Buchanan v Chief Executive, Department of Natural Resources
[1998] QLC 89
•31 July 1998
|
BRISBANE
31 JULY 1998
Re: Appeal against Valuations
Valuation of Land Act 1944
Shire of Esk.
(AV97-290 and V97-472)
Ross W Buchanan and Thelma R Buchanan
v.
Chief Executive, Department of Natural Resources
(Hearing at Toogoolawah)
D E C I S I O N
These are two appeals against the unimproved values applied by the respondent Chief Executive to the same parcel of land situated in the Marburg area of Esk Shire. Mr RW and Mrs TR Buchanan are the owners of land described as Lot 662 on Plan CH31841, Parish of Walloon, containing an area of 40.47 hectares. As at 1 October 1996, the respondent valued that land under the provisions of the Valuation of Land Act 1944 ("the Act") at $74,000. The previous valuation had been $46,500.
Mr and Mrs Buchanan objected against that valuation as they considered that property values in the area had not moved for years. Their objection was acknowledged by a letter dated 18 April 1997 from the Department of Natural Resources. They then received a letter dated 26 May 1997 from Mr Ridley, a valuer in the Ipswich office of the Department, requesting that they complete forms relating to the eligibility of their land for a concessional valuation under the provisions of section 17 of the Act. They completed the required details and returned the forms which were received by the Ipswich office of the Department on 1 July 1997.
The appellants were then advised that a conference had been arranged for 3.15 p.m. on 25 June 1997, at the Ipswich district office. After attending that conference, they received a letter dated 28 July 1997, advising that their objection had been disallowed and that the unimproved value of $74,000 remained unaltered. They were also advised that they could appeal to the Land Court within 28 days after the date of issue of that notice.
Shortly after receiving that decision upon objection, by letter dated 7 August 1997, the appellants were advised that a new valuation of $93,000 for their property had been entered on the valuation roll, with a date of valuation of 1 October 1996. Not unreasonably, they assumed that the new valuation was in retaliation for their having objected to the earlier valuation of $74,000. Accordingly, by notice of appeal dated 18 August 1997, they appealed to the Land Court against the original valuation of $74,000, advising that their estimate of the unimproved value was $46,500. One of their grounds of appeal was in relation to the further increase in the valuation from $74,000 to $93,000, which, they stated, they considered to be victimisation.
Then on 28 August 1997, they lodged an objection against the new valuation of $93,000.
By letter dated 10 September 1997, Mr and Mrs Buchanan were advised by the administration officer of the Ipswich office of the Department, that their notice of appeal was invalid, as the valuation of $74,000 was no longer effective, because a new valuation of $93,000 had issued to them on 7 August 1997. They were advised that they could object against the valuation of $93,000, which action they had already taken. Then, by letter dated 30 October 1997, they were advised that their objection against the valuation of $93,000 had been disallowed and the valuation remained unaltered. Once again, they were advised that they could appeal to the Land Court against the respondent's decision upon their objection. Accordingly, they appealed to the Land Court by notice of appeal dated 26 November 1997, once again advising that their estimate of the unimproved value was $46,500. The grounds of appeal included:
· Victimisation because of their previous objection to a valuation;
· The removal of the "farming" concession;
· Relativity with surrounding less productive properties that were still valued under the "farming" concession;
· The unsigned and unreferenced Departmental correspondence which they considered to be invalid.
Finally, on 23 March 1998, the appellants received a further notice of valuation advising that the unimproved value of their property as at 1 October 1997, had remained at $93,000. Once again they objected to that valuation, receipt of the objection being acknowledged by a Departmental letter dated 3 April 1998. That objection remained unresolved at the date of hearing of these appeals.
The Department's Explanation
At the hearing at Toogoolawah, Mr EG Ridley, a registered valuer employed by the Department of Natural Resources, gave evidence on behalf of the respondent and provided the following background:
When undertaking the revaluation on behalf of the respondent as at 1 October 1996, Mr Ridley investigated the sales in the area and came to the conclusion that there had been a considerable increase in the unimproved values of properties used for "farming" as defined by section 17 of the Act. On the other hand, sales indicated that there had been a slight drop in the market for rural residential properties. When he came to value the subject land, Mr Ridley ascertained from Departmental records that it had been valued as land used for purposes of "farming". Therefore, he increased the former valuation of $46,500 to $74,000.
When the owners' objection to that valuation was received, Mr Ridley wrote to them (presumably along with other objectors), seeking details of their farming activities in order to ascertain whether the property was still entitled to a section 17 concessional valuation. When they returned the completed form, from that information and from other details which were obtained from them at the subsequent objection conference, Mr Ridley came to the conclusion that the property no longer qualified for a concessional valuation as land used for purposes of "farming", as defined by section 17(2) of the Act. He reasoned that if the concession no longer applied, the property must be valued as a rural residential property, which he considered to be its highest and best use. By reference to sales of such properties in the Marburg area, he came to the conclusion that the unimproved market value of the subject land was $93,000. He altered the valuation accordingly, which resulted in the notice to the owners dated 7 August 1997. The owners unsuccessfully objected against that valuation and following the notice of the decision on their objection, they appealed to the Land Court.
It seems that those officers responsible for such matters in the Ipswich office of the Department were of the opinion that the issue of the new valuation for $93,000 had superseded the earlier valuation of $74,000. They therefore concluded that the appeal against that earlier valuation was invalid and they advised the owners accordingly by the letter dated 10 September 1997. Subsequently, the owners objected and appealed against the valuation of $93,000. Shortly thereafter, the Chief Executive carried out another valuation of the Esk Shire, this time as at 1 October 1997. The valuation of the subject land remained unaltered at $93,000, once again based on its highest and best use as a rural residential property. The owners objected against that valuation.
Before proceeding to deal with the merits of these appeals, there are two preliminary matters that must be dealt with.
What is the Status of the Appeal against the Valuation of $74,000?
Mr R Paterson, counsel for the respondent, argued that with the issuing of the new valuation for $93,000, the earlier valuation of $74,000 had been superseded in all respects. The new valuation had issued prior to the Esk Shire Council rating upon the former one, so there were no financial implications for the owners. Therefore the Court should hold that it was null and void. On the other hand, Mr Buchanan, who appeared for the appellants, argued strongly that the appeal should be heard. He reasoned that the initial appeal was against the valuation of $74,000 on the basis that the land was entitled to the section 17 concession as land used for purposes of "farming". Therefore, should they be successful in overturning the valuation of $93,000 on appeal, they still wished to argue the quantum of valuation of the property as "farming" land.
A somewhat similar matter came before the Land Appeal Court in Beedell Farms and Grazing Pty Ltd v. Valuer-General (1979) 6 QLCR 109, where the respondent contended that subsequent notices of valuation not only superseded the valuations previously notified, but also nullified all rights of objection and appeal appertaining to such superseded valuations. The Land Appeal Court had no doubt that when an amendment was made to the valuation roll under the provisions of the Act, the valuation last recorded becomes the valuation for the purposes of the Act, as and from the date the amended valuation takes effect. However, the Court went on to add at pages 117-118:"Although the Legislature has expressly provided for rights of objection and appeal in respect of altered or amended valuations, it has remained silent concerning any such rights which may be current in respect of the superseded valuations.
Where a right of appeal is allowed by statute we think an express provision is required to take away any such vested rights. We do not accept that section 13(2) when it expressly gives rights of objection and appeal in respect of amended or altered valuations by necessary implication nullifies all rights of objection and appeal current in respect of superseded valuations.
From a practical viewpoint we see good reasons why the Legislature did not nullify the right of objection and appeal in respect of superseded valuations. It is not, in our opinion, an inadvertent omission. If the amended valuation takes effect on a date after the superseded valuation has come into force and rates or land tax have been levied and paid pursuant to it, it appears to us that it would be inequitable and unjust to deny an owner, who has duly objected and appealed, the right to test the quantum of the valuation the consequences of which have already been financially felt by him.
Admittedly in the realm of practicality, it may be said in cases where the superseded valuation has not come into force before it is amended or altered, that no adverse consequences have been suffered by the owner. It would seem, superficially at least, in such cases that nothing is to be gained by proceeding with the prosecution of duly instituted appeals against the superseded valuations."
The Land Appeal Court then went on to point out that there may be cases where some advantage would flow from proceeding with such an appeal. The judgment continued at page 118:
"As a matter for future guidance, we would say that in those cases where, after due enquiry of the parties, it is patent to the Member below that the procedures of the Court are being purposelessly used and unnecessary costs will be incurred, he should endeavour to use his good offices to obtain a withdrawal of the appeal against the superseded valuation so that the real issue may be heard when the appeal against the amended valuation is lodged. At the same time it is stressed he cannot force the issue and, as we interpret the present provisions of the Act, he has no power to strike the matter out for want of jurisdiction.
The fact that, in certain circumstances, there may be some appeals against superseded valuations whose prosecution would be a futile and costly exercise, is not an argument of sufficient weight to persuade us that the Legislature by implication nullified the rights of objection or appeals in respect of such valuations."
In my opinion that disposes of the respondent's argument. If the Court lacks jurisdiction to strike out such an appeal, then certainly no such power vests in the Chief Executive. Therefore, clearly, the action contained in the letter from the Department of 10 September 1997, purportedly declaring the appeal invalid, is ultra vires and of no force whatsoever. The appeal is valid.
Since both appeals concern the one parcel of land, although the valuations were made on different bases, by agreement of the parties they were heard together.The Validity of the Departmental Notices
Mr Buchanan questioned the validity of the various Departmental notices that the appellants had received. In particular, two valuation notices (letters) dated 28 July 1997 and 7 August 1997, with the two different valuations were received only ten days apart. No explanation of the variations was given and neither letter was signed. Similarly, the decisions on objections and, for that matter, the acknowledgment of receipt of objections, were not signed. Only the letter from Mr Ridley and the letter from the administration officer advising of the invalidity of the earlier appeal, were signed.
Whatever else may be said of the notices or letters, there can be no question as to their validity. In respect of notices of valuation, section 50(1) provides that notice of valuation shall be issued to the owner in the approved form and, with one exception not relevant here, the notice must also state that the owner may object against the valuation. Section 2 defines "approved form" to mean a form approved by the Chief Executive.
With respect to notices of the Chief Executive's decisions on objections, section 54(1) simply requires the Chief Executive to issue to the objector written notice of his decision on the objection within certain specified times. However, there is no indication of what form such notice should take.
The various notices referred to are each in the form of a letter with the Department of Natural Resources letterhead and, although they do not carry a signature, each one carries the printed name "PF Tooley General Manager, Valuations". In my opinion, these letters clearly comply with the requirements of the Act as they contain all the relevant information. They are therefore valid.
Having disposed of those preliminary points, I can now proceed to deal with the merits of each appeal.The Subject Land
The appellants' property is situated on Steinhardts Road, approximately 5 km north-west of the township of Marburg. Steinhardts Road is a gravel road which provides only fair access, as there is a steep hill which has to be negotiated to reach the property entrance. Electricity and telephone are connected, while reticulated rural water is supplied to the property by the Glamorganvale Water Board. The water is pumped directly from the Brisbane River and supplies the subject land by means of a 1-inch pipe. The water is untreated and not suitable for drinking, however it is suitable for stock. The appellants pay the Water Board a minimum of $500 per year for that water supply. Mr Ridley thinks that the land is zoned "Rural A" under the Esk Shire Council Town Planning Scheme. In any case, he considers that it has no potential for subdivision.
The land is in an area generally known as "The Marburg Scrub". It comprises moderate to steep scrub slopes, where the original vegetation was mainly brigalow/softwood scrub. The appellants have owned the property for approximately 28 years and have constructed a house on an elevated rise near Steinhardts Road, which affords good rural views. They also run cattle on the property.
Mr Buchanan explained that the land was originally a dairy farm and had become seriously degraded, particularly an area that had been cultivated. The appellants have spent a great deal of money to rehabilitate the land and to prevent tunnel erosion. They had built contour banks on the old cultivation area and had established improved pasture, rhodes and blue grass, axilaris, siratro, green panic, and other varieties. They have left 20 to 30 acres of natural and regenerative trees, some of them rare varieties, such as crows ash, and flindersia. A local botanist has identified over 150 tree varieties. They have no intention of clearing the trees because, quite apart from protection of the species, they are effective in erosion control and salinity prevention. Mr Buchanan said they are trying to balance their grazing activities with conservation, but finding it difficult. The carrying capacity of the cleared scrub was, in his opinion, 1 beast to 3 acres, but the area which they have left under trees reduces the carrying capacity of the property.
Mr Buchanan said that they carry between 20 to 40 head of mixed cattle, with the average around 30 head, a herd of about a dozen active cows and a bull, with the balance being young heifers and calves. They cannot run more without degrading the property. Sales of cattle from the property for the financial year ending 30 June 1997 returned gross income of $2,570 and for the present financial year to the date of hearing (18 June 1998), $4,206. The details provided to the Department by the appellants on 28 June 1997 indicate that income from sales of livestock for the previous three years were $1,129 net, nil, and $2,647, while expenditure incurred in producing that income over the same three years was $1,957 (drought, fodder and poisons), $1,783 (fodder, poisons and seed), and $3,400 (weed control and pasture improvement).
In addition, other expenditure would include approximately $500 for veterinary expenses, $500 commissions and transport, at least $500 for water supply, about $500 for sprays. Occasionally, when clearing wattle that expenditure could increase considerably, for example, $2,800 for the last financial year and about $2,000 the year before. In addition there would be maintenance, depreciation and fuel costs.
Prior to 1992 they were running a Droughtmaster stud on the property. While he can recall returns of around $4,000 per annum in the 1980s, Mr Buchanan said everything went bad, particularly in the drought of the early 1990s.
The Appellants' Arguments
Concessional Valuation:
The appellants consider that their lands should be valued under the provisions of section 17 of the Act, as land used for purposes of "farming". They say it is irrational as the respondent has, to classify a property of 100 acres (40 hectares) as a rural residential site. They argue that the house site itself takes up little area, while the balance of the land is used for grazing cattle and growing trees. By any definition, they say, the land is used for farming.
They point out that the property had enjoyed the benefit of a concessional valuation up until it was altered by the respondent in 1997. They argue that the use of the land has not changed, it has been running cattle for 28 years. Prior to their ownership, the land had run dairy cattle.
They emphasise that they are serious about their enterprise, and have been accepted by the Australian Taxation Office as primary producers.Relativity:
The appellants argued that a comparison of the valuation of their property with those of surrounding properties shows severe inequities. They allege that three of the four neighbouring properties run fewer cattle than they do, yet they have been valued by the respondent under the concessional "farming" provisions of section 17. Furthermore, the owners of those properties have not carried out pasture development, weed control, soil erosion measures, or any of the other conservation and remedial works which have been carried out by the appellants to improve the country.
They can only conclude that they have been deprived of the concession and their valuation increased because they objected to the valuation of $74,000. They see it as victimisation.Level of Values:
The appellants argue that there should have been no increase from the previous valuation of $46,500. Mr Buchanan said he had been advised by local real estate agents that prices for acreage properties in the area in the range of $100,000 to $200,000, had dropped by about $20,000. To his own knowledge, properties were not selling in the locality, because "For Sale" signs remained on a number of them. As far as he knew, there had been few recent sales in the Marburg area and certainly none similar to the subject land.
The Case for the Respondent
The Valuation of $74,000:
Mr Ridley defended the valuation of $74,000 by reference to sales of properties which he said sold for purposes of farming. Sale No. 1 is situated on the bitumen sealed Tallegalla Road, south of the Warrego Highway, contains an area of 48.3 hectares and sold in November 1995 for $195,000. It analysed to show an unimproved value of $85,994 and the respondent had applied a valuation of $85,000, or $1,760 per hectare, as at 1 October 1996. That property was described by Mr Ridley as easy to moderate slopes, originally timbered with brigalow/softwood scrub, the class of country being slightly superior to that of the subject land. It had electricity, telephone services and school bus services, but lacked a rural water supply. Overall, Mr Ridley considered the sale to be inferior to the subject land on a rate per hectare basis.
Sale No. 2 is situated immediately to the east of Sale No 1, fronting the gravel surfaced Ballins Road, contains an area of 40.47 hectares and sold in June 1995 for $250,000. It analysed to show an unimproved value of $86,004 and the respondent had applied a valuation of $80,000, or $1,977 per hectare, to it as at 1 January 1996. The property has similar country to Sale No 1 and has similar services. Overall Mr Ridley considered the sale to be superior to the subject land.
Sale No. 3 is a resale of Sale 2 in May 1997 for $225,000. That sale analysed to show an unimproved value of $96,410 and as at 1 October 1997, the respondent applied an unimproved value of $85,000, or $2,100 per hectare. Mr Ridley explained that the difference between the two sales and their analysed unimproved values, resulted from the earlier sale having been subject to interest-free terms, to which he had attributed an adjustment of $43,389. Sale No. 3 did not have that complication.
Sale No. 4 is well removed from the subject land. It is situated on Cannon Creek Road, south-east of Boonah. The road is bitumen surfaced and the property has electricity and telephone services. The land is described by Mr Ridley as comprising moderate to steep slopes, originally timbered with brigalow and softwood scrub, with a small area of forest. It has an area of 133.1 hectares and sold in May 1996 for $450,000, analysed to show an unimproved value of $209,890 and the respondent had applied an unimproved value as at 1 October 1996 of $185,000, or $1,390 per hectare. Overall Mr Ridley considered the sale to be inferior to the subject property on a per hectare basis.
Sale No. 5 is a resale of Sale 4 in May 1997 for $490,000. That sale analysed to show an unimproved value of $231,480.
On the basis of that sales evidence, Mr Ridley was of the opinion that if the subject land had to be valued under the concessional "farming" provisions of section 17 of the Act, then the valuation of $74,000 was appropriate. However, as explained previously, he had come to the conclusion that the property did not qualify for a concessional valuation.The Valuation of $93,000:
To support his valuation of the subject land as a rural residential property, Mr Ridley referred to three sales situated in the general area. Each of the sales is smaller than the subject land, but in Mr Ridley's opinion, each had the attributes of a rural residential property which enable them to be compared with it.
Sale No. 1 is situated on the gravel surfaced Freeses Road, contains an area of 11.42 hectares and sold in April 1996 for $90,000. It analysed to show an unimproved value of $76,513 and the respondent had applied a valuation of $70,000 to it as at 1 October 1997. According to Mr Ridley, the property has similar services to the subject land, including rural water supply, and it comprises the same type of country. It has a building site with similar potential, but is smaller. Overall Mr Ridley considered it to be inferior to the subject property.
Sale No. 2 fronts the bitumen surfaced Haigslea-Malaba Road, comprises 15.4 hectares and sold in July 1996 for $118,000. The sale analysed to show an unimproved value of $100,330 and the respondent applied a valuation of $86,000 to it as at 1 October 1996. Mr Ridley described the property as having easy to moderate scrub slopes, with soils of basaltic origin and with an accessible building site. It has similar services to the subject land, except that it does not have a reticulated water supply. Although it is superior country, it is much smaller than the subject land and Mr Ridley considered it to be slightly inferior.
Sale No. 3 is situated on the gravel surfaced Glamorganvale-Wanora Road, comprises 18.21 hectares and sold in November 1996 for $125,000. That sale analysed to show an unimproved value of $114,700 and as at 1 October 1997, the respondent applied an unimproved value of $103,000. That land was described by Mr Ridley as moderate to steeply sloping forest country, with similar services to the subject land, including rural water supply. It has an easily accessible elevated building site, but less elevated than that on the subject land. Although it is smaller, it is much better situated and overall Mr Ridley considered it to be superior to the subject land.
Unfortunately, Mr Buchanan did not know any of the sales referred to by Mr Ridley to support the $74,000 valuation or the $93,000 valuation, nor was he able to assist the Court with any details of any other sales. Although he challenged both valuations, it was clear that Mr Buchanan's case was based principally on his arguments that the property should be valued under the concessional provisions of section 17 and on the relativity of the valuation with those of surrounding properties.
The Requirements for a Concessional Valuation
The provisions of the Valuation of Land Act require the Chief Executive to determine the unimproved value of land. The term "unimproved value" is defined to mean the market value of that land, assuming that the improvements on or appertaining to that land did not exist. That has been held to mean the property must be valued in the environment in which it is situated and with the services that are presently available, but as if it was in an unimproved state and had never been developed.
However, the Act also provides for departures from the unimproved market value in certain circumstances. One of those is provided for in section 17 of the Act where land is used for purposes of "farming" as defined by subsection (2) of that section..Section 17(1) relevantly provides -
"In making a valuation of the unimproved value of land ... used ... for purposes of farming, any enhancement in that value for that the land ... has a potential use for ... any other purposes shall be disregarded ... when the valuation is made."
Sub-section (2) defines "farming" to mean:
" (a) the business or industry of grazing ...
(b) any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock;
if the business or industry represents the dominant use of the land, and
(c) has a significant and substantial commercial purpose or character;
(d) is engaged in for the purpose of profit on a continuous or repetitive basis."
Essentially what that means is that where a property is used for "farming" as defined, but has an enhancement in value because of a potential for some other use, (for example, as a rural residential property), then that enhancement, that extra value that the land has because of that potential, must be excluded and the unimproved value ascertained on the basis of its value for "farming" purposes.
It seems to be common ground between the parties that there is a market for acreage land in the Marburg area, although Mr Buchanan is of the opinion that the market has slipped in recent years. Mr Ridley is of the opinion that certain properties have attributes which make them more valuable for rural residential purposes than for purely grazing or agricultural purposes. Such attributes as elevation, views, good access, proximity to town and availability of services, would be more important to purchasers seeking land for rural residential living than they would be to potential purchasers seeking land for grazing or agriculture. In this case, Mr Ridley has assessed that difference at $19,000, the difference between $93,000 (the unimproved market value) and $74,000 (the "farming" value).
In order to qualify for the concessional valuation as land used for purposes of "farming", each of the criteria contained within the definition must be complied with. In this case there is no argument that the land is used for the business or industry of grazing, and although Mr Ridley felt the dominant use of the land was for rural residential purposes, Mr Paterson was prepared to concede that the dominant use of the land was for grazing. It was also conceded that grazing is engaged in for the purpose of profit on a continuous or repetitive basis. The only issue then is whether that business or industry of grazing has a significant and substantial commercial purpose or character, as required by paragraph (c) of the definition.
Significant and Substantial Commercial Purpose or Character
That provision has been considered by the Land Appeal Court on a number of occasions. In Chief Executive, Department of Lands v. Whackett (1995) 15 QLCR 311, the Court was considering the valuations of two adjacent parcels of land in the Cedar Creek area near Beenleigh, which had areas of 54.8 hectares and 51.03 hectares and which were used together for grazing beef cattle. The land comprised moderate to steeply sloping forest/scrub country, which carried about 70 head of mixed cattle. In the relevant years, approximately 25 head of cattle were sold each year, with an estimated gross return in the order of $5,000 per annum. However, most of the income from the sale of cattle was spent on machinery and other expenses connected with the enterprise. The majority of the Land Appeal Court proposed the following test at page 328:"It is difficult, and unnecessary, to state a precise and compendious meaning of the expression 'significant and substantial commercial purpose' and 'significant and substantial commercial character'. Bearing in mind the various connotations of the words 'significant' and 'substantial' it is perhaps sufficient for present purposes to say that for section 17(1) of the Act to apply to the subject land there must be evidence that:
(a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or
(b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit."
The Whacketts' property had been running cattle for many years and the enterprise was not a hobby or recreational pursuit. Mr Whackett had said that it would never make a big profit because the area was not big enough. The maximum carrying capacity was about 70 head of mixed cattle and in Mr Whackett's opinion it would be necessary to run more cattle to make any profit. On occasions he had to buy in feed to supplement the grass available to run that number of stock.
The Court referred to the decision of the Land Court in the case of Taylor v. Chief Executive, Department of Lands (1992) 14 QLCR 477, particularly the statement by the Court that it was necessary to consider each case on its own merits and that it was not possible to propose a simple test, as each enterprise was different and it was not possible to set numerical or financial requirements which would be applicable in all or any of them.
In Whackett the majority of the Land Appeal Court found that neither the objective character nor the subjective purpose of the grazing enterprise could be said to be significantly or substantially commercial. They continued at page 330:"We emphasise, however, that we arrive at this conclusion on the facts presented in this case. There is insufficient evidence to find in favour of the owners. No books of account or trading figures of any kind were presented. Before us both parties relied on the verbal evidence of Mr Whackett in the Court below that the lands carry 70 head of mixed cattle on a year to year basis, that for the three years to 1992 they sold approximately 25 head of cattle per year and that he estimated their average recent gross return at $5,000 per annum. He also stated that the maximum carrying capacity is 70 head of cattle and it would be necessary to run more cattle to make any profit.
No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming.
We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant and substantial commercial purpose or character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts' business activities are presented in more detail, the matter could again be considered with quite different results."
The phrase "significant and substantial commercial purpose or character" was also considered by the Land Appeal Court in the case of CH and MC Peck . Chief Executive, Department of Natural Resources, an unreported judgment of the Land Appeal Court delivered on 1 August 1997. In that case the Pecks had a property of just over four hectares upon which they were conducting an intensive orchard comprising macadamia, lychee and other tree types, which they purchased in 1986 and from which they expected to make quite extensive returns. However, despite their best efforts, such returns were not forthcoming and in each of the financial years from 1987 to 1994, the farming operations ran at a loss.
At page 7 of their reasons for judgment, the Land Appeal Court said:" The third condition concerns one purely objective matter, the commercial character of the business or industry. The commercial purpose of the business or industry is a matter which requires consideration of a subjective matter, again the genuineness of the purpose, but the use of the adjectives 'significant' and 'substantial' to qualify the expression 'commercial purpose' in our view calls for consideration of objective criteria when assessing that purpose. The use of both adjectives leads us to the conclusion, but, of the two, 'significant' is the more important in leading to that result.
So whereas paragraph (d) makes the genuineness of the purpose alone a condition and so concerns an exclusively subject matter, paragraph (c) requires assessment of that purpose by reference to objective facts to determine if it can properly be described as significant and substantial. In making such an assessment it is permissible - and necessary in our view in a case like this in which a business has been established for some time - for consideration to be given to the results achieved by the business after a reasonable interval has elapsed following its establishment. Full allowance must, of course, be made for such things as the uncertainties of the weather, the vagaries of markets, and fluctuations in exchange rates. Having given those factors proper weight, one may conclude that an owner, though genuinely pursuing profits, is engaged in such an unpromising enterprise that it could not be said, in accordance with any ordinary or reasonable standard, to have a significant and substantial commercial purpose. Such a conclusion was clearly open in this case, as was a conclusion that the appellants' business lacked the requisite significant and substantial commercial character. Where a business or industry is in the process of being established objective criteria other than results, such as a credible business plan, will of course be appropriate."
Having regard to the observations of the Land Appeal Court in those two cases can it be said that the grazing activities conducted by the appellants have a significant and substantial commercial purpose or character? In Whackett the Court found that an enterprise which was clearly not a recreation or hobby and which produced a gross return of around
$5,000 per annum, but where most of the income from the sale of cattle was spent on machinery and other expenses connected with the enterprise, did not fulfil the requirement of being of significant and substantial commercial purpose or character. It has not been suggested by the appellants in the present case that the enterprise which they conducted on the subject land has achieved such gross returns, but most of the income which they derive from the sale of cattle is spent on expenses or on improving the land.
In Peck, despite considerable efforts and expenditure over a lengthy period, the enterprise had not returned any profit and had proved to be so unpromising that it was not able to be considered, on any objective criteria, to be significantly or substantially commercial.
The enterprise conducted by the appellants in the present case is not unpromising. It is certainly more than a hobby or a recreational activity. However, in my view, the evidence has revealed that their purpose is not necessarily to make the enterprise commercial. Their purpose is to rehabilitate and improve the land which had been badly degraded, and to conserve and retain the rare species of native trees which grow on the property. In order to do this effectively, they have spent the income from the sale of cattle and sometimes more, upon such work. It was quite evident from Mr Buchanan's evidence that they take pride in that undertaking. He said that the conservation and regenerating of the trees is not undertaken for a commercial purpose. He regarded it as a general moral commitment to keep the trees because of their scarcity.
In my view that is the main purpose of the appellants. They do not intend to make a large profit. If that had been their purpose they would not have undertaken their conservation program. They are careful not to overstock the land or to degrade it any further. What they make from their grazing enterprise offsets some of the cost of rehabilitating the property. Mr Buchanan summed this up when he stated "We are continually working to repair and improve the property, spending a substantial amount of money which helps the local economy." (Exhibit 2)
It follows from this that it cannot be said that the enterprise carried on by the appellants has a purpose which could be described as significantly and substantially commercial. Nor could the character of the enterprise be described in that way.
Therefore, no matter how worthy their enterprise, when the observations of the Land Appeal Court are applied, in my opinion, it does not fulfil the requirement of section 17(2)(c) of having a significant and substantial commercial purpose or character.
I turn now to the appellants' argument regarding the relativity of the valuation of their land with those of neighbouring lands. They claim that several of those properties are running fewer cattle than they are, but have been valued by the respondent under the concessional "farming" provisions of section 17 of the Act. Mr Ridley explained that he had not investigated the use of those lands and would only do so when some alleged anomaly was drawn to his attention. The appellants' land lost its concessional valuation as a result of information which the respondent obtained as a result of their objection to the $74,000 valuation.
Whatever justifiable criticism may be made of that process, the fact that a number of the neighbouring properties are incorrectly valued does not mean that the subject land should also be valued incorrectly. In Missig v. The Valuer-General (1980) 7 QLCR 61, the Land Appeal Court considered the provisions of section 11(1)(vii) of the Act (the predecessor of section 17), in relation to a similar argument about the valuation of a property in the Parish of Walloon. The Court said at pp.62-63:" From the evidence, it appears that the appellants are aggrieved that their land has been valued as a rural homesite while nearby parcels of land have been valued with the benefit of the subsection. Mr Cole suggests that no greater amount of primary production is carried on on some of these parcels of land than is carried on on the subject land. If error has occurred in the making of these other valuations and the benefit of section 11(1)(vii) has been incorrectly extended, this does not assist the appellants. This Court may proceed only on the evidence adduced before it as to the activities carried out on the subject land and it then becomes a matter of deciding whether or not these activities or usages conform to the tests of the Walker case. Each case qualifies for the protection of the subsection on the basis of its individual merits and not on comparison with usages of other properties."
There is no doubt that it is an essential function of a valuation system which is used for revenue raising purposes that the valuations of all lands are in proper relativity with one another. However, it is well established by a long line of authority that where there are inaccuracies in some valuations, the valuing authority must obtain correct relativity by correcting the inaccuracies rather than by making an inaccurate assessment in order to secure uniform error. See R. and M.M. Barnwell v. The Valuer-General (1989) 13 QLCR 13, at pp.16-17 and cases cited therein.
If the neighbouring properties are incorrectly valued then the respondent must correct them and not alter the valuation of the subject land to conform with them.
Conclusions
Appeal No. AV97-290 was against the valuation of $74,000 when the respondent thought that the property qualified for the section 17 concession. Having regard to the sales relied on by Mr Ridley, that valuation would seem to be appropriate. However, as I have found that the property does not qualify for such a valuation, the appeal must fail.
In relation to Appeal No. V97-472, the valuation of $93,000, during the course of his evidence Mr Ridley admitted that he was unaware of the extent of noxious weed infestation from untreated neighbouring properties. He felt that might have some influence on a potential prudent purchaser, but he felt it would be slight. I have no evidence as to how much that would affect the unimproved value of the property, but I feel that I should make some small allowance to recognise that problem.
Accordingly, in the case of Appeal AV97-290, the appeal is dismissed.
In the case of Appeal V97-472, the appeal is allowed, the valuation of the respondent is set aside and the unimproved value of the subject land is determined at Ninety Thousand Dollars ($90,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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