Goody v Chief Executive, Department of Natural Resources
[1997] QLC 156
•9 October 1997
|
BRISBANE
9 October 1997
Re: Appeal against Annual Valuation -
Valuation of Land Act 1944 -
Shire of Laidley.
(AV95-653).
John L and Fay M Goody
v.
Chief Executive, Department of Natural Resources(Hearing at Gatton)
D E C I S I O N
This is an appeal by Mr and Mrs Goody against the determination of the Chief Executive, Department of Natural Resources, of the unimproved value of their land.
Mr and Mrs Goody, are the owners of land described as Lot 3 on Registered Plan 186721, Parish of Mort, containing an area of 16.37 hectares. As at 30 June 1995, under the provisions of the Valuation of Land Act 1944, the respondent determined the unimproved value of that land at $42,500. The owners objected against that valuation. Following notice from the respondent that their objection had been disallowed, they appealed to the Land Court, advising that their estimate of the unimproved value as at the relevant date was $30,000.
The owners' grounds of appeal are as follows:"1.Topography.
2. Price of land achieved by sales.
3. Lack of property sales.
4. Increase of more than 10%, inflation supposedly 3%.
5. Lantana infestation.
6. Road not maintained to a safe standard.
7. Water diversion by Council causing large erosion areas.
8.Land could only be used for grazing.
9.Drought declared since 5/93. "
The subject land is an irregular shaped parcel fronting Berlin Road, approximately 16 kms south-west of the Town of Laidley. Berlin Road is a narrow bitumen strip road providing reasonable access to the property. Telephone, electricity and school bus services are available in the locality.
At the hearing of this appeal, Mr JL Goody appeared and gave evidence on behalf of the appellants, while Mr D O'Connor, Senior Valuer, appeared on behalf of the respondent and valuation evidence was given by Mr EG Ridley, a registered valuer employed by the Department of Natural Resources.
Mr Ridley described the land as follows:"The land may be described as having an elevated moderately to steeply sloping topography with north-easterly aspect. The land has been cleared of the original brigalow softwood vegetation. The parcel contains a suitable building site which is easily accessible from Berlin Road. Water is obtained from surface supplies. "
Mr Ridley went on to say that at the relevant date the land was zoned "Rural A" under the then Town Planning Scheme for the Shire of Laidley and was used for grazing beef cattle.
Mr Goody did not substantially disagree with the description of the land given by Mr Ridley. However, he felt that the description did not go far enough as it did not refer to the erosion prone nature of the land. Paragraph 6 of Mr Goody's statement is as follows:"(6)The erosion of my land. In 2 places the Council has built diversion tunnels under the road that force water onto my land from the natural flow, causing large scale erosion gullies and tunnel erosion. The one near the main entrance gate is now so large it measures 20 yards by 5 and is 7 feet deep. The top water channel is so fierce that approximate 2 acres have been lost. "
Mr Goody tendered photographs showing the large hole caused by erosion affecting the internal road to the cultivation. Considerable expense was incurred in having a large backhoe fill in the hole. Mr Goody fears that the erosion will recur unless he can prevent the water diversion. He contends that this problem alone has reduced the value of the land by many thousands of dollars.
Mr Goody drew attention to other problems affecting the land, the infestation of lantana and the high voltage electricity main which cut through the land from east to west. He feels that the presence of the high voltage powerlines would adversely affect the price that a potential purchaser would pay for the land. He also expressed concern about the state of the road. It is a steep, narrow, winding road, wide enough for only one vehicle. Lack of maintenance by the Council has resulted in potholes and general disrepair.
Although he felt that these features adversely affected the unimproved value of the land, Mr Goody's main argument concerned the method of valuation adopted by the respondent. He contended that the land should be valued as land used for purposes of "farming" as defined by Section 17 of the Valuation of Land Act.
The use of the land
Mr Goody described how the appellants had purchased the land in October 1983, with the intention of using it for grazing. The land was part of what had been a much larger parcel which had been subdivided and sold by a Mr O'Keefe. As part of the conditions of sale, the land was purchased fully fenced. It had been cleared, but at that time was covered with lantana. Over the years the appellants have purchased tractors and other equipment, put in dams, divided the property into four paddocks and built a shed, cattle yards, races and ramp. Approximately 50% of the property has been cleared of lantana.
Mr Goody gave the following account of the appellants' use of the property: Soon after purchasing the property, the appellants bought 28 steers and two horses. After two good seasons, then went into drought and the land has not really recovered since.
In January 1985, the appellants sold 13 of the original 28 steers for a profit of about $90 per head. In August that same year they sold another eight, for a profit of about $100 per head. In February 1986, they sold the surviving six bullocks for an average of $326.99 per head.
In January 1986, they bought eight Santa Gertrudis steers for a total of $1,720. In January 1987, they sold all those steers for a total of $2,120.
In April 1987, the appellants bought six Santa Gertrudis weaners, comprising one bull, one steer and four heifers. Then in June 1987, they purchased one Santa Gertrudis cross heifer, one Santa Gertrudis steer, two Murray Grey steers and one Santa Gertrudis cross steer, all very young.
In April 1988, the appellants sold seven Santa Gertrudis steers for a total of $1,165. Then in July 1989, they purchased four Santa Gertrudis cows in calf for $1,120.
By this time the appellants had become very interested in Santa Gertrudis cattle and in August that year joined the Santa Gertrudis Association. Later in that same month they purchased ten classified pure-bred heifers for $500 each. In September 1989, they sold all other remaining cattle for a total of $3,275 to make way for the ten heifers, which arrived in November 1989. Then in December that year, they purchased a pure-bred Santa Gertrudis bull for $3,500. The appellants then commenced a registered Santa Gertrudis stud, (registration number 1573), called "Warrigal Stud". They purchased another four heifers and at the beginning of 1990 they had 15 breeders and the bull.
However, things have not gone well for the stud. From early 1990 until the relevant date, because of the particularly dry seasons, there has been little breeding. There have been losses through dingoes and other causes. What calves they have had were sold locally. On 25 March 1993, the appellants sold a number of their stud cattle at the Cherry Red Santa Gertrudis Sale: 3 weaners for a total of $975, 2 S-registered heifers for $290 each, 2 second-cross heifers for $215 each and one second-cross heifer for $330, a total for the sale of $2,315. Mr Goody said they were disappointed with the prices.
In December 1993, they sold three 9-month-old steers and one heifer for a total of $1,000.
In February 1994, they sold three heifers for $1,630. Since then they have had more losses of cows and calves, but have sold no more cattle. As at 30 March 1995, the property was running 13 breeders and five to six heifers plus a few steers.
Mr Goody estimates the carrying capacity at 15 breeders and a bull, plus progeny, a total carrying capacity of 34 head.
Since purchasing the property, the appellants have continued to clear lantana and carry out capital development. They do not live on the property, but visit it at least once a week. Mr Goody said they have been supplementary feeding the cattle the whole time. From 1990, because of the drought, supplementary feed has cost between $150 to $200 per week. This was a deliberate strategy to preserve the blood lines of the stud. In late 1993 they were also buying water as the dams were dry.
In addition to capital expenditure and feeding costs, there were the costs of running the enterprise, including regular treatment for buffalo fly and ticks. It is therefore not surprising that Mr Goody admitted that up to March 1995, the enterprise had been run at a loss, because of the money the appellants had been putting into the venture.
However, they are confident that by running 15 breeders and achieving a minimum of $500 per head for the progeny, in 8 years time they should be making a net profit of $30,000 per annum. Mr Goody considers this to be a realistic expectation, taking into account fluctuations in cattle prices and seasons.
The method of valuation
The respondent had valued the land at its highest and best use as rural residential land by reference to sales of rural residential land in the area. Mr Ridley was not the original valuer, but he had inspected the subject land and the sales and was of the opinion that the unimproved value should have been $50,000, not $42,500. He was satisfied that the land could not be valued under Section 17 of the Act as land used for "farming".
It is therefore necessary to consider whether or not the appellants' use of the land qualifies it for a concessional valuation under Section 17.
Section 17 of the Valuation of Land Act provides for concessions based on land use. When the use of a parcel of land qualified it for valuation under the "farming" limb of Section 17, the unimproved value must be determined disregarding any enhancement in value for a potential purpose other than farming land at the relevant date.
Section 17 relevantly provides:
"(1)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 irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made.
(2)In sub-section (1) -
...
"farming" means -
(a)the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; 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. "
The provisions of Section 17 and its predecessor (section 11(1)(vii), have been the subject of considerable judicial consideration, which has been discussed at some length by the Land Appeal Court in Whackett v. Chief Executive, Department of Lands (AV93-163 and AV93-164, unreported, 3 March 1995).
Whackett's case established that each of the requirements of the definition must be satisfied and that although the words in the phrase "significant and substantial commercial purpose or character" are capable of a number of meanings, in combination they appear to require a trading or business activity of important or considerable size. There a cattle grazing enterprise producing an annual profit of about $5,000 was held not to be of a significant and substantial commercial purpose or character.
In CH and MC Peck v. Chief Executive, Department of Natural Resources (A95-94, unreported, 1 August 1997), the Land Appeal Court considered the application of section 17 to a parcel of just over 4 hectares of land situated at Mt Nathan, upon which was situated an orchard of macadamia, lychee and other trees which ran at a loss in the financial years from 1987 to 1994, despite considerable expenditure both in capital terms and in operating costs. The actual returns fell far short of those which would be reasonably expected from such a venture. In considering the application of Section 17, the Land Appeal Court said at page 5:"The definition of `farming' in the section has the effect of imposing four conditions which must be satisfied before the farming concession can apply:
First, the land must have been used for the purpose of a business or industry specified in any of the paragraphs (a) or (b);
Secondly, the business or industry must have been the dominant use of the land;
Thirdly, the business or industry must have had a significant and substantial commercial purpose or character (paragraph c); and
Fourthly, the business or industry must have been engaged in for the purpose of profit on a continuous or repetitive basis (paragraph d). "
In the present case, as in Peck's case, there was no dispute that the first and second conditions have been satisfied. However, the respondent contends that the third and fourth conditions have not.
The fourth condition contained in paragraph (d), was discussed by the Land Appeal Court in Peck's case at page 6:"The fourth condition concerns an exclusively subjective matter. It focuses on the purpose for which the business or industry was undertaken. That purpose must have been profit making on a continuous or repetitive basis, thus ruling out those who lacked the desire to make money and those who engaged in the business or industry only intermittently. "
In this case, as in Peck's case, the appellants have demonstrated the necessary persistence and financial motive, although their efforts have met with little success. This condition concerns the genuineness of the owners' purpose without reference to its results. In this case, the appellants have satisfied me that this fourth condition has been satisfied.
It is now necessary to consider the third condition contained in paragraph (c). It is again helpful to turn to what the Land Appeal Court said in Peck's case about this condition at page 7:"The third condition concerns one purely objective matter, the commercial character of the business or industry. Commercial purpose of the business or industry is a matter which requires consideration of a subjective matter, again the genuineness of the purpose, of 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 that 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 consideration and so concerns an exclusively subjective 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. "
In Peck's case, although the business had been established for some seven years and although large amounts of capital had been invested, the business had not made a profit. The Land Appeal Court held that the requirements of paragraph (c) had not been met. Similarly in this case, if the capital outlay and working costs each year are considered, Mr Goody admitted that so far the grazing enterprise has been run at a loss. However, Mr Goody said that the owners are hopeful that the Santa Gertrudis stud will make a reasonable profit in about 8 years. However, as at the relevant date, this had not been achieved. While the appellants are confident that all their efforts will be rewarded, it is well settled that as far as the application of Section 17 is concerned, it is the results achieved at the relevant date that must be considered. As the Land Appeal Court said in MacAdam v. The Valuer-General (unreported, 18 April 1981) when dealing with the predecessor to Section 17:
"We stress that intentions, hopes and aspirations, however sincere, are not sufficient to constitute a business of primary production. They must be supported and affirmed by substantial and positive actions of a type and magnitude
which are approaching or may be reasonably certain to reach commercial viability. "
Therefore, the subject land does not satisfy all the requirements of Section 17 of the Valuation of Land Act and cannot be valued as land used for purposes of "farming" as defined in that section. It might be valued at its highest and best use.
Sales Evidence
Mr Ridley gave evidence of three sales in the general vicinity of the subject land which supported the respondent's applied valuation of $42,500. Unfortunately Mr Goody did not know those sales, so was unable to comment upon them except to say that they were somewhat removed from the subject land. However, these sales indicate that there was, at the relevant date, a demand for properties of a size comparable to the subject land in the general area. The sale prices of those lands, ranging from $45,000 to over $90,000, would seem to demonstrate that the unimproved value applied by the respondent to the subject land is not excessive. Indeed, Mr Ridley thinks that it should have been $50,000, but on the evidence, particularly of the disabilities suffered by the subject land, I am not prepared to increase it from $42,500. Therefore the appeal must be dismissed.
Decision
Accordingly, the appeal is dismissed and the unimproved value of the subject land determined by the respondent at Forty-two thousand, five hundred dollars ($42,500) is affirmed.
(JJ Trickett)
President of the Land Court
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