Chief Executive, Department of Natural Resources and Mines v Bertram & Atzeni

[2001] QLAC 108

[2001] QLAC 108

 

IN THE LAND APPEAL COURT

HELD AT BRISBANE

Re:      Appeals from decisions of the Land Court

Determination of unimproved value

Local Government:  Cambooya

(AV2000-0301, 302 and 303)

BETWEEN

Chief Executive, Department of Natural Resources

and Mines

Appellant

AND

Lawrence Bertram and Delcia Sybil Atzeni

Respondents

BEFORE THE HONOURABLE JUSTICE MULLINS, MR TRICKETT

AND DR DIVETT

J U D G M E N T

Delivered at Brisbane this Tenth day of October 2001

Background:
           These are three appeals by the Chief Executive from the decisions of the Land Court dated 22 June 2001, determining the unimproved values of three parcels of land at $31,200, $58,500 and $73,125 as at 1 October 1999.  These valuations are of three adjoining parcels of land owned by Mr and Mrs Atzeni (the respondents in these appeals) situated at Hodgson Vale, about 10 kilometres south of Toowoomba and described as Lots 1 and 2 on SP 127260 and Lot 1121 on A 342430, Parish of Drayton.  Lot 1 has an area of 2.269 hectares, Lot 2 has an area of 6.426 hectares and Lot 1121 has an area of 12.052 hectares. 
           As at the date of valuation, 1 October 1999, the Chief Executive valued those lands under the provisions of the Valuation of Land Act 1944 (the Act), as follows:  Lot 1 $41,500, Lot 2 $70,000 and Lot 1121 $75,000.  Mr and Mrs Atzeni appealed to the Land Court against the valuations.
In the Land Court the appellants argued that these three adjoining lots should be valued as one parcel as land used for "farming" purposes under section 17 of the Act. The Chief Executive had valued the three lots as separate parcels by application of s.8(1) of the Act, reasoning that two of the lots had been subdivided. Accordingly, the Chief Executive valued each lot as a separate parcel of rural residential land.
The learned Member found that the subject lands were not used for purposes of "farming" under s.17 of the Act. He then considered whether the subject lands should be valued separately or as one parcel. This required consideration of sections 8, 25 and 34 of the Act.
Whether two of the lots had been subdivided is the crucial issue in these cases and depends on the interpretation of s.8 of the Act. We will consider s.8 in some detail later in these reasons.

The Effect of Sections 25 and 34

If those lots have been subdivided within the meaning of s.8, then s.25 provides for a discount in rates on subdivided land in certain circumstances. The relevant subsections of s.25 provide:

"25.(1)  This section applies to a parcel of land ('parcel') if -

(a)the parcel is 1 of the parts into which land has been subdivided;  and

(b)the person who subdivided the land (the 'subdivider') is the owner of the parcel;  and

(c)the parcel is not developed land.

(2)    For making and levying rates on the parcel under a rating Act for the discounted valuation period, the rating authority must cause the unimproved value of the parcel to be discounted by -

(a)from 1 July 1997 to 30 June 1998 – 40%;  and

(b) after 30 June 1998 – the percentage prescribed under a regulation."

The balance of section 25 is not relevant for present purposes.

Section 34 of the Act provides that adjoining parcels of lands should be included in one valuation in certain circumstances. Section 34 relevantly provides:

"34.(1)  Unless the chief executive otherwise directs, there shall be included in 1 valuation -

(a) several parcels of land which adjoin, and are owned by the same person, and where either no part is leased or all the parcels are let to 1 person;  or

(b) several parcels of land in the same area which do not adjoin but are worked as 1 holding and used exclusively for the purposes of farming, and are owned by the same person and which, if let, are all let to 1 person.

(2)  …

(3)  …

(4)  In this section -

'parcel' does not include a parcel the unimproved value of which must be discounted under section 25."

Evidence was given in the Land Court that the three lots formerly constituted part of a grazing property of 65.25 hectares which had previously been concessionally valued by the Chief Executive pursuant to s.17 of the Act as land used for purposes of "farming".  However the easternmost two lots were sold.  A stock-proof fence had to be constructed along the eastern boundaries of Lots 2 and 1121 to allow continued use of those lots for farming purposes.  After some delay the fencing was completed and the three lots were leased to a Mr Blake by an agreement dated 28 April 2000.  Mr Blake then commenced to use them as part of his farming enterprise.
           Evidence was also given that at some time after 30 August 1999, the boundaries of the predecessors of Lots 1 and 2 were adjusted to provide Lot 2 with access to the yet unconstructed Carrolls Road to the west. 
The Chief Executive had taken the view that the land had been subdivided. Having come to that conclusion, then as the person who subdivided the land was the owner of the parcel and the parcel was not developed land, the Chief Executive reasoned that provisions of s.25 of the Act should apply to Lots 1 and 2. That meant that under the provisions of s.34(4) the three subject lots could not be included in one valuation. It was accepted by the learned Member below that the only effective change resulting from the registration of Plan SP 127260 was a change in the boundaries of Lots 1 and 2. The number of lots remained the same.
The learned Member concluded that the registration of plan SP 127260 did not constitute a subdivision and found that the Chief Executive could not apply s.25 in valuing Lots 1 and 2. He found that the Chief Executive had failed to exercise the discretion to value Lots 1 and 2 as one parcel pursuant to s.34, which had resulted from a wrong view of the factual situation and that the discretion should have been exercised. He also found that s.34 to be applicable to Lot 1121 as well as Lots 1 and 2, since the parcels adjoined, they are all in the one ownership and at the date of valuation, they were not leased. After 28 April 2000 they were all leased to one person, namely Mr Blake.
           However, the learned Member did not determine a single valuation for the three amalgamated lots.  Instead, he accepted evidence from the valuer for the Chief Executive that where such lots are valued as home sites, their valuations should be discounted by applying a bulk discount of 2.5 per cent.  He therefore found that the valuation of each lot should be assessed at 2.5 per cent less than the values which he would otherwise have reached considering the issues in the appeals. 
           The learned Member considered the valuations of the subject lands in comparison with the sales advanced by the valuer to the Chief Executive.  In the case of Lot 1, he found that the valuation should be reduced from $41,500 to $32,000 and reducing that valuation by 2.5 per cent, he determined the valuation at $31,200. 
           In the case of Lot 2 the learned Member found that the valuation should be reduced from $70,000 to $60,000 and discounted by 2.5 per cent to $58,500. 
           In the case of Lot 1121 he found that the valuation of $75,000 was appropriate, but discounted that figure by 2.5 per cent to arrive at a valuation of $73,125. 

The Appeal
           The landowners did not appeal against those determinations.
           However, the Chief Executive has appealed to this Court from those decisions by the learned Member on the grounds that:

"1.     The Land Court was wrong in law in concluding that:

(a)The land comprised in the predecessors to Lots 1 and 2 Plan SP 127260 Parish of Drayton was not subdivided for the purpose of Sections 8, 25 and 34 Valuation of Land Act 1944 by the registration of that Plan; and

(b) The discretion in Section 34 should have been exercised and the appeal lands, Lots 1 and 2 Plan SP 127260 AND Lot 1121 Plan A 342430 Parish of Drayton included in one valuation.

2.If, contrary to ground 1(b) above, the Land Court was correct in concluding that the discretion in Section 34 should have been exercised and the appeal lands included in one valuation, the Land Court’s application of the 2.5% bulk of discount discloses an error of valuation principle and therefore an error of law."

Before us, Mr DJ Grealy, counsel for the appellant, argued that the Chief Executive was correct to value each lot separately and the lots should be determined in accordance with the decision of the learned Member, but with no bulk discount. He argued that the key issue was whether the subject land had been subdivided under s.8 of the Act; if subdivision had occurred then s.25 would be applicable and a single valuation for the subject land could not have been made because of the provisions of s.34(4).
Mr Grealy submitted that the issue of separate certificates of title for Lots 1 and 2 had the effect of the land being subdivided for the purposes of s.8. Therefore, Lots 1 and 2 are parcels of land to which s.25 applies. Accordingly, by virtue of s.34(4) those two lots are not to be included in the one valuation and Lot 1121 could not be amalgamated with either of them.
However, Mr Grealy also submitted that if, contrary to Ground 1(b), the Land Court was correct in concluding that the discretion in s.34 should have been exercised and the lands included in one valuation, the Land Court's application of the 2.5 per cent bulk discount discloses an error in valuation principle and therefore an error in law.

On the other hand, Mr Atzeni, who appeared on behalf of the respondents, submitted that the Land Court was correct in concluding that the issue of separate certificates of title for Lots 1 and 2 did not have the effect of the land being subdivided for the purposes of s.8. Therefore, he submitted, Lots 1 and 2 are not parcels of land to which s.25 applies and pursuant to s.34 the three Lots should be included in the one valuation and the Chief Executive was not correct to value each lot separately.
In support of his contention that Lots 1 and 2 were not "subdivided" for the purposes of s.8, Mr Atzeni referred to the evidence before the Land Court of correspondence with the Cambooya Shire Council that the proposed survey was merely for the purpose of adjustment of property boundaries. The only cost associated with the application was the $300 application fee and there had been no other contribution required as there would be where subdivision into multiple lots is proposed. Mr Atzeni contended that the intended purpose of the subdivision was thus demonstrated to be for minor adjustment of boundaries.

Was the Land Subdivided?
           We turn now to consider whether the learned Member was correct in finding that Lots 1 and 2 had not been subdivided. 
The learned Member rejected the application of s.25 of the Act in valuing Lots 1 and 2 on the basis that the land affected by SP 127260 which then came to be described as Lots 1 and 2 had not been subdivided within the meaning of s.8 of the Act.
This appeal therefore raises the issue of what is meant by the definition of "subdivide" in s.8 of the Act and whether it applies to what was done by SP 127260.
Section 8 of the Act provides:

"Meaning of 'subdivide'

8.(1)  'Subdivide' land means divide land into parts.

(2)     Land may be divided into parts by -

(a)      sale, conveyance, transfer or partition;  or

(b) an agreement, conveyance or instrument between living persons under which a part of the land becomes immediately available for separate disposition or occupation;  or

(c) the issue of a certificate of title under the Land Title Act 1994 for a part of the land.

(3)  An agreement, conveyance or instrument mentioned in subsection (2)(b) includes a lease only if -

(a) the lease's term exceeds 5 years;  or

(b) the lease's term, together with any period of renewal available under the lease, exceeds 5 years."

The provision in that form was inserted in the Act as s.5F by the Lands Legislation Amendment Act 1993.  That definition replaced the definition that was previously found in the general definition section of the Act as originally enacted in the following terms:

"'Subdivided' and 'subdivide' – mean and refer to dividing land into parts, whether the dividing is-

(a) By sale, conveyance, transfer, or partition; or

(b) By any agreement, dealing or instrument inter vivos (other than a lease for any term not exceeding five years without right of renewal) rendering different parts thereof immediately available for separate disposition or separate occupation; or

(c) By procuring the issue of a certificate of title under 'The Real Property Acts, 1861 to 1887' (as amended by subsequent Acts), in respect of a part of the land;"

A copy of SP 127260 was not before the Land Court.  The learned Member proceeded on the basis of oral evidence from Mr Atzeni as to the effect of SP 127260.  It was not a matter in dispute.  The learned Member also proceeded on the assumption that the registration of that plan resulted in new certificates of title becoming available for Lots 1 and 2.  That was also not a matter in dispute.
           The background to the preparation of SP 127260 was that the appellants had owned the land to the east of the land the subject of this appeal which was sold in August 1999 which took away the access to the subject land from the south. SP 127260 applied to the land which was then described as Lot 97 on Ag 3759 and Lot 1122 on A342430.  The registration of SP 127260 changed the respective south-west boundaries of Lots 97 and 1122.  Plan Ag 3759 shows a surveyed road on the western boundary of Lot 97 and that the boundary between Lots 97 and 1122 continued in a general south-westerly direction from where it left Highgate Road in an unbroken straight line until it met the surveyed road on the western boundary of Lot 97, at a point where Lots 97, 1122 and 1121 all met.  The adjustment was made to the boundary between Lots 97 and 1122 so that, in its final 10 or 20 metres or so, it continues in a westerly rather than south-westerly direction.
           The effect of that adjustment was to give access to Lot 1122 to the surveyed road which was otherwise shown on plan Ag 3759 as bounding Lot 97.  The adjustment involved a triangular piece of Lot 97 of an area about 240 square metres being excised from Lot 97 and amalgamated with Lot 1122.  Lot 97 after the excision became Lot 1 and Lot 1122 after the amalgamation became Lot 2.
The learned Member concluded that while Lot 97 and Lot 1122 may have been "reconfigured", they were not subdivided for the purposes of ss.8, 25 and 34 of the Act.
On the hearing of the appeal Mr Grealy on behalf of the appellant argued that, notwithstanding that SP 127260 effected a small change in the two lots to which the plan applied, the consequence of the registration of that plan was that certificates of title issued for Lots 1 and 2 which meant that there was a subdivision for the purpose of s.8 of the Act. The appellant therefore sought findings that Lots 1 and 2 were parcels of land to which s.25 of the Act applied and that it was correct to value each of Lots 1, 2 and 1121 separately. The appellant did not dispute the values of each of the lots determined by the learned Member, before applying the bulk discount.
Mr Atzeni disputed that the issue of certificates of title for Lots 1 and 2 meant that the land had been subdivided for the purpose of s.8 of the Act. He relied on the fact that there were the same number of lots before and after registration of SP 127260 and that the ordinary meaning of "subdivide" found in the Australian Oxford Dictionary is "divide further; divide (land) into blocks for sale". Mr Atzeni submitted that the use of the word "may" in s.8(2) of the Act meant that it was not mandatory to conclude that there had been a subdivision, when separate certificates of title issued after the registration of the relevant plan. Mr Atzeni submitted it is a matter of determining whether, in fact, there had been a subdivision. Mr Atzeni relied on the opinion expressed in the letter of the Cambooya Shire Council dated 30 August 1999 that what the respondents were seeking to do was "the adjustment of your property boundary".
           The concept of subdivision which is relevant to this appeal is that which is provided for in the definition of "subdivide" in the Act. 
           When the definition of “subdivide” inserted in the Act in 1993 is compared with the original definition in the Act, the new definition appears to have modernised the drafting of the original definition, rather than change the underlying concept of subdivision.  That is consistent with the Explanatory Notes for the Lands Legislation Amendment Act 1993 which refer to the relevant amendment providing for "updated meanings" of definitions including "subdivide".
Possible approaches to the construction of the virtually identically worded part of the definition of "subdivide" in s 4 of the Local Government Act 1919 (NSW) were considered by Mahoney JA in Registrar-General v Lee (1990) 19 NSWLR 240, 248; 70 LGRA 114, 122:

"It is not clear whether the words 'whether the dividing is' which introduce matters intended to be within the definition are intended to include within the words 'dividing land into parts' the matters in pars (a), (b) and (c) upon the basis that they clarify what would otherwise fall within 'dividing land into parts' or whether the words 'whether the dividing is' are intended to include those matters within the general expression upon the basis that they would not otherwise be included in it.  This is of relevance because if the registration of the present plan by the Registrar-General would not, as I think, constitute a 'dividing land into parts', then the pars (a), (b) and (c) would, on the first basis require no further consideration:  on the second basis, they would.  I shall at this point assume without deciding that the words 'whether the dividing is' are intended to add to 'dividing land into parts' things which otherwise would not be within them and are therefore equivalent to 'include'." 

Other members of the court in Registrar-General v Lee did not consider this aspect of the definition of "subdivide".
           As a matter of analysis, we consider that the operative part of the original definition of "subdivide" is that of "dividing land into parts" and that the purpose of paras (a), (b) and (c) is to set out examples of the means by which land can be divided into parts in a way that is illustrative, but not exhaustive, of how subdivision can occur.  We therefore prefer the first interpretation offered by Mahoney JA that the matter in paras (a), (b) and (c) clarify what would otherwise fall within "dividing land into parts", but we would add that the inclusion of these specific matters does not exclude other means of dividing land into parts not expressly covered by paras (a), (b) and (c). 
That approach to the old definition is reinforced by the modern drafting of the same definition now found in s.8 of the Act. Section 8(1) contains the operative definition. Section 8(2) of the Act then lists means by which land may be divided into parts and expressly relates back to the operative definition in s.8(1) of the Act. The means of dividing land into parts that are set out in s.8(2) of the Act illustrate possible means of how dividing land into parts can occur. The use of the word "may" in s.8(2) of the Act is consistent with the methods of dividing land into parts which are set out in paras (a), (b) and (c) being specified as methods of effecting a subdivision for the purpose of the Act, but that they are not necessarily all possible methods. The use of the word "may" does not connote that if one of the matters set out in paras (a), (b) or (c) of s.8(2) of the Act has occurred, further inquiry should be made as to whether there has been a subdivision for the purpose of the Act. If one of the matters in paras (a), (b) or (c) of s.8(2) of the Act occurs, the result is that the land has been subdivided into parts for the purpose of s.8(1) of the Act.

The effect of SP 127260 was to divide two existing lots of land into two lots of land with a slightly different boundary than had existed for the two existing lots. The parts into which the land was divided were not identical to the parts which existed prior to the registration of the relevant plan. It is not essential to the definition in s.8(1) of the Act that a subdivision must produce a different or greater number of lots than that which existed prior to the subdivision.
We therefore conclude that SP 127260 divided Lots 97 and 1122 into parts, namely Lots 1 and 2. That conclusion is also confirmed by the application of s.8(2)(c) of the Act. It follows from the issue of certificates of title for Lots 1 and 2 after the registration of SP 127260 that Lots 97 and 1122 had been divided into parts.

Therefore, since Lots 1 and 2 have been "subdivided", the provisions of s.25 of the Act apply to those lots so that the unimproved value will be discounted by the rating authority for the making and levying of rates. While s.34 requires that the Chief Executive, unless he otherwise directs, to include such parcels of land in the one valuation, subsection (4) excludes a parcel of land to which s.25 applies. Since s.25 applies to Lot 1 and Lot 2, they cannot be included in the one valuation, nor can either of them be included in a valuation with Lot 1121. Therefore, all three lots must be valued separately.
           The learned Member in the Court below acted on what he understood to be the evidence of the valuer for the Chief Executive and applied a discount of 2.5 per cent to the unimproved values which he determined for each of the three lots.  The appellant has challenged the learned Member’s application of the discount.

The Multiple Holding Discount Allowance
Section 34(1)(a) directs that, unless the Chief Executive otherwise determines, such lands are to be included in one valuation. However, that does not require that the land must be valued as one in globo parcel. A method often used to assess unimproved value in such circumstances is to add the values of the individual lots for their highest and best use, and then to apply a discount for bulk or multiple ownership.
           That method of valuation and of allowing for "bulk or multiple holding" was discussed by the Land Appeal Court in Burns Philp & Co Limited v. Valuer-General (1974) 1 QLCR 161 at 165:

"It is apparently a practice in the Valuer-General's Department when several parcels are included in one valuation to make an allowance for 'bulk or multiple holding'.  Often this is made at the rate of 2½%  per allotment or subdivision.  As we understand the practice this is an acknowledgment that larger areas generally command a lesser owner unit value than smaller areas.  We see no reason as presently advised to disallow this practice but the quantum thereof is one calling for discretion according to the circumstances of individual cases.  The basis for the allowance cannot be a rule of thumb of 2½% for each allotment included in the parcel.  Logical and practical considerations require that a maximum limit be applied for the bulk allowance percentage, otherwise increasingly large numbers of allotments would result in inordinately low unimproved values until when forty allotments are included the absurd position of the nil value would result."

Clearly the direction from the Land Appeal Court is that discretion must be used in the application of any "bulk allowance".  Economic market forces generally dictate the extent of any such discounting factor in sales of several lots to one purchaser from a subdivisional development, the rate of sales being an important criterion.  The foundation of this approach is the concept of how much discount a hypothetical prudent purchaser, as envisaged by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418, would expect if such a purchaser was to negotiate the purchase of multiple lots.
           In the present case, the three lots must be valued separately and not included in the one valuation.  Therefore, the concept of discount for multiple holding does not apply.

Orders
           The appeal is allowed.  The decision of the Land Court made on 22 June 2001 is set aside.
           The valuation of Lot 1 on SP127260 (AV00-301) is assessed at Thirty-two Thousand Dollars ($32,000).
           The valuation of Lot 2 on SP127260 (AV00-302) is assessed at Sixty Thousand Dollars ($60,000).
           The valuation of Lot 1121 on A342430 (AV00-303) is assessed at Seventy-five Thousand Dollars ($75,000).

JUSTICE OF THE SUPREME COURT

PRESIDENT OF THE LAND COURT

MEMBER OF THE LAND COURT