Hazell v Department of Natural Resources, Mines and Water
[2007] QLC 48
•22 June 2007
LAND COURT OF QUEENSLAND
CITATION: Hazell v Department of Natural Resources, Mines and Water [2007] QLC 0048 PARTIES: Patrick T Hazell
(appellant)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NO: AV2006/0671 DIVISION: Land Court of Queensland PROCEEDING: Appeal against valuation DELIVERED ON: 22 June 2007 DELIVERED AT: Brisbane HEARD AT: Mackay MEMBER: Mr RP Scott ORDER: The appeal is dismissed. CATCHWORDS: Valuation of Land Act 1944 – s.17 - farming – "purpose of profit" is subjective but requires proof – "continuous or repetitive basis" relates to the type of business. APPEARANCES: The appellant in person.
Ms C Liu, Senior Legal Officer, Natural Resources, Mines and Water, for the respondent.
Pursuant to the provisions of the Valuation of Land Act 1944 (the Act) the Chief Executive placed a value on land owned by the appellant in the amount of $187,500 as at a relevant date of 1 October 2005. The appellant objected against that valuation and failing to be satisfied with the outcome of that objection, has appealed to this Court. Subsequent to the lodgement of that appeal the Chief Executive reduced the valuation to $160,000 in terms of s.68 of the Act however as that figure fell well short of the appellant's estimate of $80,000, the hearing of the appeal proceeded. Pursuant to s.68(3) of the Act the reduced valuation becomes the valuation appealed against.
Mr Hazell, who appeared on his own behalf, said that he had been told by an officer of the Chief Executive's department that property values normally doubled every seven years. On the basis of that advice he ascertained that as the unimproved value of the subject land in 1984 was $10,000 it would at 1 October 2005 be $80,000. That is not a sound basis for valuing land which must be valued in accordance with proper principle, generally having regard to evidence of the value of comparable lands in the vicinity of the subject property.
The value of the subject land for the respondent was supported by a valuation by Robyn Joy Merritt, a registered valuer who valued the land as a rural home site. Mr Hazell contended that the land ought to be valued on the basis that it is "exclusively used for the purposes of … farming" in accordance with s.17 of the Act:
"17 Exclusive use for single dwelling house or farming
(1) In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or 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 subsection (1) –
farm improvements includes appropriate sheds, other structures, facilities, farm plant and land development for the particular farming business but does not include a dwelling or car accommodation.
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; and
if the business or industry represents the dominant use of the land, and –
(c) has a substantial commercial purpose or character by -
(i) having an average gross annual return, calculated over a 3 year period, of at least $5,000; or
(ii) if the business is the establishment and harvesting of native or non-native forests – having an average anticipated gross annual return, calculated over the period from establishment to harvesting, that is usual for the particular species of tree, of at least $5,000; or
(iii)if the business is the maintenance and harvesting of native forests – having an average anticipated gross annual return, calculated over the period from the start of maintenance to harvesting of the particular species of tree – of at least $5,000; or
(iv)having -
(A) a minimum value of farm improvements or plantings of forest or orchard trees of $50,000; and
(B)the appearance of being maintained for farming or expenditure on crops, forest trees, maintenance of farm improvements, livestock or orchard trees; and
(d) is engaged in for the purpose of profit on a continuous or repetitive basis.
The legislative intent of this provision (as it relates to farming) is that land used for farming is to be valued on that basis even though it may have a higher use potential and thus a higher value in the market, when viewed as unimproved. For a property to attract such a concessional valuation it needs to satisfy one of the criteria in s.17(2)(c)(i)(ii)(iii) or (iv), as well as s.17(2)(d). In Ms Merritt's opinion and in the submission for the Chief Executive, the subject land is not "engaged in for the purpose of profit on a continuous or repetitive basis" (s.17(2)(d)). There is therefore no requirement for me to consider the various alternative criteria found in s.17(2)(c).
Mr Hazell gave evidence that he had not generated an average gross annual return of at least $5,000 over a three year period but said that the effect of drought, the beef market, and the price of replacement cows was such that he was not able to stock the subject land with sufficient productive cattle on an ongoing basis. He started grazing cattle on the land in the early 1990's or perhaps in 1989 having bought 10 cows and a bull in the first year and breeding up to 34 head of cattle, on a mixed herd basis. His strategy was to sell steers in the second year and to keep the heifers in order to increase the number of breeders. Owing to the effect of drought, and the inability of the property to sustain the stock on it he had to reduce the number of head grazing there to about 12 head in 2001, 10 in 2002, 7 in 2003, 5-6 in 2004 and 5 together with a couple of cows in 2006.
Mr Hazell said that he had spent a considerable amount of money on the land both in terms of structural improvements including the relocation of a house there, fencing and the establishment of improved pastures. Unfortunately the pastures suffered at the hands of drought, combined with grazing. He has advice from a past colleague whom Mr Hazell considers to be expert in such matters, that he only needs 12 cows to make the property viable as a farm, assuming no downturn in the form of drought or in the beef market. He was unable to produce a business plan or to be able to outline how the property would be viable on that basis or for that matter, on any other basis. He has recently carried some horses on the land. He was given a mare in foal and hopes horses will generate some income for the property in due course. Nevertheless he cannot foresee when he might be able to make a profit.
The property has an area of 13.53 hectares only and has no natural permanent water from Bagley Creek though has two reliable dams and a water allocation of 22 megalitres from the Eton Irrigation Scheme. The water allocation can be used to irrigate the improved pastures. Ms Merritt expressed the view that whilst a viable grazing enterprise may possibly be capable of being established on the subject land, she had no suitable evidence to that effect. She said that intensive management of the property by way of controlled grazing methods may allow such an enterprise to be established, but that this would require a full time commitment to the property –something that Mr Hazell said he was unable to give.
Ms Merritt said that she had not come across a lot of the size of the subject property which supported a viable grazing operation. She thought that 40 to 50 head of cattle would be needed before a viable enterprise might be established, whereas in her opinion the carrying capacity of the subject land would probably be about 6 head throughout average seasons.
The language of section 17(2)(d) as then part of a differently constructed s.17, (though relevantly similar), was considered by the Land Appeal Court in Peckv Chief Executive, Department of Natural Resources (1997) 18 QLCR 59 at 69:
"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. …"
Although the Court said in Peck that s.17(2)(d) "concerns an exclusively subjective matter" I do not understand that to mean that a mere assertion by a landholder that he hopes to make a profit will satisfy the provision. I say that for two reasons. First, for a landholder to honestly hold the view that his purpose is one of profit-making he would need to have formed that view based on objective criteria such as one might find in a business plan; past performance on the property; or comparison with a similar property. The possession of an unjustified hope for a profit would not, in my view, amount to a belief that the undertaking will produce a profit. That understanding is, I think, consistent with Whackett v Chief Executive, Department of Lands (1995) 15 QLCR 311 where at 330 – 331 the Land Appeal Court referred to the need for proof of an intention to gain a profit.
Second, in the words quoted from Peck the Court expressly includes objective criteria by reference "those who engaged in the business or industry intermittently". I formed the view on the evidence that Mr Hazell's management of the property may be thus described. Presently and for the foreseeable future he will not be in a position of being able to manage the property in the intensive manner by which, in Ms Merritt's opinion, a profitable business may be possibly established. In Whackett at 331 the Land Appeal Court said:
"The question whether a particular business or industry is engaged in on a continuous or repetitive basis must be answered in light of the factual circumstances surrounding the business, or businesses of that type. Some types of farming may require frequent and intensive amounts of activity while in other cases "the activity may be intermittent with long intervals of quiescence in between" (American Leaf Blending Co v Director-General of Inland Revenue [1978] 3 All ER 1185 at p.1189 per Lord Diplock, also Bartholomew v The Valuer-General (1978) 5 QLCR 253 at p.259."
Mr Hazell has not convinced me that intermittent management of the type he has undertaken thus far would be likely to lead to a profitable grazing venture on the land.
In Libella Dion Pty Ltd v Chief Executive, Natural Resources (1997) 17 QLCR 67 the words "on a continuous or repetitive basis" were closely considered. The following quotation is taken from p. 84 of that decision:
"I note that in clause (d) of the definition of “farming” the statute uses the present tense, that is, “is engaged”. It follows that in considering this element of the s.17 definition it is appropriate to have regard to not only the history of the use of the land and its past profitability, but a prospective view must also be taken. Indeed, I would have thought that it is the prospect of a continuity in profit that is the hallmark of being a business. If on 1 January 1995 one is engaged “in a business or industry”, of the types mentioned in s.17(2), “for the purpose of profit on a continuous or repetitive basis”, one should be able to demonstrate the prospect of a profit emerging or continuing for the foreseeable future. Such a prospective view may be amply supported by evidence of a strong history of business management and trading where such is available and where there is no evidence which leads to a conclusion that the future will be other than a continuation, or possible growth of the enterprise. In cases where a profit has yet to be produced by the enterprise or where it lacks sufficient trading history, there will be a greater need for evidence (other than evidence of an historical nature) which indicates the continuation of the enterprise and the prospect of future profits. The present case is one of that type. It has traded since the year 1992-93 only and, as such, does not have a strong history of management and profitability which might indicate what the future holds. …"
In Mr Hazell's case he has neither pointed to a history or to a business plan of even the rudimentary type which might satisfy s.17(2)(d).
The sole ground of appeal agitated by Mr Hazell related to the question of the application of s.17 of the Act to the subject land. He did not challenge the valuation of Ms Merritt other than on that basis. Accordingly, the appeal is dismissed and the valuation of the subject land is affirmed in the amount of $160,000.
RP SCOTT
MEMBER OF THE LAND COURT
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