Bojack v Chief Executive, Department of Natural Resources
[2000] QLC 61
•12 October 2000
|
BRISBANE
12 October 2000
Re: Determination of Unimproved Value for
Conversion Purposes -
Land Act 1944 -
Special Lease No: 44/45731.
(LA99-1400).
William H and Merle A Bojack
v.
Chief Executive, Department of Natural Resources
(Hearing at Townsville)
D E C I S I O N
Background:
This matter relates to the conversion of Special Lease No 44/45731 to freehold tenure. The subject land is described as Lot 52 on Plan SB665, Parish of Inkerman, has an area of 125 hectares, and is located about 3.3km south of the Home Hill Post Office. The land is zoned "Rural B" under the Town Plan of the Shire of Burdekin of 2 July 1977 current at the date of valuation, which is the date of application for conversion by the lessee at 24 August 1995.
On 24 August 1995 the lessees, William H and Merle A Bojack, made application to the Minister for Lands (now Minister for Natural Resources) to convert the tenure of the lease to freehold. Following an initial offer by the Chief Executive, and a subsequent review of the unimproved value proposed at the request of the lessees, the Chief Executive confirmed the valuation for conversion at $291,500 on 26 August 1999. The offer by the Chief Executive was for the issue of a freeholding lease at $23,412.50 (including fees), or for the issue of a deed of grant in freehold at $300,332.50 (including fees).
The lessees appealed to the Land Court on 6 October 1999, claiming the unimproved value should more properly be $149,985. The lessees argue that the purchase price is excessive, and that insufficient allowance has been made for the limited use of the land, the sodicity and salinity of the soils, the nature of the land and the lack of comparability with sales of comparable properties.
Mr B Baxter, solicitor, appeared for the appellants, calling evidence from William Henry Bojack, and Geoffrey William Eales, a registered valuer. Mr J O'Rourke, Principal Legal Officer, appeared for the respondent, calling evidence from Stephen Brooks Gilbert, the Departmental registered valuer responsible for determining the valuation.
History of the Lease -
Mr Bojack has worked the land with his late parents since 1960, having had an association with the land since 1951. The appellants acquired the Special Lease in June 1995, after accepting an offer by the executor of his late parent's estate to match the most favourable offer of $110,009 from public tenders for the land. Throughout all of the above time the subject land has been used for grazing purposes only.
The appellants are experienced farmers in that locality, farming other lands (200ha) which are used for both grazing and cane farming. Mr Bojack confirms that in his opinion about 40ha of the subject land would be suitable for development as cane lands, but only after considerable cost to redevelop the land.
Both the subject land and the adjoining parcel (Lot 100 on CP907576, with an area of 160.2ha, were subjected to public tenders as part of the finalisation of the Bojacks' late mother's estate. The special lease of Lot 100 was subsequently purchased by Mr Populin, a neighbouring farmer, for $415,990.99 in June 1995. At the time of acquiring the special lease of Lot 100 there was a cleared and cultivated area of 28ha, which had previously been used for milo and sorghum crops.
Mr Populin subsequently freeholded Lot 100 for a further $415,000, and he has now developed Lot 100 as cane lands. The special lease of the subject land was for a period of 20 years for the purpose only of grazing, and was due to expire on 17 September 2003.
The Nature of the Land -
The subject land is flat to gently sloping open to lightly timbered coastal forest, originally of poplar gum and Moreton Bay ash, with areas of ti-tree, beefwood, black bean, rubber vine and chinee apple. The land is generally low-lying and subject to flooding in periods of heavy inundation. The land is slightly irregular in shape with a width of 445.4 metres north-south fronting the unformed Woods Road, and a depth of about 3,000 metres west to east.
The soils are generally dark cracking pudgy soils, changing to heavy dark clays in the low swamp areas to the south and east. The land is grassed with natural grasses and large areas of paragrass in the swampy melonhole areas. Mr Bojack notes that the land is continually wet for much of each year to September, and it has been used only for breeders, but not for fattening purposes. The land carries between 60-70 head of cattle in the normal season. Those stock were watered from a neighbouring lot, and partly from a lagoon on the subject land. Mr Gilbert concedes that the pocket of land containing the subject land is poor in both quantity and quality of water for grazing purposes.
Mr Bojack advises that about 40ha of the higher areas adjoining the boundary with Lot 100, could be developed for agriculture subject to suitable drainage. However the whole of the land is subject to flooding, which could flood up to 1.5 metres in very heavy rains.
There is a South Burdekin Water Board water channel constructed across the eastern end of the subject parcel, discharging into a natural watercourse to the east. The Home Hill Sewerage Treatment Plant is located to the north-east, and treated effluent discharges through a pipe underground into the lower gully and swamp areas to the east.
Mr Eales assesses the subject land as comprising 40ha of potential agricultural land, and 89ha of low-lying grazing land. Mr Gilbert sees the classification as 110ha of fair loam to medium and heavy cracking soils with some agricultural potential, but with likely sodidic affected soils; and the remaining 15ha of lagoon swamps with no arable potential. Mr Gilbert sees only 13ha of the higher lands as having any immediate arable potential, with major drainage works. Mr Bojack estimates about 40ha of land suitable for development for agriculture, possibly cane.
Mr Bojack notes that subsequent to the date of valuation, the adjoining Lot 100 (Populin) has been considerably developed for cane, thus increasing the risk of further water runoff across the lower subject land. The Populin land also includes the old Portion 379 (now part of Lot 100) to the east of the South Burdekin Water Board channel. That land has also been developed for cane production, although with a lower yield than the higher lands to the west.
The availability of water to the subject land is currently not confirmed. Mr Bojack concedes that there is an existing Departmental test hole upon the subject land, but neither he nor Mr Eales has any knowledge of the availability or quality of any underground water source on the subject land. It is confirmed that the current policy of the South Burdekin Water Board is to preclude use of the Board's water supply to lands where, either underground water is available, or underground water is available from an adjoining farm. Without adequate water availability it is not possible to grow cane. Having proved the availability of underground water supplies, owners may then seek Board water where the underground water is too saline or a high iron content exists.
Mr Gilbert advises that he had recently spoken to a Departmental agronomist (Mr Elliot) in July 2000. Mr Elliot had generally agreed with Mr Gilbert's earlier classification of the subject land, the main sale (Lago) and the Populin property. Mr Elliot was unavailable to provide evidence personally, but Mr Gilbert advises Mr Elliot's opinions as follows:·Lago Sale - 48.5ha of soils suitable for cane; about 24ha of heavier soils that would be suitable for cane with limitations; and 27ha of land unsuitable for cane.
·Populin Land - 40ha suitable for cane; 62ha suitable with limitations; and 57ha unsuitable for cane.
·Subject land - 35ha suitable for cane; 80ha marginally suitable for cane; and 12ha unsuitable for cane and which is highly sodic.
Mr Gilbert further advises that information from departmental water resource staff provided to Mr Gilbert, confirms that the underground water from the test hole on the Populin land, indicated a lesser water quality, but still capable of sustaining a crop yield of 85% of the mill average (100 tonnes of cane to the hectare instead of 125 tonnes). It had also been the water officer's opinion that similar underground water supplies could be found on the subject land. However Mr Gilbert concedes that as there was no proven water on the subject land, there remains some risk to availability. Mr Populin apparently mixes his underground waters from two bores on his other lands adjoining Lot 100, with Board channel water for irrigation purposes.
However there was a difference of opinion about the level of reliability that could be attached to Mr Elliot's opinions, relating generally to his extent of investigations of the actual soils in 1995. Mr Bojack advises that on 31 March 1995 Mr Elliot had indicated to him that his opinions were based only upon a quick inspection; while Mr Gilbert had concluded that Mr Elliot's inspections had been quite rigorous, as he noted he had taken some samples. However Mr Gilbert concedes that he also had a letter from Mr Elliot which notes that the classification followed a quick inspection.
There was agreement that a thorough inspection by an agronomist would be the best evidence of soil capability in normal circumstances. However, where the agronomist had only been able to undertake a more cursory inspection, then there may be some room for speculation on the suitability of the soils. Mr Gilbert concedes that, even in spite of an agronomist's advice that certain soils were unsuitable for cane, experience has demonstrated that farmers still develop those lands and cultivate cane on them, although not to optimum levels of production.
Mr Gilbert also confirms that when he refers to 80ha of land marginally suitable for cane, he refers to the problems of drainage and sodicity which need to be overcome in order to make the land agriculturally productive.
Access -
The subject land is located on the unformed section of Woods Road, and is currently accessed via the bitumen sealed Bojack Road to the north, and then by an unformed surveyed road for 540 metres south along Woods Road. Alternative access could be obtained from the Bruce Highway along the unformed Woods Road for 160 metres, towards the north-west to the southern boundary of the subject land.
There is some difference between the valuers' estimate of likely costs of developing the alternative access from the Bruce Highway. Mr Eales estimates the cost of formed gravel and a pipe culvert at about $15,000 to $20,000. Mr Eales sees the current unformed access at that location as suitable only for 4WD vehicles, and even then not during heavy rains. Mr Gilbert describes the access as only requiring minor roadworks to make it "all weather" for vehicles.
Mr Eales disputes that an existing track from the Bruce Highway could be upgraded, as he notes that track is not within the Woods Road survey reserve, and crosses private lands. Mr Eales also notes that, in his opinion, the $15,000 to $20,000 would only provide access to one point on the southern boundary of the subject land. He notes that any further internal access would be a matter considered in the inglobo value of the land, compared to other sale properties.
Mr Gilbert by comparison provides no cost for the access, and was of the view that, if the subject land was held in sole ownership separate to adjoining lands, then pressure could be brought upon the Council to construct an access road to the subject land. Mr Gilbert concedes that generally councils seek to avoid having to provide access to the boundaries of properties, but he seems to get assurance that pressure can be put upon the Council to do so.
Mr Gilbert agrees that there is no statutory right for an owner to force Council to comply, but argues generally Councils tend to be sympathetic to such requests for access, conceding however that there would be some risk involved in such an exercise. Mr Gilbert also concedes that he knows of no circumstance where the Burdekin Shire Council has in fact constructed such a road access at no cost to the owner.
Comparison of Sales -
In seeking support for his valuation, Mr Eales relies upon two sales of comparable lands. Those sales occurred as a result of the finalisation of the estate of McDonald, and Mr Eales inspected the lands on 23 November 1994 to prepare valuation reports for the executor prior to the sales.· Sale 1 - (Bruce Highway, Iyah, Home Hill - Lot 2 on RP721271)
This is a parcel of 99.38ha, purchased by Lago in February 1995 for $306,934. The sale has subsequently been developed into assigned cane lands. The sale had a set of yards at the date of sale, as well as a water supply from a road reserve. Mr Eales allowed for improvements on the sale at $20,000, and analysed the sale land at 60ha potential cane land at $4,450 per hectare, and 39.38ha of swamp at $500 per hectare. The sale shows an overall rate of $2,887 per hectare. Mr Eales had assessed that 40ha was originally swamp land, and needed drainage before it could be developed for cane.
· Sale 2 - (Bruce Highway - Lot 214 on SB117)
This is a 99.26ha parcel adjoining Sale 1, and purchased by Mann and Delaney in February 1995 for $306,566. Mr Eales again assessed that 40ha was swamp similar to Sale 1. The sale was also subsequently developed as cane lands.
After allowing $5,000 for improvements the sale was analysed at 60ha potential cane lands at $4,775 per hectare; plus 39.9ha swamp at $500 per hectare; showing an overall rate of $3,038 per hectare.
Both Sales 1 and 2 had their potential cane lands elevated above the swamp by 0.6 to 0.9 of a metre, and were therefore seen as superior to the subject land. Both sales are about 3km south-east of the subject land.
To support his valuation Mr Gilbert provides the following sales:
· Sale 1 - (Bruce Highway - Lot 2 on RP 721271)
This is the common sale with Mr Eales (Lago) for $306,934 ($3,088 per ha). Mr Gilbert sees the sale as having similar location, availability of water, and drainage problems; and superior access and soils. Overall the sale is seen as superior on a per hectare basis.
After allowing for improvements the same was analysed at $262,198 ($2638 per hectare).
· Sale 2 - (Inkerman Station Road, Home Hill - Lot 292 on SB145)
This is a 53.72ha parcel sold (Hindmarsh to Vecchio) in July 1995 for $553,800 ($10,309 per hectare). After allowing for improvements the sale was analysed at $263,881 ($4,912 per hectare) and is seen overall as superior to the subject land.
Mr Gilbert agrees with Mr Eales that his Sale 2 (Vecchio) is certainly superior, and is included merely to demonstrate a far superior property, typical of a normal cane farm without the problems of the subject land. Mr Gilbert therefore relies mainly on his common Sale 1.
In considering the Lago sale Mr Eales notes that property was subsequently developed by Lago at considerable expense. Mr Lago personally had major earth-moving equipment, which apparently tended to minimise the actual costs of the drainage works. It was Mr Eales' opinion that the extent of the development was likely to have proved uneconomic had normal contract costs been required. Mr Eales also believes that there was some internal arrangement between Lago and Mann and Delaney, which may impact both the development and the operations of the resulting cane lands on both properties. There was also considerable development of drainage on the adjoining Mann and Delaney land.
Mr Eales also notes that access to both the Lago and the Mann and Delaney sales was far superior to the subject land. There was a formed gravel road along the total frontage fronting the railway line and the Bruce Highway to the north-east of both sales. Mr Eales also confirms that the Lago and Mann sales also contained sodic soils which would have required treatment by gypsum prior to development for cane.
In respect of available water on the Lago and Mann sales, Mr Eales argues that at the time of his inspection in November 1994, there had been an irrigation well and spear capable of irrigating those parcels. While it had then been used for flood irrigation in the swampy areas, it was a potential supply of water for those sales, and had in fact been used for stock purposes while the former owner (McDonald) grazed the lands. Mr Gilbert concedes that he had not personally inspected the Lago and Mann sales prior to the major development works, and had relied on Departmental records. However Mr Gilbert notes that four bores have subsequently been sunk on the Lago sale, and all have needed mixing with bore water to overcome salinity.
Mr Gilbert also agrees that while Mr Elliot had determined that 27 hectares of the Lago sale was unsuitable for cane production, in fact the entire area of the Lago sale was now in cane production. A remotely sensed map (Exhibit 7) demonstrates the extent of the cane. However it is also noted that Mr Lago continues to complain of drainage problems for his cane, claiming that up to one-third of the area is inundated each year to some extent. Problems are continuing to be encountered preventing Mr Lago from discharging his flood waters across the highway. In light of those problems the wisdom of Mr Elliot's opinion would appear to be exonerated. It is also noted that similar drainage problems occur on the Mann sale. Mr Elliot's view of the Lago sale had been restricted to an overview while driving past the sale.
Mr Gilbert agrees that the soils of the subject land are more sodic than either of the Lago or the Mann sales. Mr Gilbert balances that disability against the very extensive earthworks necessary on the Lago and Mann properties in order to bring those lands into production. However there was no comparable estimate of costs for any potential development of the subject land.
The Conversion of Populin's Land -
While neither valuer has relied upon comparisons with the conversion valuation for the adjoining Populin's land, certain facts relating to that conversion are noted. At the time of accepting the conversion figure Mr Populin had also applied for a cane assignment, having also commenced development of the land for cane purposes. Mr Populin was aware at that time that the local mill suppliers' committee would not allocate a cane assignment until Mr Populin had possession of a freehold land title.
Mr Eales argues that he was aware that Mr Populin believed the conversion figure to be high. However, for expedience sake, he chose not to challenge the valuation, and to thus acquire the freehold title without delay. Mr Eales also argues that the parts of both the subject land and Populin's land, located east of the Board's water channel and the sewerage line, are difficult areas for cane, and Populin in fact is now experiencing difficulties with young cane in that area of his lot.
While Mr Eales has no evidence to support his conclusion, he argues that it is not correct to argue that Mr Populin agreed with the conversion valuation, but only that he did not object the level of value at $2,600 per hectare. Because of the special circumstances of Mr Populin's acceptance of the conversion figure, as an adjoining owner, Mr Eales argues that it is unwise to rely upon that figure as representing a sale. While Mr Eales does not challenge the validity of the conversion valuation, he rejects its use for the purpose of the current matter.
Mr Eales argues that Mr Populin accepted the conversion figure rather than risk not to be able to effectively harvest the existing cane on Lot 100, which was probably worth $200,000 to $300,000 at the mill. As a further part of that balanced decision by Mr Populin, there was also the realisation that the Minister allowed Mr Populin to pay off the freeholding costs over a period of years. For the above reasons Mr Eales sees the conversion as other than representing a transaction between a prudent vendor and a not anxious purchaser, and in his opinion, it is thus not reliable for use in the current matter.
Mr O'Rourke challenges that conclusion noting that the conversion figure was determined under s.170(3) of the Land Act 1994. Under that Act the determined unimproved value is defined under s.434(1). Mr Eales agrees with those directions, but argues that the Land Act also provides grounds for appeal by an applicant to freehold land. The fact that an appeal was not lodged, for whatever reason, in Mr Eales' opinion, does not demonstrate that the conversion value was correct.
However Mr Gilbert advises that while he was not the valuer preparing the conversion valuation, he was sure that the basis of that conversion figure was a comparison with the Lago sale (now Sale 1). Mr Gilbert agrees that the Lago sale ($2,638 per hectare) is superior to both the conversion figure for Populin ($2,593.75 per hectare) and the subject land ($2,332 per hectare).
Mr Gilbert also notes the conversion figure of $415,000 ($2,590.50 per hectare) compared to the amount paid for the lease of $415,990 ($2,596.70 per hectare). He concludes that a lease for grazing purposes only under the special lease, seems to make the conversion figure appear very conservative for a freehold parcel.
In comparing the price paid for that special lease of the Populin land and the subject land, I find that the trustees of Mr Bojack's parents' estate were required under legislation to ensure public accountability in obtaining a fair market price for each parcel under the selected tender process. On that basis there is some comparison of the perceived relativity between those parcels at $415,000 (Populin) and $110,000 (subject land). However the weight that can be applied to that relativity must also be considered in line with whether there was a full and open exposure of the lands to the marketplace.
The tenders were called in the local newspaper, but there was no evidence of whether the tender by the adjoining owner (Populin) was either the sole tenderer or in fact the highest tenderer. Bearing in mind any lack of evidence of a competitive market, and that Mr Populin was the adjoining owner of at least Lot 100, I believe the only safe relativity that can be concluded is that Lot 100 is far superior to the subject land. Mr Gilbert agrees the Populin sale is not one he would use.
Mr Gilbert challenges Mr Eales' understanding of the background of the Populin conversion. It is Mr Gilbert's understanding that at that time Mr Populin was not allowed to develop any more of the Populin land than the area that had been previously used for fodder crops, and not the whole of Lot 100. However Mr Gilbert accepts the intricacies of local committees, and concedes that there may have been other personal factors which could have influenced Mr Populin's decision to avoid confrontation, and to accept the conversion figure.
Mr Gilbert also advises that Mr Populin may have not been aware that he could have made application to amend the special lease from grazing to cultivation potential. However, while Mr Gilbert concludes such an approach could overcome the need to freehold the land, there was no evidence of the likely cost of renegotiating a new lease for that extended purpose, or indeed if whether the mill committee would have approved the assignment for cane under those purposes. In the end neither valuer has drawn comfort from the Populin conversion, and I will not consider further that conversion figure.
Decision:
(i) The Nature of the Land -
It is agreed that the soils of the subject land are generally heavy and partly sodic affected, requiring considerable development before being agriculturally usable. Without major drainage and reshaping, the subject land continues to be useful only for grazing. The low nature of the subject land makes it very difficult to drain, and the southern and eastern parts (12 to 15 hectares) are really of little value as agricultural land.
If I consider the areas proposed as having immediate potential for agriculture with reasonable development costs, I have Mr Eales (40 hectares), Mr Elliot (35 hectares), Mr Gilbert (30 hectares) and Mr Bojack (40 hectares). Under normal circumstances I would tend to be guided by the expert knowledge of Mr Elliot who is an agronomist. However I note that both Mr Bojack and Mr Gilbert gave evidence that Mr Elliot may not have been afforded opportunity to undertake a thorough soils analysis on this occasion. In view of the lack of opportunity to further explore his findings with Mr Elliot, I will tend to place increased weight upon the opinions of Mr Eales, and Mr Bojack who farmed it for at least 40 years. I will accept an area of 40 hectares as having immediate potential for agriculture.
If I then look to the remaining area I note that Mr Elliot sees 80 hectares as marginally suitable for cane; Mr Gilbert sees 75 hectares (110-35) as having some agricultural potential, and Mr Bojack sees 60 hectares of land that could be developed for agriculture subject to suitable drainage. It is generally held that the lack of suitable capacity to drain the lands is its greatest disability. Mr Eales has disregarded any of the balanced areas as suitable for agriculture, noting a total of 89 hectares as low-lying grazing land only. I will accept the balance areas as having some agricultural potential, and I will adopt the following classifications:
Immediate potential for agriculture 40ha
Some agricultural potential 70ha
Little value for agriculture 15ha
TOTAL 125ha
Note: While there is some difference between the parties in respect of the area of the subject land (Mr Gilbert 125ha and Mr Eales 129ha), I will accept 125ha for the purposes of this matter.
(ii) The Method of Valuation -
The two comparable sales which assist me are the common sale (Lago), and the Mann and Delaney sale. If I consider those on the basis of direct comparisons on an overall rate per hectare I find:
Sale Analysed rate per ha ComparisonLago $ 2,887 (Mr Eales) Superior
Lago $ 2,638 (Mr Gilbert) Superior
Mann & Delaney $ 3,038 (Mr Eales) Superior
On that overall basis, there is nothing to discredit Mr Gilbert's overall rate of $2,330 per hectare, which presumably allows for the lesser drainage of the subject land and also its inferior access. I then seek comparisons on the basis of the different classifications of the land. I note that Mr Eales sees the land with agricultural potential at $3,000 per hectare compared with the superior potential cane land on the Lago sale at $4,450 per hectare; and the superior potential cane land on the Mann and Delaney sale at $4,775 per hectare. Mr Gilbert has not differentiated his classification levels, but clearly his assessment of the better 40 hectares of land would be greater than $2,330 per hectare.
A considerable difference between the valuers would appear to lie in the appropriate rate to apply to the swampy lands which are seen as of little value for agriculture. Mr Eales has adopted a rate of $500 per hectare, while Mr Gilbert values the swampy lands as part of the overall assessment. Mr Gilbert relies upon the experience of surrounding farmers (Lago, Mann and Delaney and Populin), who have all chosen to redevelop all of their farms, including their low swampy lands. On that basis Mr Gilbert argues that an overall rate per hectare provides the more appropriate method of valuation, as all of the land is likely to have some potential for agriculture.
In adopting his rate of $500 per hectare for the swampy grazing lands, Mr Eales relies upon a former decision of this Court and the Land Appeal Court in the Burdekin area. In those matters Mr Eales argues that the value of grazing lands close by to cane lands was seen to vary between $400 per hectare and $650 per hectare at about 1990, the date accepted for compensation purposes. Mr Eales compares the low swampy grazing lands of the subject land, with similar lands in VH Cox v. Water Resources Commission (1996-97) 16 QLCR 123, at 247. In that matter this Court found a value for grazing land in that locality at $400 per hectare, cleared to grazing standard.
In the Cox matter Mr Eales had not attributed a specific value to grazing lands, but had argued for a "value of $1,000 per hectare for Class 5 soils, those soils unsuitable for agriculture" (page 248). The grazing lands in the Cox matter were located about 22km south-west of Ayr, and about 15km south-west of the current subject land. While the Land Appeal Court reduced the rate per hectare for dry arable lands, it made no alteration to the learned Member's (now President's) assessment of the grazing land (1996) 16 QLCR 281, at 303.
In the current matter Mr Eales sees the low swampy grazing land of the subject land as comparable to the Cox lands, and has allowed for the later date of the conversion (1995). Mr Gilbert disagrees with Mr Eales' comparison with the Cox lands, noting that those grazing lands were larger in area and located near Northcote, and are well outside of Ayr. By comparison he notes the subject lands are in close proximity to Home Hill, and even as a horse or pony paddock would have a value of about $1,000 per hectare.
Mr Gilbert refers also to an unimproved value of the subject land for grazing purposes under the Valuation of Land Act 1944. He notes the current unimproved value of $108,000, which conservatively adopts a rate of $864 per hectare. However Mr Gilbert concedes that he has not considered sales of grazing lands in the current matter. Mr O'Rourke also agrees that the unimproved value determined under the Valuation of Land Act 1944 is different to that required in the current matter under the Land Act 1994 for conversion purposes.
Mr Baxter points out that the subject land also had been valued at $90,000 ($720 per hectare) at the relevant date as unimproved land for rental purposes under the Land Act 1944, and that has subsequently been increased to $108,000 at a subsequent valuation.
In respect of those unimproved values for rental purposes Mr Gilbert confirms that the unimproved value of the subject land at 1 January 1995 was $90,000, and at 1 January 1996 it was $108,000. It was also noted that the unimproved value for grazing and agricultural purposes had increased in 1998 to $193,000. However Mr Gilbert could provide no further information about how those unimproved values had been determined, except to note that in his opinion those values were more of an assessment than a true valuation. From a rental perspective Mr Gilbert argues that the important feature was the percentage of unimproved value for grazing rentals which was 0.8% per annum. In respect of those unimproved values I note that in the Valuation of Land Act 1944, s.15(1) states:"15(1) The value to be used to determine the rent applying to a lease, licence or permit under the Land Act 1994 is the unimproved value under this Act."
However I also note that s.434(1) of the Land Act 1994 states:
"434(1) In this Act, the 'unimproved value' of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion.
(2) The unimproved value must be decided without regard to the commercial value of the timber.
(3) To remove any doubt, it is declared that the Valuation of Land Act 1944 does not apply to the meaning of unimproved value in this section."
A reading of those provisions differentiates the understanding of "unimproved value" for rental purposes from that for conversion purposes, which is determined under s.170(4) of the Land Act 1994. On that reading I get little assistance from the rental value of $90,000 at the relevant date, except that $720 per hectare is likely to be a conservative estimate of the true overall unimproved value of the grazing land. For the purpose of this matter I will adopt $720 per hectare for land suitable only for grazing, allowing for the period of some 5 years since the Cox matter.
In concluding my valuation I have no direct evidence of the differential between land with immediate potential, and land with some potential for agriculture, and I will adopt an overall rate for those combined purposes.
If I adopt Mr Elliot's classification of the Lago sale, and apply those areas to Mr Eales' analysed values of that sale, I could conclude:
48.5ha of land suitable for cane @ $4,450/ha = $ 215,82524ha of land suitable with drainage @ $1,370/ha = $ 32,873
(by deduction)27ha of land suitable only for grazing @ $500/ha = $ 13,500
TOTAL ANALYSED VALUE = $ 262,198
That would give a rate for the land suitable for major drainage at $1,370 per hectare, and an overall rate for arable land at $248,698 for 72.5 hectares ($3,430 per hectare). If I then allow a similar difference as Mr Eales between the Lago sale and the subject land for land suitable for cane ($3,000 to $4,450 per hectare or 67%), I could conclude an overall rate for the arable land at 67% of $3,430 per hectare or $2,298 per hectare, say $2,300 per hectare.
Allowing for the better access in drainage of the Lago sale, I believe an overall rate for the potential arable lands (110 hectares) would be $2,300 per hectare. However in comparing the existing access to the subject land, I note that Mr Gilbert sees the provision of a direct access off the Bruce Highway as unlikely to incur costs for the lessee. On balance I believe a cost of $15,000 was likely to be required, and I will make a further deduction for that purpose.
I therefore conclude:
Potential arable land - 110ha @ $2,300/ha = $253,000
Grazing lands - 15ha @ $720/ha = $ 10,800
Less cost of alternative access = $ 15,000
TOTAL UNIMPROVED VALUE = $248,800
Say $249,000.
Conclusion:
Having considered the whole of the evidence I am persuaded that the appellants have partly proved their case. Accordingly for the purpose of conversion of the tenure of Special Lease No 44/45731 to freehold tenure, the unimproved value of Lot 52 on SB665 is determined at Two hundred and forty-nine thousand dollars ($249,000).
(NG Divett)
Member of the Land Court
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