Holder v Chief Executive, Department of Natural Resources and Mines
[2001] QLC 78
•19 July 2001
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BRISBANE
19 JULY 2001
Re: AV98-321 and AV98-322
Appeals against Unimproved Valuations -
Valuation of Land Act 1944
Local Government: Johnstone Shire
DK and K Holder
v.
Chief Executive, Department of Natural Resources and Mines
D E C I S I O N
Mr and Mrs Holder own land fronting Mena Creek Road and McFadden Road about 10 km westerly of the township of Mena Creek and about 28 km south-westerly of Innisfail.
The land is described as follows:(1)AV98-321 - Lot 187 on Plan NR3479 and Lot 218 on Plan NR4279 being Special Lease 264110 over Camping and Water Reserve R588, Parish of Japoon, containing a total area of about 83.74 hectares.
(2)AV98-322 - Lot 188 on Plan NR3479, Parish of Japoon, containing an area of 116.7 hectares.
As at 1 October 1997, the unimproved valuations of the chief executive were as follows:
(1) AV98-321 - $76,000
(2) AV98-322 - $86,000.
The appellants' estimates of value as stated in the Notices of Appeal were $63,000 and $72,000 respectively. At the hearing of the appeals Mr B Gillan, Solicitor, appeared on their behalf. Evidence was led through Mr Holder to the effect that the unimproved values should have been $63,000 for each parcel of land if valued separately.
The Court was advised by Mr K Fisher, Barrister, who appeared on behalf of the respondent chief executive, that, pursuant to s.34(1)(a) of the Valuation of Land Act1944, the parcels were required to be included in one valuation as the chief executive had not otherwise directed. On that basis, evidence was to be led through the chief executive's valuer that the single valuation would be in the rounded amount of $160,000.
The appellants' revised estimate on that same basis then became $113,400. Mr Holder's evidence was that about 15 years ago both parcels of land had been valued under the Valuation of Land Act in the same amount. At that time his father had owned the lands and had been of the mistaken belief that the two subject parcels had been valued together. He had lodged a single appeal in the Land Court but as it happened that had been only against the valuation of the parcel which included Lot 187. The appeal had been successful and that valuation reduced. However the valuation for Lot 188 had remained unaltered. It was Mr Holder's opinion that both parcels were of about equal value and the correct relativity had never been reinstated subsequent to the Land Court decision in relation to Lot 187.
The amalgamation of parcels into one valuation has removed the necessity to consider the question of relativity of the individual valuations now appealed against.
In the grounds of appeal reference was made to the nature of the country comprising mainly steep hills and ridges, inaccessible in parts to tractors or dozers, causing management and maintenance difficulties and inefficiencies. Four intersecting creeks/gullies were described as "swampy" some of which being bottomless and unsuitable for cattle to cross. Cattle require access to permanent water in Mena Creek on the northern side of Mena Creek Road and it had been necessary for grids to be installed in that road. Rather than crossing the gullies cattle also use Mena Creek Road to gain access from one ridge to another.
In Mr Holder's opinion there was an area of about 3 hectares of stony flat ground in the north-western section of Lot 187 with another flat area of about 2 hectares alongside but intersected by a steep spring-fed gully. Reference was made to the soils throughout the property being generally of a stony nature or of a red schist type susceptible to erosion and unsuitable for arable use. Some improved pasture had been established where topography allowed but heavy fertilisation and reseeding was necessitated as a result of high local rainfall and resultant leaching of soils.
Produced through Mr Holder were copies of sections of an agricultural land suitability map (Exhibit 7) and a CSIRO soil classification map (Exhibit 16). This mapping indicated that some land on the aggregation was suitable for arable use but the majority as being non-agricultural land.
The valuations appealed against had been made by Mr ML Donnelly, a registered valued employed by the chief executive.
Mr Donnelly described the Mena Creek Road access as being of gravel and bitumen construction from the township of Mena Creek and subject to flooding. Mr Holder's response to that description was that the bitumen section from Mena Creek township ends about 6 km from the property then was of "rough" (a description with which Mr Donnelly disagreed) single-lane gravel.
Mr Donnelly described Lot 187 and Lot 218 as comprising "approximately 8 hectares (10%) of easy sloping good grazing country; approximately 66 hectares (79%) of moderate to steeply sloping grazing country broken by gullies and with some stone the balance 9.74 hectares (11%) of green scrub steep slopes and gullies". In his oral evidence he described Lot 188 as being generally steeper country and in his written report the description was "approximately 10 hectares (9%) of easy sloping good grazing country; approximately 90 hectares (77%) of more moderate to steeply sloping grazing country broken by gullies and with granite outcrops and the balance approximately 16.7 hectares (14%) of green scrub, steep slopes and gullies". He said there was one permanent gully on Lot 188 with the other gullies being seasonal. He acknowledged that the gully lines on Lot 188 were inclined to be boggy.
Access along McFadden Road was described as being formed gravel for about 500 metres off Mena Creek Road then a "rough gravel track and wheel tracks, part subject to washouts during the wet season".
In the individual assessments appealed against, Mr Donnelly's evidence was that he had valued both parcels as having highest and best use as grazing land applying $965 per ha to 74 hectares of Lots 187 and 218, $785 per ha to 100 hectares of Lot 188 and $450 per ha to the "balance" areas on each parcel.
Then, in amalgamation, the valuation placed before the Court was as follows:174 ha @ $860/ha $149,640
Add
Balance land 26.44 ha @ $450/ha $11,898
$161,538
Adopt $160,000
($800/ha)
Mr Donnelly's separate valuations had "been determined by direct comparison. Specific regard has been had to the three sales on the attached schedule, which were analysed to reflect grazing land values for the 1 October 1997 revaluation."
Each of the three sale properties is used for grazing purposes. The subject land had been valued "as land exclusively used for farming pursuant to the provisions of Section 17 of the Valuation of Land Act 1944".
In s.17 "farming" means, inter alia, "the business or industry of grazing".
Brief details of the three sales which Mr Donnelly had included in his valuation basis were as follows:
49.39 hectares situated Coquette Pont Road , Innisfail, sold 24 August 1996 for $125,000, analysed to show an unimproved value of $79,380 ($1,607 ha). This land was described as comprising 17 hectares (34%) low lying flood prone cleared coastal forest country; 27 hectares (55%) of tea tree and pandanus swamp and 5.29 hectares (11%) of mangrove country. The sale had been analysed to show an unimproved classification of $3,812 per ha for the 17 hectares which had been cleared to improved pasture and $450 per hectare for the balance areas. The valuation applied as at 1 October 1997 was $64,000 ($1,300 ha) rounded from 17 hectares at $2,910 per hectare and 32.39 hectares at $450 per ha.
The land is situated on the fringe of Innisfail with gravel road access subject to flooding and has town water available. Mr Donnelly's evidence was that the sale price was considered high "from a pure grazing perspective". He pointed out that the sale land comprised different topography to the subject lands and that a premium might have been paid for its close proximity to Innisfail as well as its adjacency to an unfenced section of about 12 hectares of pasture land owned by the Council. The land had resold for $130,000 in February 1999 and that was seen as strong support for Mr Donnelly's opinion that the market for grazing land had remained relatively stable in the period subsequent to the valuation date relevant to this matter.
In comparison, Mr Donnelly commented that "the sale property is smaller than the subject and as such reflects a higher rate per hectare."
Mr Holder had found it difficult to make a comparison between the sale property and the subject land because of the superior access, location, soil types and the heavier carrying capacity potential.
(2)
"Menavale", of 352.1 hectares situated Mena Creek Road, Japoon, adjoining part of the subject land's western boundary, sold 8 November 1995 for $1,100,000, analysed to show an unimproved value of $511,350 ($1452 ha). The sale property was described as comprising 257.4 hectares (73%) of easy broken flats to easy moderate ridges to steep mountain spurs and 94.7 hectares (27%) of green scrub, deep gully lines and steep ridges. The unimproved analysis was "broken up as 257.4 hectares at $1895 per hectare and 94.7 hectares at $250 per hectare". The applied valuation classification was $880 per hectare and $250 per hectare respectively rounded to a total $250,000 ($710 ha). Mr Donnelly described "Menavale" as having been developed for breeding and fattening of cattle having generally "superior quantity and quality of grazing land to that of the subject" with similar water supply, similar situation, access and services. He commented that while the sale took place almost two years prior to the relevant date of valuation it "still gives support to grazing land values in Johnstone Shire at the relevant date". He said it was included "as support evidence due to the distinct lack of grazing sales which took place during the relevant period. 'Menavale' is considerably larger than the subject" (as individual parcels) "hence has a greater area of grazing land. The subject (sic) has some similar country to the subject but generally the sale property has better quality grazing country."
Mr Holder said that "Menavale" had been earlier put to auction unsuccessfully, but had run 1,000 head of cattle for a short period on agistment before going to an abattoir, and had been advertised as having that carrying capacity potential. However the purchasers had found the carrying capacity to be around 350 to 400 head. In comparison the subject property was capable of carrying no more than 200 head in his experience. According to Mr Holder the property "Menavale" had once been used as a banana farm and still had an irrigation licence and no flooding problems or water shortages. He said that "Menavale" had more flat country including heavy river flats and was an overall superior grazing property and, with multiple titles, had some potential to be sold as separately surveyed individual lots.
Mr Donnelly had no knowledge of the property ever having been used for banana farming and said that the irrigation licences were for pasture purposes.
(3)
61.71 hectares, Palmerston Highway, sold 24 September 1998 for $250,000, analysed to show an unimproved value of $74,444 ($1,206 ha) The sale land was described as comprising 55 hectares (89%) of moderate to parts steeply sloping, cleared grazing country with approximately 6 hectares (11%) of timbered gully lines intersecting the property. The unimproved analysis was "broken up as 55.4 hectares at $1,293 per hectare and 6.3 hectares at $450 per hectare". The applied classification of values at the relevant date of valuation was $1,285 per hectare and $450 per hectare respectively.
Mr Donnelly commented that in comparison with the subject lands (before amalgamation) the sale land was superior in terms of situation and access with an inferior natural water supply, similar services and slightly better quality grazing land in that it was less sloping and less broken and in comparison with each individual subject parcel "superior in terms of grazing land rate per hectare".
Mr Holder knew the locality of the sale land and described it as comprising red volcanic soils. Mr Donnelly conceded that to be an accurate description of the soil types.
Although the sale took place almost one year after the relevant date of valuation, Mr Donnelly was confident that, as evidenced by the resale of Sale 1, the market for grazing land had been stable in the period subsequent to the date of valuation and at least until the date of the next valuation in the year 2000.
It is clear that there was a dearth of sales evidence of land with highest and best use potential for the purpose of grazing. Mr Donnelly's original valuations had concentrated on the physical attributes of the individual parcels. He had inspected the land and was comfortable with the relativity which had resulted from the valuations as applied to each parcel as well as the comparisons with the sale lands. There was no evidence led through Mr Holder which would have proved those individual valuations to be wrong even though the sales evidence was not ideal.
As I understood the overall evidence Mr Donnelly had endeavoured to maintain throughout Johnstone Shire the relativity which had previously existed, not only between the valuations of grazing lands but the relativity which had previously existed between arable and grazing lands. He had identified a trend suggesting a 20% increase for the arable lands while the weaker sales evidence for the grazing lands overall, showed a minimum increase of 20% (Sale 3) then much higher increases for Sales 1 and 2. However, it was his opinion that the poor quality arable lands were intrinsically more valuable than the best quality grazing land with no arable potential. He had not been prepared, on the state of the evidence, to alter the previously existing overall relativity by altering grazing values by more than the increase which had been applied to the values of arable lands. As a consequence, although Sales 1 and 2 showed much higher values than the values applied to those lands, he regarded those sales as "support" evidence to Sale 3.
Although there had been no evidence forthcoming from the appellants as to the added value of timber treatment, Mr Donnelly was subjected to some intense cross-examination as to the allowances made for timber treatment in his sales analyses. Mr Gillan sought to establish from Mr Donnelly, with little success, the specific basis for the timber treatment allowances on the several sales and the relationship between those allowances and determinations made by the Land Court in previous hearings where timber treatment had been an issue. Mr Donnelly's evidence was that, in analyses of sales for the purpose of establishing revaluation bases in the northern valuation district generally, departmental valuers had consulted and given consideration to "reasonable" allowances for the treatment of various classes of country types and their usage, based on spreadsheet analyses of actual costs obtained for various components of the timber treatment process. He had been aware of the previous Land Court decisions as referred to by Mr Gillan and said he was confident that the allowances made for timber treatment as at the relevant date of valuation were greater than a result produced by application of inflationary trends to those earlier determinations.
Valuation Allowance for Size
There was some conflict in Mr Donnelly's oral evidence as to the circumstances when he believed size became a valuation discounting factor for grazing lands. As I understood his oral evidence he seemed to suggest that there was support for an argument that valuation discount for size should only apply to the very large properties in excess of a living area while no allowance should be made at least until a minimum living area was established. Mr Donnelly had interpreted the relatively high level of value shown by the "Menavale" sale as suggesting that no market value discount had been demonstrated in the price paid for that larger property. He conceded that the existence of multiple titles which went to make up the "Menavale" aggregation might have been a factor which enhanced the sale price but on his inquiries the property had been purchased for a specific grazing enterprise.
He had not wished to be drawn on the reasoning behind the valuation actually applied to "Menavale", preferring to maintain the view that the sale "supported" the valuation applied to that land just as it did support the valuation applied to the subject land in amalgamation. However, he did concede that the relativity between the grazing component valuation on "Menavale" and the valuation sought to be applied to the subject land in amalgamation was incorrect. It would follow that either the "Menavale" valuation at $880 per hectare for the 257.4 hectares of significantly superior grazing country was too low, or the 174 hectares at $860 per hectare for the subject land was too high. It seems to me, on the evidence, that the same could be said for the "balance area" valuations at $250 per hectare and $450 per hectare respectively regardless of the identification of the classified components of "balance areas" of 27% and 13.2% of the respective total areas.
Prima facie the evidence provided by the sale of "Menavale" could be interpreted to suggest that in comparison with at least Sale 3, the market provided no, or no significant, discount in value for size. However, there are circumstances, including the quality of country involved and the existence of multiple titles, in a locality where rural residential and hobby farm subdivision has taken place (for example adjacent to the subject land) which cloud the size issue. The submission for the appellants that a 10% discount off the unimproved value of the individual parcels was realistic may have been a convenient approach bearing in mind that originally separate valuations for the individual parcels had issued. However once it has been established that the land qualifies to be valued pursuant to s.17 of the Valuation of Land Act as being exclusively used for the business of farming, then the existence of separate titles is to be disregarded.
The overall evidence, including specific comments in Mr Donnelly's schedule of sales, indicates to me that size has been a factor which has been recognised by him and applied to existing relativities of valuations of grazing lands in this locality. In the absence of cogent conclusive evidence to the contrary, it is not seen as surprising that size is a factor which would influence market value, even of lands with highest and best use for grazing, in a locality where many lots of relatively small size, by commercial grazing standards, are in existence.
Conclusion
The evidence of value shown by Sales 1 and 2 has not been adopted by the respondent as basic evidence of grazing land value, while Sale 3 has. The evidence is that Sale 3 is of land of superior location and quality being inferior to the subject land only in terms of natural permanent water albeit in an area of heavy annual rainfall. It is a parcel much smaller in area than the subject land in amalgamation. Direct comparison of the sale land with the subject land is demonstrably difficult for valuation purposes.
From a relativity perspective, "Menavale" is larger in size with superior quality land in the same locality as the subject land. While the two aggregations are not directly comparable, the valuation exercise involved in comparing like with like is less difficult. For the purpose of the exercise before the Court, equitable comparison has to be made on the basis of the valuation applied to "Menavale" by the respondent in the full knowledge of the sale of that property. There was no evidence to suggest that the valuation applied to "Menavale" had been previously regarded as being out of relativity with other local grazing lands.
All things considered I am unable to accept that, on an overall pro-rata unit of area basis, the subject property should be regarded as superior to "Menavale". All things considered, including the size factor and the relative proportion of "balance areas", I have decided to adopt an unimproved valuation of $700 per hectare overall for the subject land. On Mr Donnelly's approach, that valuation is also "supported" by each of the sales, although the supporting evidence test is of very limited assistance in these circumstances, where equitable relativity between valuations is an important criterion. That aspect will be discussed more comprehensively in the decision relative to another appeal by Mr Holder, AV98-323, also delivered today.
Orders(1) The appeals are allowed.
(2)By consent, it is ordered that, pursuant to sub-s.(1)(a) of s.34 of the Valuation of Land Act1944, the several parcels of land subject of the valuations appealed against be included in one valuation.
(3)The one valuation of the unimproved value of those several parcels is determined in the rounded amount of One Hundred and Forty Thousand Dollars ($140,000) as at 1 October 1997.
RE WENCK
MEMBER OF THE LAND COURT
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