Hughes v Department of Natural Resources and Mines
[2005] QLC 7
•28 January 2005
LAND COURT OF QUEENSLAND
CITATION: Hughes v Department of Natural Resources and Mines [2005] QLC 0007 PARTIES: Kelva D Hughes and Richard B Hughes
(appellants)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO: V2002/0841 DIVISION: Land Court of Queensland PROCEEDING: An appeal against an unimproved valuation DELIVERED ON: 28 January 2005 DELIVERED AT: Brisbane HEARD AT: Clermont MEMBER: Mr JJ Trickett, President ORDER: The appeal is dismissed, the valuation of Three Million Two Hundred Thousand Dollars ($3,200,000) applied by the respondent is affirmed. CATCHWORDS: Unimproved value - Factors affecting valuation - Direct comparison with sales - Valuation of Land Act 1944 APPEARANCES: Mrs KD Hughes for the appellants
Mr K Fisher, Crown Law, for the respondent
This is an appeal by landowners against the unimproved value applied to their land in the Shire of Belyando, by the Chief Executive, Department of Natural Resources and Mines (the respondent) as at 1 October 2001.
Background
Mr and Mrs Hughes are the owners of a property known as "Wentworth", described as L4DC167:GHFL12/2554: Parish of Martyr and L2DC184:GHFL12/2557: Parish of Martyr and L7DC99: Parish of Martyr, containing an area of 27,207.528 ha. As at 1 October 2001, the respondent applied an unimproved value to that land of $3,200,000 (or $117 per ha), under the provisions of s.37(1) of the Valuation of Land Act 1944 (the Act). Mr and Mrs Hughes objected against that valuation and subsequently appealed to the Land Court, advising that their estimate of the unimproved value was $1,740,000.
The Notice of Appeal contained seven grounds of appeal relating to (i) water shortage, (ii) unreliable rainfall, (iii) restrictions to run-off, (iv) location of water and distribution; (v) soil salinity, (vi) soil type and (vii) physical location. In a written statement supplemented by oral evidence, Mrs Hughes addressed those grounds of appeal, placing particular emphasis upon some of them.
The Subject Land
"Wentworth" is situated approximately 30 km from Moranbah and 77 km from Clermont in a direct line. However, according to Mrs Hughes, actual road distances are 80 km from Moranbah and 125 km from Clermont. Access is by means of the formed gravel Wuthung Road which, according to Mrs Hughes, is maintained to the end of the school bus run, with the balance being graded only infrequently.
According to the report tendered by the respondent's valuer, Mr David Doyle, the property comprises:
2,000 ha (7%) of crop assisted scrub grazing, comprising better brigalow gidyea scrub suitable for cultivation;
3,000 ha (11%) of crop assisted downs grazing, comprising better open to lightly timbered downs country with black soils;
16,808 ha (62%) of good to fair scrub grazing, comprising cleared brigalow, gidyea, yellow wood and sandalwood with a area of poorer country to the north timbered with boree; and
5,400 ha (20%) of downs grazing, comprising open to lightly timbered downs country with black soils.
The property is used for grazing and a small amount of cultivation.
The Relevant Legislation
The responsibilities of the respondent in valuing the subject land are set out in the provisions of the Act. The respondent is required to make annually, or periodically, a valuation of all land in a local government area: s.37. For the purposes of the Act, the valuation of each parcel of land is to be the "unimproved value" of that land, which is defined to mean in relation to improved land, the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements on that land did not exist: s.3(1).
The Act thus requires the respondent to ascertain the unimproved market value of each parcel of land as at the date of valuation, assuming that there were no improvements on the land, but also assuming the existence of all present facilities and amenities external to the land, such as roads, power, access and the like.
The "market value" of land was defined by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. In that case, the High Court found that the value of land is determined by the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are aware of all the circumstances which might affect the value of the land, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding facilities, the then present demand for land and the likelihood of a rise or fall in the value of the property. (See Griffith CJ at 432 and Isaacs J at 441).
It has been well established that the unimproved value of land is ascertained by reference to prices that have been paid for similar parcels of land. Pike J said in Waterhouse v The Valuer-General (1927) 8 LGR (NSW) 137 at 139 that:
"Land in my opinion differs in no way from any other commodity. It certainly is more difficult to ascertain the market value of it, but - as with other commodities - the best way to ascertain the market price is by finding what lands comparable to the subject land were bringing in the market on the relevant date - and that is evidenced by sales."
However, there are many areas of the State, such as the area in which the subject land is situated, where there is essentially no unimproved land, as all land has been improved to a greater or lesser extent. Therefore, there are no sales of unimproved land which can be used as a basis for unimproved value. In such cases, it is necessary to have regard to improved sales. The use of improved sales in establishing unimproved value was considered by the Land Appeal Court in The Valuer-General v Marano (1978) 5 QLCR at 194 and at pages 200-201 the Land Appeal Court said:
"It is well established that the best way to ascertain the unimproved value of land is by applying to it sales of unimproved, comparable, lands which took place reasonably close to the date at which the valuation is to be made. But in many districts it is impossible to obtain sufficient unimproved sales to form a sound foundation, and it therefore becomes necessary to analyse sales of improved lands for the purpose of ascertaining, as far as is possible, what part of the purchase price of the sale property relates to improvements and what part is attributable to the land itself."
That was the process adopted by the respondent in valuing the subject land.
The Respondent's Valuation
Mr Doyle gave evidence that the sales throughout the district indicated that the market for rural land had increased sharply around August/September 2000, due to favourable market conditions, including low interest rates, high cattle prices and relatively good seasons. He added that the most sought-after country was fattening country, in particular scrub country. According to Mr Doyle, this interest filtered down into forest and downs grazing country, but not to the same extent, while cultivation country was less in demand, with some scrub cultivation properties reverting to grazing.
According to Mr Doyle's evidence, the respondent's valuers analysed the sales in the area and he concluded that the most comparable sales to the subject land were the properties known as "Yarmina" and "Charlton Park". He defended the respondent's valuation of the subject land by direct comparison with those two sales.
"Yarmina" is situated approximately 140 km north-west of Clermont and contains an area of 23,700 ha. In November 2000, it sold for $5,750,000 and was analysed to show an unimproved value of $1,421,672. As at 1 October 2001, the respondent applied an unimproved value to that land of $1,200,000, or $50.60 per ha. That represented an increase on the previous valuation of 2.14 times.
According to Mr Doyle, "Yarmina" comprises approximately 2,900 ha of coolibah, 8,800 ha of fair to poor scrub, 1,120 ha of open to lightly timbered downs, 3,400 ha of fair forest and 7,480 ha of desert. The property had been extensively developed, with approximately 15,000 ha pulled, burnt and grassed. In comparing "Yarmina" with the subject property, Mr Doyle concluded that on a per ha basis overall, "Yarmina" was inferior because of its inferior class of country and because of its location.
"Charlton Park" is situated approximately 61 km north of Clermont with good access. It contains an area of 10,471.28 ha. In April 2001, it sold for $4,200,000 and was analysed to show an unimproved value of $1,817,567. As at 1 October 2001, the respondent applied an unimproved value to that land of $1,600,000, or $153 per ha. That represents an increase from the previous valuation of 2.22 times.
According to Mr Doyle, "Charlton Park" comprises 450 ha of crop assisted scrub cultivation, 350 ha of crop assisted downs grazing, 200 ha of downs grazing, 7,000 ha of good developed brigalow scrub grazing and 2,471 ha of fair forest grazing, comprising ironbark country. The property was purchased by owners of an adjoining property. In comparing "Charlton Park" with the subject property, Mr Doyle concluded that on a per ha basis it was superior because of its superior scrub country and because it does not have the water problems associated with "Wentworth". It is also much smaller.
The appellants had not attempted to analyse any sales in the area. Their estimate of unimproved value of $1,740,000 was based on advice which they had received from Agforce, but Mrs Hughes was unaware of the basis for that advice.
However, it is clear from their grounds of appeal that the appellants are not challenging the basis for the valuation. Their appeal is based solely upon their contention that the respondent has not fully taken into account the various disabilities associated with the subject land.
The Case for the Appellants
Ground of appeal No. 1 related to the water shortage on "Wentworth". Mrs Hughes gave evidence that there was no natural water, nor any underground water on the property. It is totally reliant upon dams, of which there were about 18, which range in size from about 10,000 cubic yards up to 70,000 cubic yards.
Mrs Hughes gave evidence of the difficulties of relying upon such a source of water. A major problem is that heavy rainfall is required to fill the dams, but rainfall appears to be diminishing and the timing and frequency have changed. She said that as most of the property has been developed, it takes more rain to create run-off because of the improved soil structure and ground cover; developing country with improved pastures increases the carrying capacity, but inhibits run-off to fill dams.
According to Mrs Hughes, there is only one main watercourse through the property. It seems that a neighbour upstream of "Wentworth" has constructed a very large dam (stated as 250,000 megalitres in the Notice of Appeal). Being upstream, this dam will fill before any water flows onto the subject land and Mrs Hughes was concerned that even more rainfall will be required to fill the dams on "Wentworth".
Mrs Hughes went on to say that the water storages need to last four years to compensate for the years with low rainfall when there is no run-off. There were also problems with water quality from suspended clay in some of the dams, which impacts on the stock. She added that watering by means of dams required additional expenditure on an extensive pipeline infrastructure and a full-time employee to ensure that the stock have water.
Mr Doyle gave evidence that he acknowledged that "Wentworth" had particular problems with water because it was near the top of the watershed. He had made an allowance of 15% in the valuation to recognise the problem; the only higher allowance of 20% was made to the valuation of the appellants' adjoining property "Wuthung", which was, he said, right at the top of the watershed. Mr Doyle added that normally such problems were recognised by an allowance of 2.5%, or perhaps 5% reduction in the valuation.
The appellants' grounds of appeal 2, 3 and 4 (unreliable rainfall, restrictions to run-off, location of water and distribution), were all related to the water difficulties suffered by the subject land.
Ground of appeal 5 related to soil salinity. In her oral evidence, Mrs Hughes confirmed the statement in the grounds of appeal that 3,500 ha of "Wentworth" is affected by salinity. She added that this type of country grows fuchsia bush, which can be poisonous to cattle.
Mr Doyle acknowledged that there was an area of salinity on the subject land, but pointed out that other properties in the area were similarly affected. He made no specific allowance for it.
Ground of appeal 6 related to soil type. It stated that 6,000 ha of second-rate country grew only forest Mitchell, white spear and lighter grasses. It was an area susceptible to parthenium which severely impacts on stocking rates to control the problem. However, in her statement of evidence, Mrs Hughes said that about two-thirds of the property had native grasses that require spelling to enable a body of feed to be established. In her oral evidence, she said that at least part of that country had been sown to buffel grass but did not respond as well as the good scrub country.
Ground of appeal 7 related to the physical location of the property, emphasising the distance to grain depots, cattle markets/abattoirs, schooling, recreation and shopping, as well as affecting family life and the ability to attract staff. In her written statement Mrs Hughes described the property as isolated, with actual road distances being 80 km to Moranbah and 125 km to Clermont, towns with diminishing services for rural landowners. She particularly emphasised that there was no schooling available, the only option to home schooling being boarding school for children at a very young age. This isolation also impacted on the ability to attract and retain staff.
In her oral evidence, Mrs Hughes elaborated further, stating that the property was 245 km by road from Mackay and about the same distance from Emerald. However, the business centre for the appellants was Mackay, although the nearest doctor was at Moranbah.
Conclusion
Although the appellants nominated seven grounds of appeal, essentially those grounds can be refined to three:
· difficulty in obtaining water;
· country type and disabilities;
· location and impact of isolation.
The appellants' Notice of Appeal and Mrs Hughes' written and oral evidence detail the problems associated with having no natural water and no underground water on "Wentworth". The property is entirely reliant upon large dams which only fill if there is sufficient heavy rain to run off the country which is largely of such a nature that it needs a heavy soaking before there is any run-off. Ground cover and cultivation only exacerbate the problem. Any further development such as blade ploughing, further inhibits the run-off necessary to fill the dams. It is therefore necessary to treat regrowth by other means.
However, Mr Doyle acknowledged the water problem on the subject land. He attributes the lack of natural and underground water to being close to the top of the watershed. He recognised the problem by discounting the valuation by 15%, which was close to the highest discount that had been allowed. Normally discounts for disabilities are in the range of 2½% to 5%.
The appellants, through Mrs Hughes, contend that 15% is not enough. They claim that further discount should be allowed.
With regard to the second "ground of appeal", country type and disabilities, the appellants have argued that the appeal property is largely developed, so that the legislative restrictions on further vegetation development are not a major concern. However, maintenance was an ongoing problem; blade ploughing is effective in controlling regrowth, but it inhibits run-off. They allege that two-thirds of the property has not responded well to buffel grass and consists largely of natural grasses, which require careful management and spelling in order to be productive. This, together with an area of 3,500 ha affected by salinity, as well as infestation by parthenium and other species, some of which are poisonous, have reduced the carrying capacity considerably.
Mr Doyle gave evidence that he was aware of these problems, but indicated that they were common throughout the area. He had made no specific allowance for them.
The third "ground of appeal" is concerned with the physical location and isolation of the property. This was a major concern to the appellants both from a personal and a business point of view. However, Mr Doyle would have been well aware of the location and isolation as he had inspected the property.
Therefore, it appears to me that Mr Doyle was aware of the matters raised in the grounds by the appellants. The major ground concerning lack of water, had been allowed for with a specific 15% discount to what would otherwise have been the valuation of the property. Although Mrs Hughes thought that it was not enough, there was no evidence to indicate just how much less an informed prudent purchaser would have paid for the property if aware of that water disability.
The appellants did not challenge the analyses of the two sales which Mr Doyle referred to in support of his valuation. Although Mrs Hughes did not know anything about "Yarminda", she was aware of the background to the sale of "Charlton Park". She said that the property had been on the market for at least two years and had only sold during the drought to the adjoining owners when there was no agistment available. She considered, therefore, that they had paid more for the property than would a prudent purchaser. In addition, she said that "Charlton Park" had an attractive homestead which would have been an important selling feature. It is now occupied by the owners' daughter and son-in-law. Although she did not challenge it in detail, she questioned whether Mr Doyle's apportionment of approximately $90,000 to the homestead and surrounds was appropriate.
The authorities indicate that as a basis of valuation, adjoining owner sales must be treated with some caution, as an adjoining landowner may well pay more than market value for land. However, it is well established that such sales should not be automatically rejected (see for example Barber v. Valuer-General (1969) 17 LGRA 409), unless it can be proved by reference to other sales, that the sale price was excessive. Here, no such evidence was produced.
As for the country on "Charlton Park", Mrs Hughes stated that although it had some light country, it was largely superior scrub country and on a per ha basis would be superior to the subject land. It is located on Logan Creek, a major watercourse, which is a safer catchment for dams. Furthermore, it is not entirely dependent on dams, as its water supply is supplemented by two bores.
Mr Doyle has recognised that on a per ha basis "Charlton Park" is superior to the subject land as he has applied a valuation of $153 per ha to that property, compared with $117 per ha to the subject land. He has assessed the carrying capacity of "Charlton Park" at 1,800 head, or one beast to 5.8 ha. In his oral evidence he said the carrying capacity of the subject land was one beast to 6 or 7 ha. Also it seems that he has made allowance for the size difference. In his oral evidence he stated that if "Charlton Park" was the same size as the subject land, the valuation per ha would have been around 10% less. In my view, that is acknowledging that in applying the valuation to the subject land, he made an allowance for its size.
Having regard to the fact that the valuation was also adjusted by an allowance of 15% for the water disability, a comparison between the valuation applied to "Charlton Park" and that applied to the subject land, seems to me to indicate that the relativity is appropriate.
Under s.45(4) of the Act, the appellants are limited to the grounds stated in their appeal and have the burden of proving any and every such ground. In this case, I am of the view that after a consideration of all of the evidence, the appellants have not proved their grounds of appeal. Therefore, the appeal must be dismissed.
Order
The appeal is dismissed, the valuation of Three Million Two Hundred Thousand Dollars ($3,200,000) applied by the respondent is affirmed.
JJ TRICKETT
PRESIDENT OF THE LAND COURT
0
1
0