Gleeson v Chief Executive, Department of Natural Resources
[2000] QLAC 50
•11 August 2000
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In the matter of an appeal to the Land Appeal Court from the decision of the Land Court in the matter of the determination of the unimproved value of the land contained in Valuation Roll No 11801/10000, Local Authority Townsville, as at 31 March 1992, 1 June 1993, 1 January
1995 and 1 January 1996. (AV97-31 to 34).
BETWEEN
Paul Vincent Gleeson
Appellant
AND
Chief Executive, Department of Natural Resources
Respondent
BEFORE THE HONOURABLE JUSTICE CULLINANE, MR JJ TRICKETT
AND DR NG DIVETT
REASONS FOR JUDGMENT - THE COURT
Delivered at Townsville this eleventh day of August 2000.
These are four appeals by Mr Gleeson (the appellant) against the determinations by the Land Court of the unimproved values of his land for four consecutive valuations applied by the Chief Executive, Department of Natural Resources (the respondent) under the provisions of the Valuation of Land Act 1944 (the Act). The unimproved values were made as at 31 March 1992, 1 June 1993, 1 January 1995 and 1 January 1996. The respondent applied unimproved values for the first three of those years at
$337,500 ($230 per hectare) and for 1996 at $365,000 ($250 per hectare). The Land Court confirmed the unimproved value of the subject land as at 1 January 1996, at
$365,000 and reduced the valuations for each of the other three years to $308,000.
The subject land comprises a number of freehold titles, with an amalgamated area of 1466.12 hectares. It is located about 30km by road south of Townsville and is used for small-scale cattle grazing. There is no dispute that the land is to be valued under the concessional provisions of s.17 of the Act as land used for purposes of "farming". The real issue in these cases was the method that should be adopted in determining the unimproved value of that land.
Before the Land Court the appellant estimated that the unimproved value for each of the years should be $240,000. However, during the hearing of the matters in the Land Court, evidence was led through his valuer, Mr Honnef, to a value of
$200,000 for each of the valuations. Both the appellant and the respondent relied upon the sales of purportedly comparable lands. However, s.17 of the Act requires that the land be valued excluding any enhancement in value because of potential for any other purpose. In seeking to comply with s.17, the valuers for each party relied upon different sales.
Section 17 relevantly provides:
"(1) In making a valuation of the unimproved value of land exclusively used for purposes of … farming, any enhancement in that value … or any other purposes shall be disregarded … when the valuation is made."
"Farming" is defined by sub-section (2) to mean: "(a) the business or industry of grazing … ; or
(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; and
(d)is engaged in for the purpose of profit on a continuous or repetitive basis. "
In the Land Court, valuation evidence for the respondent was provided by valuer, Mr Campbell. Mr Campbell relied upon sales in the immediate vicinity of the subject land as providing the best evidence of unimproved value. On the other hand, Mr Honnef concluded that such sales would be "tainted" with subdivisional potential. He relied on four sales situated between 30 to 50km from the subject land, in an area where the highest and best use was for grazing purposes, where there was no subdivisional potential.
The basic difference between the two approaches was complicated by the fact that Mr Honnef acknowledged that the subject land was situated in an area which enjoyed an advantage because of its proximity to Townsville. Therefore, he added a premium of $35 per hectare to his valuations to allow for that advantage.
Mr Campbell realised that his sales were situated in an area where land was used for rural residential and more intensive development. However, for various reasons he concluded that the sales he had relied upon lacked any immediate subdivisional potential.
After considering that evidence, the learned Member of the Land Court dismissed the appeal against the unimproved value of $365,000 applied as at 1 January 1996. He found that although there was no evidence from either side to support that valuation, the valuation made by the respondent is deemed to be correct until proved otherwise (s.33 of the Act) and the burden of proof was upon the appellant (s.45(4) of the Act). The learned Member found that the appellant had failed to discharge that burden of proof and dismissed the appeal against that unimproved value.
In respect of the valuations for the other years, the appellant presented the following argument:
· Various factors had contributed to substantially dampen confidence and significantly curb the market for cattle properties throughout north Queensland;
· It was safer not to use sales close to the subject land, because of their potential for subdivision;
· The sales used by the appellant are located 55 to 65km from Townsville in the Reid River area, beyond the influence of rural residential development. Those sales reflected a grazing value only;
· A premium of $35 per hectare should be added to the valuation of the subject land, because of its locational advantage compared to the sales in the Reid River area.
Essentially the respondent's argument was that:
· Sales closer to the subject land provide better evidence of value;
· His sales are closer to the relevant dates than the sales used by the appellant;
· His sales had been carefully chosen so that they reflected no (or very little) enhancement in value because of subdivisional potential;
· The sales were used for grazing purposes.
In this case, it was common ground that the subject land has potential for subdivision in the future. Normally the most appropriate method of determining the unimproved value is by comparison with sales of comparable lands, preferably unimproved or lightly improved, in the vicinity of the subject land. However, section 17 creates an artificial situation whereby the valuation must be determined excluding, not only the value of improvements on the land, but also any enhancement in value because of a higher potential.
The parties have adopted different approaches to this theoretical valuation. The respondent relied on sales in the vicinity of the subject land, with little or no enhancement in value because of potential for subdivision, and then discounted those sales for that potential. The appellant, on the other hand, relied on sales further afield, beyond the range of subdivisional influence, with no higher potential than for grazing and then added a premium of $35 per hectare for the more advantageous location of the subject land.
The learned Member concluded that Mr Honnef's sales were further from the subject land and more distant from the relevant dates. The addition of the premium of
$35 had no basis in the market, but was solely Mr Honnef's professional opinion. He thought that Mr Honnef had led himself into error by employing the method of valuation which he had adopted. In the event, the learned Member preferred the sales relied upon by Mr Campbell. However, he concluded that the unimproved values of
$230 per hectare applied to the subject land for the 1992, 1993 and 1995 valuations were "a little high" in comparison with those sales
The learned Member adopted a value of $210 per hectare, or a valuation of
$308,000, for each of those years.
Before us, Mr White, counsel for the appellant, submitted that as the subject land was to be valued under s.17(1), there were two valuation methods which could be employed which, if correctly applied, should produce the same result:
·select sales of comparable properties in the immediate vicinity of the subject land, then discount those sales by an amount which would reflect the value of the subdivisional potential; or
·select sales of comparable properties in the general locality of the subject land which have no subdivisional potential, and from those sales establish the value of grazing land, then add to that value a premium for location proximate to, in this case, Townsville.
Mr White submitted that in view of the difficulties in identifying and isolating a value that could be attributed to the subject land as a consequence of any additional potential for subdivision of the land, then the former method is fraught with difficulties and should not be adopted. He argued that sales of properties used entirely for grazing purposes in the Reid River area, albeit 25 to 35km removed from the subject land, were a better reflection of the market value of grazing lands. Having drawn comparisons between those sales in the Reid River area and the subject land, Mr Honnef had then made an allowance of a further $35 per hectare for the subject
land's closer proximity to Townsville. Mr White submitted that the additional premium for locational advantage was not unexplained nor unsupported, as found by the learned Member, but was based upon Mr Honnef's professional experience.
At the heart of that argument is the logic that it is the "use" of the land which is the fundamental comparable feature. Any comparable sales should be located in the general locality of the subject land. Mr White argued that a distance of 25 to 35km is of no account when comparing grazing lands of some 1400ha in area. At face value that is not unreasonable.
However, we believe the problem with Mr Honnef's sales was not only their location and the dates of those transactions, but also his subsequent adjustment of $35 per hectare to allow for the closer proximity of the subject land to Townsville and its increased opportunities
Mr Honnef allowed a premium for grazing purposes because of that closer proximity. However, the question needs to be asked: why only an additional $35 per hectare? Why not $100 per hectare? In our view, a valuer must be able to demonstrate the basis for his opinion, notwithstanding that such an opinion stems from his or her professional experience as an expert.
The use of an unsupported opinion by an expert valuer in matters of this kind has been accepted by the courts. (Minister of Environment v. Petroccia (1982) 30 SASR 333, per Wells J at 336; and Commissioner of Highways v. Tynan (1982) 53 LGRA 1, per Wells J at 9.) However, the relative weight that might attach to such an opinion was highlighted by this Court in its decision of CF Standfield v. Commissioner of Main Roads (1969) 36 CLLR 76 where, in referring to an opinion by an expert valuer, the Land Appeal Court said at page 80:
"Such an opinion may be held by an experienced valuer in all honesty and sincerity but its evidentiary weight lessens if it cannot be substantiated or demonstrated by some tangible calculations reasonably based on available data."
Mr White argued that Mr Campbell had failed to have regard to the productive capacity of the land, or the viability of the grazing enterprise. He submitted that the use of comparisons on a "beast area basis" as a common denominator, is used for comparing rural lands.
However, in our view, the stock carrying capacity is only one factor. It must be considered along with other factors, geographical location, altitude, soils, topography, working costs, comparable levels of development, as well as climate factors and industry market indices. Those issues were addressed by the learned
Member, who noted that such indicators were provided by Mr Honnef only as background information and were not directly correlated to the market value of grazing land.
Essentially, the appellant's argument in this appeal is that the learned Member erred in preferring Mr Campbell's sales to those of Mr Honnef, because those sales included subdivisional potential. The learned Member noted that Mr Campbell offered his professional opinion that his Sale 1 could be 5% to 10% higher because of subdivisional potential. Mr White argued that as subdivisional potential existed in Sale 1, then it should be disregarded for the valuation of grazing land.
Although Sale 1 was subsequently used for grazing purposes, Mr Honnef ascertained that the purchaser regarded the property as his superannuation, bearing in mind its subdivision potential.
Mr Campbell's Sale 2 comprised a number of surveyed parcels, but because there was no formed access, Mr Campbell was of the opinion they could not be sold separately.
It is agreed that Mr Campbell's Sales 3 to 5 have relevance only in respect of possible changes in the market.
The learned Member found that Mr Campbell's Sale 1 had a greater subdivisional potential than Mr Campbell acknowledged, but that subdivision would be deferred for some years. In the event, he found that Sale 1 and Sale 2 were the best evidence of value.
The learned Member rejected the validity of the approach adopted by Mr Honnef. He found that the valuer had relied upon sales in a different environment, substantially removed from Townsville. He also found that Mr Honnef had compounded the lack of comparability of those sales by adding a premium for location based on an unsupported opinion. He thought it preferable to consider sales in the area of the subject land and to discount those sales, if necessary. He preferred to rely on Mr Campbell's sales evidence.
In preferring the method of valuation adopted by Mr Campbell in preference to the method adopted by Mr Honnef, in our view the learned Member followed a course which was open to him and made no error of law. (Melwood Units Pty Ltd v. Commissioner of Main Roads (1978) 5 QLCR 145 at 149; and followed in Electricity Commission of New South Wales (Trading as Pacific Power) v. Arrow (1994) 85 LGERA 418 at 419.)
In the Court below, the learned Member was faced with two sets of evidence, arising from the different approaches taken in seeking comparable sales. We find that
it was open for him to rely upon the evidence of Mr Campbell and to make the findings that he made.
There are two further matters which we should mention.
Counsel for the respondent, Mr O'Rourke, sought to argue that the learned Member erred in reducing the unimproved values made as at 1992, 1993 and 1995. However, the respondent had not cross-appealed. By not appealing the respondent effectively accepted the decisions of the learned Member. In our view, it is not open to him to challenge those decisions in the present appeals.
Mr White submitted that the appellant was entitled to his costs, both in the Land Court and on appeal to this Court. The basis for that submission was that the valuations made by the respondent were both capricious and arbitrary, because Mr Campbell had not taken into account the subdivisional potential in Sale 1 in arriving at the valuations of the subject land. Having regard to the provisions of s.70 of the Act, that submission can only have been made on the assumption that these appeals would be successful. They have not been.
The appeals are dismissed.
(Cullinane J)
JUSTICE OF THE SUPREME COURT
(JJ Trickett)
PRESIDENT OF THE LAND COURT
(NG Divett)
MEMBER OF THE LAND COURT
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