Graham v Chief Executive, Department of Lands
[1996] QLC 139
•23 October 1996
|
BRISBANE
23 October 1996
Re: Appeal against annual valuation -
Valuation of Land Act 1944 -
Shire of Eacham.
(AV95-543).
Herbert W Graham and Noelene W Graham
v.
Chief Executive, Department of Lands
(Hearing at Atherton)
D E C I S I O N
Mr and Mrs Graham are the owners of land described as Lots 9 and 12 on Registered Plan 846970, Parish of East Barron, County of Nares, containing an area of 13.55 hectares. Under the provisions of the Valuation of Land Act 1944, as at 1 January 1995, the respondent determined the unimproved value of that land at $120,000. Following an objection by the owners, the valuation was subsequently reduced to $115,000. Mr and Mrs Graham then appealed to the Land Court against the respondent's decision upon their objection, advising that their estimate of the unimproved value was $90,000.
The grounds of the appeal are as follows:•"The condition of Mather Road, which services all these properties, is not consistent with the property valuation.
•Two highly priced adjoining properties are not being used entirely for agricultural purposes.
•The meaning of "significant and substantial commercial purpose or character" is debatable.
•Farming is a long term investment.
•Valuations of surrounding properties are out of proportion.
•Profitability in cattle breeding is at a low. "
At the hearing of the appeal, Mr HW Graham appeared and gave evidence on behalf of the owners. The respondent was represented by Senior Valuer Mr K Allan, while evidence for the respondent was given by Mr RG Moroney, a registered valuer employed by the Department of Natural Resources.
The subject land is situated about 2 kms by road south of the Yungaburra Post Office with access by means of the formed earth Mather Road, which provides virtually all-weather access to the property boundary. Telephone and electricity services are available.
The subject land comprises cleared former scrub country, with red volcanic soil, suited to cropping. It rises from Mather Road in the west to the eastern boundary, which has frontage to an unmade road. The property is watered by a bore on Lot 9 and another bore on Lot 12, while access to water in Peterson Creek to the west, is provided by means of an easement over Lot 8 on RP 703901, where the owners have a Waterworks Licence to pump water to the subject land for domestic and irrigation purposes.
The land is zoned "Rural Special Farming" under the Town Planning Scheme for the Shire of Eacham. A dwelling house is situated on Lot 9 and the property is used for residential and cattle grazing purposes.
The owners' first ground of appeal was in respect of the condition of Mather Road, which Mr Graham described as being in "a shocking condition". It seems that Mather Road is part of the old railway line from Yungaburra to Malanda. For approximately one kilometre south of the Yungaburra Post Office the access to the subject land is bitumen sealed, but from the intersection with Beech Street, Mather Road is gravel. Mr Graham claimed the road was not well maintained and was in poor condition, being corrugated and with wash-outs. However, he conceded that it was virtually an all-weather road. Near the subject property, there was tall guinea grass growing on either side of the road, making it dangerous, in Mr Graham's opinion. He said that although the Council cut the grass about twice a year, it grows back quickly.
Mr Moroney did not consider that the road was in a poor condition. He had driven to the subject land only about a week before the hearing. He described it as an all-weather, very solidly built road to the north-western corner of Lot 9, but from then on, along the western boundary of the subject land, it became just an earth track. This may well explain the difference in the description of the road by these two witnesses.
The second, third, fourth and sixth grounds of appeal are in respect of the owners' contention that the land should be valued under the concessional provisions of s.17 of the Valuation of Land Act, as land exclusively used for purposes of "farming", as defined in sub-section (2) of that section.
Mr Graham explained that he and his wife purchased the property in about 1981. It was first used for the growing of corn and they later experimented with ducks and goats. In about 1990, they commenced cattle raising, buying young calves and rearing them to adulthood, selling the males and keeping the females for breeding.
The first sales of cattle were in 1991 when prices were good and the enterprise looked like being successful. However, it had to be curtailed because of the drought and they had to sell all their cattle by October 1991.
Soon after they purchased eight Brahmans, twelve months old, for which they bought feed. Meanwhile, they improved their pastures. As conditions improved, they expanded their herd. By the relevant date, 1 January 1995, they had 26 head which comprised four bulls, eight breeding cows, the balance being progeny of various ages. Although they have not yet sold any Brahman cattle, Mr Graham said they have eight for sale when cattle prices improve.
It is the owners' intention to establish a small stud when they are able to. In the meantime, they will continue their cattle rearing operation.
Mr Graham felt that the carrying capacity of the land was limited to about 30 head, without resorting to hand feeding. From that number of cattle he predicted that they would be able to turn off a maximum of 25 head per year at twelve months old and younger. In good times he expected that they could get about $500 per head, but conceded that at present they would not get $300 per head.
In the longer term, Mr Graham anticipated that the gross return from the sale of cattle would be approximately $12,500 per year, while running costs may be about $3,000 per year.
Mr Moroney gave evidence that he valued the land as a rural residential property, which he considered to be its highest and best use. He was of the opinion that it did not qualify for valuation under the concessional provisions of s.17 of the Valuation of Land Act 1944, because the use of the land did not fulfil the requirements of that section, in particular the requirement that the land be used for a business or industry which has "a significant and substantial commercial purpose or character".
However, Mr Graham contended that the owners' cattle operation would produce a net return of at least $5,000 per annum, which he considered would come within the requirement. Although he conceded that the owners had not been able to make such profit at this stage, he made the point that few farmers were making a profit in the present circumstances. It was the owners' hope and intention to make more than $5,000 per annum profit in the future. Farming was, as he put it, a long term investment.
The appellants' second ground of appeal was with respect to the sales of two adjoining properties, which Mr Graham considered were over-priced. The property adjoining the subject land to the north west, with an area of 4.856 hectares, sold from Stewart to Mackenzie in July 1993, for $93,000. That property had little in the way of improvements, except for clearing. Mr Graham regarded it as a special purpose sale, because Mackenzie purchased it with the intention of establishing a retirement village on that property.
Mr Moloney used that sale as one of his basic sales (Sale No 3). He had analysed it to show an unimproved value of $87,140, and had applied an unimproved value as at the relevant date of $80,000. He had interviewed Mr Mackenzie and had been assured that the purchaser had not paid a premium above its rural residential value. It seems that the sale was not contingent upon approval for the establishment of a retirement village. Subsequent to purchase, Mackenzie applied to Eacham Shire Council for rezoning of the land from "Rural Special Purposes" to "Special Facility Retirement Village", but that application was refused. He has since established a large home on the property.
The second sale referred to by Mr Graham as over-priced, was the sale of the balance of Stewart's property with an area of 8.213 hectares, which adjoins the subject land to the north. Mr Graham said that property had previously been sold from Stewart to Solley for over $120,000. Solley had constructed improvements on the property, including a large shed, a bore and a large concrete tank. According to Mr Graham, the property was sold approximately twelve months ago by Solley to McLarty for about $200,000. Mr Graham said McLarty is using the property as a transport depot and for running a few calves.
Mr Moroney was aware of that sale, but as it was highly improved, he had not attempted to use it as a basis for his valuation, preferring instead the sales of vacant or lightly improved land.
In addition to his Sale No 3, Mr Moroney relied upon two other sales situated to the south of the subject land in the vicinity of Malanda. Mr Moroney's Sale No 1 was situated in Anderson Road, about 6 km north-east of Malanda, had an area of 6.291 hectares, and sold in August 1994, for $105,000. Mr Moroney analysed that sale to show an unimproved value of $95,400. That property had a hatchet-shaped access to the bitumen sealed Anderson Road, with telephone and electricity services available. He described the land as comprising long easy slopes, falling from the north and west to the east and south-east, to a creek which traversed the land towards the rear boundary.
By way of comparison, he said that the sale land is smaller than the subject land, with superior road access, but with inferior internal access to the homesite. Its topography is similar to the subject land, with similar services and water supply. However, its situation was inferior. Overall, he considered the sale to be inferior to the subject land.
Mr Moroney's Sale No 2 was situated in Forest Road, Malanda, with access by means of a gravel road. It had an area of 8.57 ha, and sold in February 1994 for $110,000. He analysed that sale to show an unimproved value of $94,250. Mr Moroney described the topography of that land as long easy to moderate slopes, falling to the north to Kenney Creek, which formed the northern boundary.
By way of comparison, he said that the sale was smaller than the subject land, and had inferior access to the site. It had similar services and water supply, but inferior topography and location. Overall, he considered the sale to be inferior to the subject property.
In addition to the two sales which he considered to be overpriced, Mr Graham gave evidence that he had attempted to sell Lot 12 of the subject land. He tendered a contract dated 13 March 1993, showing a sale price of $117,000 for that 12.35 ha parcel. However, he said that the purchaser had rescinded the contract. As the transaction did not proceed to fruition, I can place no weight on that evidence.
In relation to the appellants' fifth ground of appeal, the relativity of values in the area, Mr Graham referred to the fact that the 14.16 hectare property immediately to the south of the subject land, owned by Williams, which he said had been valued at $35,400 in 1994, and at $39,500 in 1995. That was an increase of only 11.58%. He also referred to the property owned by Dowling, with an area of 10.07 hectares, situated just to the north of the subject land, which was valued at $31,000.
Mr Moroney said that the properties held by Williams and Dowling were not valued as rural residential blocks. They were parts of larger properties held by the Williams and Dowling families, which attracted s.17 concessional valuations. They were valued separately because they were held in different ownerships to the rest of the family aggregations. However, they were both worked as part of those aggregations. As those properties were valued on a different basis to the subject land, comparisons with their applied values were of no assistance.
In addition, Mr Graham referred to the unimproved values applied to a number of other properties in the area, none of which had been increased to the extent of the subject land. The only property that had been significantly increased was a property owned by Brian Hard, which Mr Graham said had been valued in 1993 at $94,000, in 1994 at $108,000, and in 1995 at $130,000. Mr Hard had objected to the 1995 valuation, which had been reduced to $117,000.
Mr Graham said that Mr Hard was not using the property for farming. It was a larger property, overlooking Yungaburra and overlooking the lake, yet its valuation was only $2,000 more than that of the subject land. However, Mr Moroney explained that Mr Hard's property was situated further from Yungaburra and consisted of steeper and more broken country than the subject land.
Mr Moroney explained that as at 1 January 1995, unimproved values in the area had been increased by about 15% for primary production properties and by about 20% for rural residential properties. He said that no valuation had been carried out by the respondent in 1994. As Mr Graham's information came from the rating records of the Eacham Shire Council, Mr Moroney thought that the details relating to 1994 may be the result of an averaging by the Council of earlier valuations.
Mr Moroney said that he had inspected the subject land in September 1994. After discussion with Mr Graham, he formed the opinion that the land was not being used for purposes of "farming". When making the valuation as at 1 January 1995, he altered the former concessional valuation of $42,000 to one which reflected its highest and best use as a rural residential property. If it had continued to attract the "farming" concession, he would have valued it at about $48,000 or $49,000.
Before proceeding further, it is necessary to consider whether Mr Graham has proved his major ground of appeal, that the property should qualify for valuation under the concessional provisions of s.17 of the Valuation of Land Act. Section 17(1), so far as is relevant to this case, provides that where land is exclusively used for purposes of "farming", any enhancement in the value of that land for any other purpose must be disregarded. Sub-section (2) of s.17 defines "farming" to mean:
"(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. "
That section and its predecessor, s.11(1)(vii), have been the subject of intensive litigation for many years. The leading authorities on s.17, as it is presently expressed, are Whackett v. Chief Executive, Department of Lands, Thomason v. Chief Executive, Department of Lands and Chief Executive, Department of Lands v. Higbie, as yet unreported decisions of the Land Appeal Court delivered on 3 March 1995. Those cases have established the following propositions:
•The definition of "farming" may be satisfied where the subject land is used by someone other than the appellant;
•However, each of the requirements of the definition must be satisfied;
•The expression "dominant use" implies that some other use may be made of at least part of the land and it does not necessarily follow that the other use must be incidental or ancillary to the dominant use;
•Each of the words used in the phrase "significant and substantial commercial purpose or character;" is capable of a number of meanings, but in combination, they appear to require a trading or business activity of important or considerable size (Taylor v. Chief Executive, Department of Lands (1993) 14 QLCR 477);
•Each case must be considered on its own merits and it is not possible to set numerical or financial requirements which would be applicable in every case.
In the present case, in my view, it is not necessary to consider other than the requirements contained in paragraphs (c) and (d). It could not be seriously suggested that the activities conducted on the subject land as at the relevant date had a significant and substantial commercial purpose or character, as the business activity was not at that stage what could be described as of important or considerable size.
As at that date, the activity was a modest one with no sales of livestock occurring in the last four years. Even if seasonal conditions and prices had been favourable, the sales of the progeny of eight breeding cows would not be sufficient to bring the enterprise within that requirement.
Nor could it be said that the activity was engaged in for the purpose of profit on a continuous or repetitive basis. On Mr Graham's own admission, the enterprise had not been profitable when in 1991 the drought forced the sale of all livestock. Although the property has been at least partially restocked, there have been no sales of stock since 1991. Mr Graham said there are eight cattle ready for sale if and when prices improve. If cattle prices do not improve, it is doubtful if the returns from the present enterprise would ever exceed the costs of running the property.
Mr Graham said the owners hoped in the future to establish a small stud. In the long term, such an enterprise may prove to be a viable venture. However, the owners' future intentions are irrelevant to the application of s.17. In McAdam v. Valuer-General, an unreported decision of the Land Appeal Court delivered 18 September 1981, the Land Appeal Court said:"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. "
On the whole of the evidence before me, I cannot find the activities conducted on the subject land during the relevant period constituted the exclusive use of the land for purposes of "farming" as defined by s.17 of the Act. Therefore, Mr Graham has not proved that ground of appeal.
The property must therefore be valued at its highest and best use. Mr Moroney saw that as rural residential and has produced sales of such properties in the vicinity. In my opinion, those sales support the value applied to the subject land.
Mr Graham has argued as another ground of appeal that the road to the subject land is not consistent with the valuation applied. However, although the property fronts a gravel road which is no doubt washed out and corrugated at times, Mr Graham conceded that it provides virtually all-weather access to the property. As it is only a mile from a bitumen road, and one of the basic sales is situated on the same road, in my opinion Mr Graham has not proved that ground of appeal.
The remaining ground of appeal is with respect to the relativity of the valuation of the subject land with those applied to similar adjoining properties. After having regard to the points raised by Mr Graham and those raised by Mr Moroney, I am of the opinion that Mr Moroney has valued the subject land in correct relativity with the values that he has applied to the surrounding lands.
Having regard to the whole of the evidence, I have come to the conclusion that Mr Graham has not proved any of his grounds of appeal. Therefore, the appeal must fail.
Accordingly, the appeal is dismissed and the unimproved value of the subject land as at 1 January 1995 as determined by the Chief Executive, Department of Lands, at $115,000, is affirmed.
(JJ Trickett)
President of the Land Court
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