 of her Honour’s judgment which will be found in the book at - - -

GUMMOW J: Page 125.

MR VINER: Yes, at 125, your Honour. The trial judge having not accepted the evidence of certain other valuers, in particular, McMahon and Dix on behalf of the appellant, then turned to the valuation evidence of the respondent’s experts. The trial judge in accepting the evidence and valuation of Mr Spencer did not, however, as her Honour Justice McLure found, satisfy himself or did not himself form a positive opinion as to the correctness of Mr Spencer’s valuation.

GLEESON CJ: Is that because of the way in which he expressed himself on page 52 in paragraph 256?

MR VINER: If I may turn that up. I think not because what her Honour Justice McLure found, and indeed was the case, that the trial judge did not examine each of the sales in Mr Spencer’s basket to satisfy himself that they were indeed comparable sales and until he did that exercise - - -

GLEESON CJ: That is the first sentence of paragraph 254?

MR VINER: Yes, and that is another comment that, indeed, that her Honour Justice McLure referred to, that the trial judge took the unusual step of not analysing each sale. Now, earlier in her Honour’s judgment her Honour criticised that but said that it did not go to the core or fundamental of the process of reasoning by the learned trial judge. However, when her Honour came to consider the learned trial judge’s decision that he favoured the valuation of Mr Spencer, in our submission, Justice McLure quite properly found that the learned trial judge did not make the underlying findings of fact from which that opinion could be formed. That then led her Honour to proceed to determine that question for herself.

GLEESON CJ: Now, why was it wrong for her to do that?

MR VINER: Because, in our submission, upon a rehearing, the appellate court was required to itself make the findings of fact which the trial judge had not made, and that is on the basis of the Makita principles, that the underlying findings of fact to support the opinion must be admissible and then be found before the opinion dependent upon them is to be accepted. So it is our contention that where you have competing opinions in a situation where the appellate court has found the trial judge has not made findings of fact to support any one or other of those opinions, the appellate court must itself, to use Justice Kirby’s terms, condescend to examine the evidence and the facts for itself and make those necessary findings of fact.

It is our submission that that is a fundamental error on the part of her Honour Justice McLure in then seeking to substitute her valuation for that of the trial judge. As it happened, she arrived at the same valuation as the trial judge. That really points up the difference between the circumstances in this case and those which arose in Fox v Percy because there this Court considered the long line of cases where different statements had been made about the regard to be had by the appellate court to a trial judge’s finding or consideration on demeanour. Where opinion evidence is the very basis and lies at the heart of the final judgment to be made and there are not findings of fact made by the trial judge to support any one or other of those opinions, then the appellate court must itself make those findings. The appellate court in this case has failed to do that.

Now, that is brought home and then brought together when one has regard to the application of the Spencer principles in a case where the comparable sales method is being applied, because all the different factors affecting market value in the contemporary scene must be taken into account and so the appellate court must itself do what the trial judge should have done in determining market value.

GLEESON CJ: Where is this error? Where do we find this error?

MR VINER: We find it in those paragraphs 143 and 144. It may be because there is nothing more than to be found in 143 and 144 of the consideration by her Honour of all those various factors. Now, it may be seen, for example, in her Honour’s exclusion of sales 3, 4, 7, 9 and 13 which appears in the middle of paragraph 144 about line 30.

Now, one of the considerations on the well-known principle that blighted land is not to be taken into account in a valuation was partly applied by her Honour in ignoring those sales, but the evidence before her, and particularly in regard to what was said by Mr Spencer, whose opinion her Honour and the trial judge were relying upon, was that the whole of the area described as Northbridge, which is immediately south of Newcastle Street in which the Duffy land was situated, to a varying extent was blighted. So there were more sales than 3, 4, 7, 9 and 13 in the vicinity of the blighted area in Northbridge which were blighted and hence whose valuation was affected. Therefore it required the appellate court to examine each of the contended comparable sales in order to see, amongst other things, the extent to which those sales were blighted as well as such matters as differential zoning requirements in order to determine whether and which sales were relevant.

That, in our respectful submission, is a prime example of the error made by, not only the trial judge, because as her Honour said, the trial judge did not consider each particular sale in Spencer’s basket to determine whether it was comparable but took just a very broad view and likewise, her Honour did not examine each of those sales to determine whether they were comparable and therefore relevant to valuation.

GUMMOW J: How many days did this trial run?

MR VINER: If I may ask my learned junior – 20 days, yes, 20 days and a considerable mass of evidence.

GUMMOW J: And you want a retrial, do you not?

MR VINER: Yes, that is our submission. Now, we are conscious, of course, that it was a very lengthy case, but where there is such a fundamental error, in our respectful submission, and the appellate court cannot itself condescend into the evidence and make the necessary findings, then - - -

GLEESON CJ: Why can it not?

MR VINER: Well, maybe if I rephrase that. It would have to go back into all the evidence, weighing each part of that evidence if it was to even attempt to put itself in the position of making findings of fact. It is our contention that it would also have to do that in order to decide between the contending valuers. It is not enough on a rehearing to simply adopt the exclusion of certain valuation evidence by some of the valuers and then prefer a final valuer’s evidence unless the appellate court goes into the evidence given by all of them and it necessarily has to make a complete assessment, a reassessment and a re-examination of all the evidence, not simply looking at one valuer’s evidence, because lying at the heart of accepting one valuer’s evidence over another are the considerations that I have referred to.

GUMMOW J: Your opinions were from Mr McMahon and Mr Dix, were they?

MR VINER: That is right, yes. If I may, just in conclusion, refer to what is apparent in the inconsistency between the way in which the same coram of the appellate court made its findings in Duffy and those in a related case of land only some 235 metres away in Arcus. Some of the findings that his Honour Justice Pullin made which were upheld by the appellate court, such as the exclusion of suburban zoned land as comparable sales, no discount for magnitude and variations of allowance as to time, which were all upheld by the appellate bench in critical instances were not upheld in the Duffy Case. In other words, there was an allowance made for magnitude which reduced the valuation.

Then finally, the appellate court in Arcus found that his Honour Justice Pullin was in error in looking to a particular sale as the most important sale being, coincidentally, the most important sale in Duffy and not finding that his Honour Justice Pullin could not have regard to that particular sale but sending it back with a direction as to how to deal with it, but in Duffy rejecting that sale as a relevant comparable sale. So that it set up an inconsistency between these two cases, Arcus and Duffy, by the same appellate bench.

The injustice of that in the end result was that where Justice Pullin finally valued the Arcus land at some $1,200 per square metre, the Duffy land was valued at only $775 per square metres. So there are matters of principle, in our respectful submission, which need to be resolved by this Court to give guidance not only to Western Australian courts on land resumption but courts around Australia in a situation where it is conflicting opinion evidence which is being examined by the appellate court.

GUMMOW J: Do you need an extension of time?

MR VINER: There is an application, your Honour, and I apologise for not moving that in the first instance.

GLEESON CJ: Is that opposed, Mr Tannin?

MR TANNIN: No, your Honour.

GLEESON CJ: Yes, you have that.

MR VINER: May it please the Court.

GLEESON CJ: Thank you. Yes, Mr Tannin.

MR TANNIN: If your Honours please, the factors that my friend puts up for special leave are not - - -

GLEESON CJ: We do not need to hear you on the first point, that is, the function of the appellate court, but we would like to hear what you have to say about the second point of Mr Viner.

MR TANNIN: The question of the Spencer test?

GLEESON CJ: No, maybe that is a way of summarising it. The criticism that he addresses to paragraphs 143 and 144 on the basis that there was an inadequate consideration and the related remark with which he concluded that there is an inconsistency between this decision and Arcus.

MR TANNIN: The construction that my friend puts on paragraph 144 of her Honour’s judgment is, with great respect, unfair. At that point her Honour was ultimately summarising the findings that the Full Court was enabled to make but it did so in a context where, starting at paragraph 110, it had done the analysis of Mr Spencer’s evidence and each of the comparable sales which it relied upon to make its findings. So it is quite wrong, with great respect, to say that only in 144 does one have an analysis. On its own, it looks quite glib, but it is not - - -

GLEESON CJ: I understood Mr Viner to say that it was not only sales 3, 4, 7, 9 and 13 that were affected by urban blight, it was all of them to some extent, which I think is another way of saying they are not truly comparable.

MR TANNIN: Yes, but her Honour dealt with the question of urban blight earlier in the judgment and each of the criticisms he makes simply reflects the way he has put his argument. The judgment of the Full Court in its entirety takes account of the fact of blight – it does so expressly – looks at each of the comparable sales - - -

GUMMOW J: Where does it deal with blight?

MR TANNIN: At paragraph 107 and there is an earlier general reference, because the grounds before the Full Court were very extensive and overlapping. What her Honour did was to try to group them into separate parts to try and analyse them more simply. The question of - - -

GLEESON CJ: Well, it starts at paragraph 11, does it not?

MR TANNIN: Yes. Now, I just cannot pick up directly where blight is referred to, but I am positive it was.

GLEESON CJ: Paragraph 11.

GUMMOW J: Page 75.

MR TANNIN: Thank you, your Honour. So that really deals with the first reference to the inadequacy of the process of the Full Court. The second argument put against us is that somehow the question of zoning should be elevated as a matter of law to having some particular importance in the context of a valuation exercise for the purposes of Spencer. That, with respect, cannot be accurate. Valuation is simply one of the facts. Its relevance in a particular case is a matter of fact to be assessed in context. The context is the value attributable by the market.

In one of the most colourful parts of this application book you will see a reference to the evidence of Mr Spencer at application book 30 where he gives us the Mukinbudin example and explains at the top of page 30 of the application book that you can have a property zoned city property in Mukinbudin with a commercial zoning and it would not mean anything if there was no market demand for it. That perfectly, in our submission, encapsulates the error of the submission made by the applicant in this case, that somehow zoning has another special quality.

As to the third point of the alleged intra-jurisdictional conflict, the Arcus Case did involve some of the same witnesses, but what it significantly did was involve a different kind of evidence. Your Honours, I have replicated in the book of materials the Arcus judgment and your Honours can see expressly in that judgment, which was written again by her Honour Justice McLure, firstly, at page 31 of the materials paragraph 46 where her Honour notes:

It is also apparent from the trial Judge’s consideration of the sales evidence that he examined each sale in isolation and made a judgment as to its comparability . . . The appellant says the trial Judge’s methodology is flawed. Before addressing that matter –

her Honour explains that unlike in Duffy - - -

GUMMOW J: They came down on the same day, did they not?

MR TANNIN: Yes, and they were effectively heard simultaneously, but in that case there was very little expert evidence as to the processes involved. Similarly, if I can take you to page 38, paragraphs 69 through to 71, where again her Honour distinguishes Duffy and if you look at paragraph 70 as an example, referring to Duffy, in Duffy we had the situation of this trial that took about four weeks and why it took four weeks is people like Mr Elliott were cross-examined at enormous length and, in effect, in their cross-examination they explained the methodology that had been used in the valuation process. That had not happened in Arcus.

So whilst we had the same witnesses, we did not have the same extent of explanation as to the method, therefore, the court was able in this case to undertake the exercise in rehearing and determining the matter where it was not able to do so in Arcus. There is no intra-jurisdictional conflict. They are my submissions.

GLEESON CJ: It really comes to the point, does it not, on paragraph 78 on page 40 of Arcus?

MR TANNIN: Yes, that is the point I made. They are my submissions.

GLEESON CJ: Thank you. Mr Viner.

MR VINER: If I may respond shortly, your Honour. With regard to the matter of blight, in those passages to which your Honours have referred and identifying where the trial judge and Justice McLure referred to blight, the error on the part of her Honour at paragraph 144 is that she has not examined all the alleged comparable sales for the undoubted effect of blight on those sales to determine whether, notwithstanding the blight, they are relevantly comparable. That is one example of the fundamental error in paragraph 144.

As I have said, for the appellate court to re-examine the evidence and make the finding of fact and law for itself it had to re-examine all those sales that were put forward by Mr Spencer as comparable sales, and her Honour failed to do that. The matter of blight then is an example of the more fundamental failure at the point where having found that there were
errors made by the learned trial judge, then it was not carried through to what is the function and duty of the appellate court.

Now, that may be seen in looking at paragraph 147 where her Honour identifies the grounds of appeal which are upheld, they being grounds 1(e)(i), 4(c) and 4(d). Now, in the application book, if I may turn to those pages – page 60 – one can see how the fallacy is exemplified because 1(e)(i) on page 61 is that his Honour the trial judge:

without individual scrutiny of claimed comparable sales or testing of the particular valuer’s process of reasoning found that the comparable sales put forward by the respondent’s valuer Mr J Spencer were “reasonable” –

and then 4(c), which is on page 63, is that:

His Honour failed to decide which, if any, of the sales in the “basket of sales evidence” were in fact comparable to the resumed land.

And that ground of appeal was upheld and that is fundamental to his Honour the trial judge making the appropriate value and likewise of the appellate court in substitution, and then partly upheld 4(d) that:

His Honour accepted Spencer’s valuation of the resumed land when . . . his valuation was unreliable.

And those matters going to the heart of the necessary finding of fact in order to determine a value, in our respectful submission, the appellate court was in error and the only way to rectify that error is for a retrial. May it please the Court.

GLEESON CJ: This appeal turned on the application of well-settled principles as to the functions of an appellate court and as to valuation law and practice to the particular facts and circumstances and does not raise an issue suitable to a grant of special leave. Furthermore, we are not persuaded that the interests of justice require such a grant, and the application is dismissed with costs.

AT 2.34 PM THE MATTER WAS CONCLUDED