Cook v Chief Executive, Department of Natural Resources, Mines and Water
[2007] QLC 67
•26 September 2007
LAND COURT OF QUEENSLAND
CITATION: Cook v Chief Executive, Department of Natural Resources, Mines and Water [2007] QLC 0067 PARTIES: Helen M and Phillip L Cook
(appellants)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NOS: RV2006/0132
AV2006/0133DIVISION: Land Court of Queensland PROCEEDING: Appeals against valuations. DELIVERED ON: 26 September 2007 DELIVERED AT: Brisbane HEARD AT: Charters Towers MEMBER: Mr RP Scott ORDER: The appeals are dismissed. CATCHWORDS: Valuation – comparison with sales – refined detail of points of comparison in relevant but covered in broad comparison.
Valuation – unimproved value – sales evidence preferred to relativities.
APPEARANCES: Mr P L Cook for the appellants.
Mr W Isdale of Crown Law for the respondent.
These reasons relate to proceedings in two matters involving the one parcel of land, "Dillon Creek" Holding being leasehold land held under the provisions of the Land Act 1994. As at a relevant date of 1 October 2004 the Chief Executive placed valuations on the subject land, one (RV2006/0132) being a rental valuation for the purposes of rent under the provisions of the Land Act, the other (AV2006/0133) being an annual valuation for the purposes of the Valuation of Land Act 1944 (the Act). A leasehold property valued under the provisions of the Valuation of Land Act is required under s.14 of that Act to be valued as if it were held in fee simple. It transpires that the application of the relevant statutory provisions leads to the conclusion that a valuation for the purposes of either Act would be based on the same principles leading to the same valuation outcome. Accordingly, the parties consented to these two matters being heard together.
The Chief Executive had placed a valuation of $227,500 on the subject land by use of the mass appraisal technique by which individual inspections and valuations are not carried out, but a rate of increase in value from the previous statutory valuation is calculated having regard to a broad analysis of the relevant market place. The appellants objected against that valuation and in response to that objection the Chief Executive reduced the figure to $170,000 following a desk top review. In due course, a registered valuer in the employ of the Chief Executive's department, Michael McDougall, inspected the subject land in addition to relevant sales properties and provided a valuation in the amount of $125,000. By letter dated 21 March 2006 the appellants were advised that for the purposes of both the rental and annual valuations the value of the subject property would be reduced to that figure in terms of s.68 of the Act. Pursuant to s.68(3) of the Act, the figure of $125,000 becomes the valuation appealed against.
Phillip Leonard Cook one of the co-owners appeared for and gave evidence on behalf of the appellants while Mr McDougall provided valuation evidence in support of the Chief Executive's valuation. One of the concerns raised by Mr Cook related to the large variation in figures settled upon by the Chief Executive for the valuation of the subject land. Mr Cook described these as being "wild gyrations and guesses". Mr McDougall explained that the earlier valuation figures of $227,500 and $170,000 were arrived at without inspection. The reduction of valuation following objection focused mainly on the unavailability of electricity to the subject land and that formed the main basis of the substantial discount. The latest valuation figure, being that actually appealed against pursuant to s.68(3), is the only figure that resulted from a detailed valuation and inspection. I do not think that any thinking tax payer, and I observe Mr Cook the so described, would expect the Chief Executive to carry out physical inspections and valuations of every property in the State every year in preference to the use of cheaper though sometimes inaccurate mass appraisal techniques. In short, I do not think that the variations in figures between the various desktop valuations and the actual valuation following inspection provides a sound basis for criticism of Mr McDougall or his final valuation.
The subject property has an area of 2,952.6 hectares and is located approximately 52 kilometres west of Charters Towers. Services and facilities such as Primary and Secondary Boarding Schools, Hospitals, Supermarkets and Sale Yards are available in Charters Towers. Access to that town is via 32 kilometres of the Flinders Highway which is sealed, then by way of 20 kilometres of formed earth and gravel roadways. Electricity is not connected to the property though mail delivery is available twice weekly.
Mr McDougall described the property as being an elevated, near regular shaped parcel generally falling from a red earth tableland in the east to Dillon Creek which forms the western boundary. The property is intersected by a gazetted but unformed road and surrounds two small parcels of unallocated state land. The property contains significant areas of rough or bendee and lancewood gorges and ridges. He classified 265 hectares or 9% as fair forest grazing; 1,260 hectares or 43% as poor forest grazing and 1,427.6 hectares or 48% as poor to unavailable forest grazing comprising steep and broken conglomerate walls and gorges thickly timbered with lancewood, bendee, Normanton box and wattle.
Mr Cook suggested that the location of a permanent spring noticed by Mr McDougall was not able to be clarified by him, the prospect being that that spring was located on unallocated state land, not on the subject property. Whilst proof of the location of the permanent spring was not established to my satisfaction, it is not a matter or relevance as Mr McDougall said that it is located in an area of little grazing value so is not something of material relevance to the valuation.
Mr Cook provided a great deal of detailed and thoughtful evidence concerning the increase in the cost of land development brought about by changes to the prospect of clearing trees from the subject land pursuant to the provisions of the Vegetation Management Act 1999. Only 2.72% of Dillon Creek comprises non-remnant vegetation and therefore vegetation amenable to clearing. Sixty per cent of the land is mapped as "not of concern" where thinning under a permit may be possible whilst the balance is mapped as being "of concern" where no development of any kind is permitted under the statutory regime. Mr Cook demonstrated by reference to unchallenged evidence that the cost of thinning was substantially more than the cost of broad-scale clearing and on that basis he suggested that there was an imposition on the subject land which ought to have an effect on its unimproved value.
Mr McDougall was of the view that clearing on the subject property, including thinning, was not really an economic proposition. His opinion is reinforced by the evidence of Mr Cook as to the level of costs involved. Mr McDougall said that the small area of non-remnant vegetation could be cleared, but that he saw no added grazing potential in that. Such a small area might be useful as providing an open area for management purposes only.
Mr McDougall inspected the subject land in the company of Mr Cook and said that he would have asked Mr Cook to show or reveal to him any issues of concern to the owners. Notwithstanding that request, Mr Cook did not take Mr McDougall to some mine shafts located on the land. Mr McDougall said he was aware that there was some mining activity in the locality in the past, but that his inspection did not reveal any physical evidence to suggest that the land was contaminated. Neither did Mr Cook produce any evidence that contamination existed. Nevertheless Mr Cook maintained his concern that the mine shafts posed a potential risk to livestock as well as to any unwary person, so he had the mineshafts fenced off.
On the evidence I cannot accept that the mining activity has resulted in contamination of the land. I do accept that there are some open mineshafts on the land which could pose a risk to livestock. It appears that any rehabilitation bond on the previous mining leases associated with the mineshafts would not readily be made available to reinstate the land to its former state. Mr Cook did not tell me the dimensions of the openings and the type of fencing needed to fence the mine shafts off and, given that, and the fact that he did not see the need to show Mr McDougall the mineshafts during the inspection, I am reinforced in my conclusion that the effect of the mineshafts on the unimproved value of the subject land is nominal only not unlike the sorts of annoyances or dangers one might find on any grazing property. Not every such annoyance has an effect on value. Mr McDougall said that evidence of mining activity was much more pronounced on "Chippendale Valley", his sale number 3 which I discuss below. He also said that evidence of contamination from mining activity would potentially pose a greater valuation issue than the physical existence of the mine shafts described by Mr Cook.
Mr McDougall was aware of the presence of rubber vine on "Dillon Creek" in addition to a range of associated weeds that are common to properties in the area. He accepted that he had not specifically inspected the extent of the rubber vine during his 2006 inspection, but said that he was, having regard to his field work in that area, aware of the rapid expansion of this weed since his last inspection of the subject twelve years previously.
The appellants complained that insufficient allowance has been made for the disability caused by lack of mains electricity to the subject land. Mr Cook gave evidence that as at 1 September 2000 the cost of connecting electricity to the subject property was estimated at around $35,000 and that that price would have increased by the relevant date of 1 October 2004. Mr McDougall said that following the objection conference he made an allowance for the electricity disability in the amount of $25,000 not on the basis of costs but on the basis of his appreciation of the value differential flowing from that negative feature. That approach is consistent with principle.
Another reason for the reduction in value was that following his inspection Mr McDougall formed the view that there had been a thickening of timber on the tableland to the eastern side of the property since an inspection some twelve years previously.
There is within the subject property a gazetted but unformed road as well as some small parcels of unallocated State land. Mr Cook expressed concern that the existence of these constituted "a silent threat hanging over" the land as well as to cattle management. Mr McDougall did not accept that suggestion. It seems to me that for a conclusion to be drawn that there is a real threat associated with those features, which I assume have been in place for decades, there would need to be some evidence indicating that the State might have been expected to act in such a way as to bring about a detriment to the use of the land. No such evidence was forthcoming. Apart from that it seems that the relevant areas would be managed as part of the property and would, where suitable, be grazed.
Mr Cook provided what he termed an analysis of possible purchasers of the land submitting that if one considered an owner/operator cattle producer; retired or semi-retired persons; young persons wanting a starter block with the ability to gain off-property income; and neighbours, one would conclude that the property suffers from disabilities which would negatively impact on the attractiveness of the property to such potential purchasers. Whilst I accept the thrust of the proposition that the property does suffer from disabilities it would be double dipping to take into account both the disabilities and their effect on value as well as their effect on purchasers. Apart from that, there was evidence from Mr McDougall that at the relevant date the market for grazing properties was extremely healthy, so one would readily expect there to be at least two parties willing to compete for the property: the conclusion from that being that there would be a market for it. Importantly, I would add that in cases such as this there is a requirement to proceed on the assumption of a sale even if a sale is not permitted or is not practicable.[1]
[1] Geita Sebea v Territory of Papua (1941) 67 CLR 544.
In his valuation report Mr McDougall compared the subject property to three properties that had sold in the general vicinity of the subject land at dates close to the date of valuation. Each of these properties was considered by Mr McDougall and I think accepted by Mr Cook as being substantially superior to the subject property. Sale one "Tomato Springs" sold for an analysed unimproved price of $748,895 or $163.33 per hectare for its 4,585 hectares. That property is applied at an unimproved value of $144.80 per hectare. It has a carrying capacity of 1:11 hectares, is markedly superior to the subject in terms of country type is superior in water, has better access and enjoys rural power and Digital Radio Concentrator Site (D.R.C.S) telephone.
Mr McDougall's second sale "Southernview" is 2,344 hectares in area and is therefore smaller in land area but is also considered markedly superior to the subject property. It is closer to Charters Towers, enjoys good access with a shorter distance of unsealed road, has rural power and D.R.C.S. telephone, has superior country type and has good ground water and good dam sites. Mr McDougall analysed this sale to a figure of $240.33 per hectare unimproved and that was applied at $174.91 per hectare.
The third sale in Mr McDougall's "Chippendale Valley" is larger in area than the subject being 3,497 hectares in size and was considered by Mr McDougall to be overall markedly superior to "Dillon Creek". It is superior in access and has superior waters, however is similar in terms of services, having neither rural power nor D.R.C.S. telephone connected. Mr McDougall analysed the "Chippendale" sale to $221.50 per hectare and had an applied value of $144.12 per hectare.
Mr McDougall recognised the substantial superiority of the sale properties to the subject, however said that his experience in valuing properties of the class of the subject in the Charters Towers area since 1995 has given him the type of experience which allows him to make suitable valuation judgments when comparing subject properties with sales that are imperfect bases of comparison. Mr Cook's opinion was that the sales are so dissimilar to the subject property that the comparisons are better described as contrasts. In a comparison schedule which he provided he largely repeated in detail many of the points of comparison made by Mr McDougall, however added in the reference to the mine shafts on the subject land and repeated his reference to the effect of the Vegetation Management Act restrictions on the subject property. Mr Cook also made reference to the absence of homestead infrastructure on "Dillon Creek", there being complete infrastructure on his understanding on each of the sales properties referred to by Mr McDougall. This last mentioned point is not relevant as the requirement is to consider the properties as unimproved in accordance with the provisions of the Valuation of Land Act.
Mr Cook said that the need for feeding supplement to stock was greater on "Dillon Creek" than on any of the three sales referred to by Mr McDougall. He also stressed the isolated location of the subject property in relation to its access to schools and medical facilities. Mr McDougall has clearly taken the isolation of the subject into account. Whilst he made no mention of the need to food supplement to stock it seems to me that the value struck by Mr McDougall in comparison with the sales adequately reflects the poorer quality of the subject, including its carrying capacity. Mr McDougall acknowledged a suggestion by Mr Cook that "Dillon Creek" is neither well watered nor has potential for the effective development of further waters. In Mr McDougall's opinion however, the property does not need further water given the limited carrying capacity he placed on the property.
Given his appreciation of the differences between the sale properties and the subject land Mr Cook advanced a method of valuation based on a comparison with Chief Executive valuations of two nearby properties: "Fern Springs" and part of "Tandanus". He took the estimated carrying capacity of each of these properties and the subject and the applied statutory valuation figures to arrive at beast area values of $908.50 per beast on "Fern Springs" $1,311.50 on "Tandanus" and $1,693.20 on "Dillon Creek" based on the Chief Executive's valuations. Mr Cook then took the "Fern Springs" beast area value and made comparisons between that property and "Dillon Creek" to demonstrate that "Dillon Creek" was inferior to "Fern Springs" in his opinion. The aspects of inferiority that he identified related to water storage, the absence of homestead infrastructure and the vegetation management concerns to which I have referred earlier. He said that had "Fern Springs" been applied directly to the subject land the appeal properties valuation would be $66,287.65, however given the comparative disabilities of the subject land which he had noticed, he submitted that "Dillon Creek" ought to have a lower unimproved value.
My earlier comments concerning vegetation management and homestead infrastructure apply equally to Mr Cook's comparison between "Fern Springs" and "Dillon Creek" such that they ought not validly apply in such a comparison. In addition to that Mr McDougall said that in making broad comparisons using the beast area method one needs to be aware of the need to take into account that potential carrying capacities are used in the statutory valuations and that the cost of releasing any potential needs to form part of the calculations. The inclusion of such costs has the effect of reducing the beast area value. A broad comparison carried out incompletely can therefore skew calculations. I accept that this is so and has been commented upon frequently by this Court. I would add that the calculations would be further complicated where one is attempting to value a small property with a relatively low carrying capacity. The method is at best a check method most useful in comparing properties with similar potential, size and country type.
I accept the proposition that the three sales relied upon by Mr McDougall are imperfect bases for valuing the subject property. Their significant superiority to the subject is indicated by their respective applied per hectare values. Nevertheless, I conclude that theses sales comprise the best evidence of value and I elect to rely on them in preference to the relativity properties referred to by Mr Cook. I notice that the sales were selected from in excess of twenty sales investigated by the respondent's valuers in the area.
In Grahn v Valuer General[2] the Court recorded these propositions with approval:
"(a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis. (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p. 16 and cases cited in it."
(e) Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WMand TJ Fischer v the Valuer-General (1983) 9 QLCR 44, at p.46."
The importance of sales evidence in valuation cases as against the relativity between statutory valuations was stressed by Land Appeal Court in Clough v Valuer-General[3]
"It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements."
[2] (1992) 14 QLCR 327at 328.
[3] (1981) 8 QLCR 70 at 76.
Mr Cook said that the Shire Council frequently closes the Powlathanga – Red Falls Road, the access road to "Dillon Creek" and adjacent properties following significant rainfall. By way of example he said that in 2007 the road was closed from 29 January to 28 March, a period during which the marketing of cattle can provide a price advantage over other periods. He understood that the signs erected on the road from time to time had such legal effect that it would be unlawful to ignore them. Mr McDougall was aware that other properties had road closures from time to time resulting from the inaccessibility of roads following rainfall and that he saw no difference, insofar as the issue of valuation was concerned, between those closures and closures of the type referred to by Mr Cook. Mr Cook's position was that the timing of the closures was such that it precluded the marketing of stock from the property at a particularly advantageous time. It seems that he had evidence in support of his understanding of the nature of the market, but that evidence was not tendered. Nevertheless, Mr McDougall did not disagree with the proposition.
This issue of the road being closed from time to time came up in a number of matters heard at the same hearing at Charters Towers as "Dillon Creek", but with some inconsistency between the various recitations of the facts. Following a request by me Mr McDougall made further enquiries about the road closure issue and that evidence was produced in the hearing of Hammer v Chief Executive Department of Natural Resources, Mines and Water[4]. He spoke to Mr R Jayo and Mr J Gott the Chief Executive of the Dalrymple Shire. He was told that signs warning of the condition of the road were often erected following heavy rains. For example if Hann Creek has cut the road or the road is otherwise damaged, the sign will warn that there is no through road. Hann Creek need not be crossed to gain access to the subject property. Mr McDougall was told there was no specific local restriction on the road. Public access was therefore permitted. Just like any earth and gravel road, however, climatic conditions would dictate whether the road was passable. Pursuant to s.7 of the Land Court Act 2000 I take that evidence into account in this matter.
[4] [2007] QLC 70.
In the final analysis it appears to me that practical access to the subject is inhibited at times which can be inconvenient to the marketing of livestock and can, therefore, result in economic loss. Having said that I notice that Mr McDougall has made allowance in his valuation for the fact that the property has earth and gravel access. That is less desirable than all weather access and impacts on the property's value. No further refinement to Mr McDougall's valuation is warranted for the specifics raised by Mr Cook. That is the nature of land valuation in which adjustments must necessarily be broad and be based on the application of subjective but professional judgment to the available evidence.
In a matter such as this the Chief Executive's valuation enjoys the protection afforded by the presumption expressed in s.33 of the Act: -
"Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered."
The nature of this presumption was considered by the High Court in Brisbane City Council v Valuer-General[5] where in reference to s.33 when it was numbered as s.13(7), Gibbs J, as he then was, said:
"In my opinion, once it is shown that in making the valuation the Valuer General acted upon a wrong principle, or made a serious error of fact, the presumption created by s.13(7) is rebutted."
[5] (1978) 5 QLCR 283 at 303.
I must say that I am satisfied with the extent and diligence of Mr McDougall's inspection of the subject land in the context of professional task he was performing. Mr Cook went to considerable trouble to detail particular features of the subject property which he saw as disabilities. I refer, for example, to the existence of old mine shafts, the gazetted but unformed road and the unallocated state land, the quality of road access to the subject and the location of the permanent spring. He is to be commended for the effort he put in. What needs to be done, however, is to demonstrate by reference to the market place that such features have an affect on value and the extent of that effect.
I do not think that Mr McDougall has made a serious error of fact in his valuations nor that he has departed from principle in the way that he has treated these various issues. Accordingly, the appeals are dismissed and the valuations of the Chief Executive are affirmed.
RP SCOTT
MEMBER OF THE LAND COURT
0
2
0