Hunt v Chief Executive, Department of Natural Resources
[2000] QLAC 29
•11 May 2000
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Re:Appeal against a decision of the Land Court - Determination of Unimproved Value -
Warwick City Council (AV99-420)
BETWEEN
Barry R and Ruth L Hunt AND
Chief Executive, Department of Natural Resources
Appellants
Respondent
BEFORE THE HONOURABLE MR JUSTICE MUIR, MR JJ TRICKETT AND DR NG DIVETT
REASONS FOR JUDGMENT - THE COURT
Delivered at Brisbane this Eleventh day of May 2000
This is an appeal by Mr and Mrs Hunt against the decision of the Land Court dismissing their appeal and affirming the determination of the Chief Executive of the unimproved value of their land at $55,000 as at 1 October 1998. In making the determination the Court held that the Hunt's land should not be valued as land used for "purposes of farming" under the concessional provisions of s.17 of the Valuation of Land Act 1944.
The land in question is described as Lot 2 on Registered Plan 224120, Parish of Warwick, County of Merivale, containing an area of 14.2 ha. The property is situated approximately 8 km south-west of Warwick, with bitumen road access and power, telephone and water connected to the property. It is zoned "Rural C" and was described by the respondent's valuer as "easy sloping part cleared forest".
Mr and Mrs Hunt purchased the subject land in early 1998 for $87,000. At the time it was partly cleared and had a dam and some fencing, to which the respondent's valuer attributed $23,854, so that the sale analysed to show an unimproved value of
$63,146. As at the date of valuation (1 October 1998) the Chief Executive applied an unimproved value of $55,000 as a large rural homesite, a figure with which the applicant has no dispute for that purpose.
However, in the Land Court the appellants argued that the land should have been valued at $20,000, not as a rural homesite, but as land used for purposes of farming under the provisions of s.17 of the Act. That section of the Act provides for valuation concessions based on land use. Where the use of a parcel of land qualifies it for valuation under s.17, the unimproved value must be determined disregarding any enhancement in value for purposes other than the one for which the land was used at the relevant date.
Relevantly s.17 provides
"(1) In making a valuation of the unimproved value of land exclusively used 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) -
…
'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,
(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."
Mr WG Major appeared in the Land Court as agent for the appellants and also gave evidence. He also appeared on behalf of the appellants before us.
In the Land Court Mr Major explained that the subject land had been used for the grazing of cattle both before and after its purchase by the appellants. Subsequent to their purchase the appellants had commenced to operate an intensive farming business, together with another leased property, by fattening purchased steers with the intention of
turning off 80 head of steers annually. In Mr Major's opinion, this enterprise would produce an annual net income of $16,000.
Mr Major said that in addition to erecting a house on the property in which the Hunts now live, they had spent $32,775 on machinery, irrigation plant, water facilities, fertiliser and seed.
The respondent was represented in the Land Court by Mr DP Coe, a registered valuer employed by the Department of Natural Resources, who also gave evidence. Mr Coe could not accept that the subject land was used for the purposes of farming, as defined by s.17. In particular, he said there was no evidence to show that the business had a significant and substantial commercial purpose or character or that it was engaged in for the purpose of profit on a continuous or repetitive basis.
The learned Member in the Court below formed the view that the estimated annual turnoff of 80 head of fat cattle could not be achieved, even in conjunction with the leased land, unless crop assistance and supplementary feeding were provided. However, no cogent evidence had been produced to show that the appellants' intentions were realistic and capable of support. The appellants had relied entirely on the oral evidence of Mr Major and he found that there was no, or insufficient, evidence to demonstrate that the business of grazing, at least in the period relevant to the valuation under appeal, was one which had a significant and substantial commercial purpose or character.
Before us, the only issue was whether or not the enterprise conducted by the appellants on the property had a significant and substantial commercial purpose or character, as required by paragraph (c) of sub-s. (2) of s.17.
Mr Major argued that the use of the property represents a very intensive farming activity. He emphasised the expenditure by the appellants of over $32,000 on the purchase of machinery, irrigation equipment, dams, fertiliser and in generally improving the property, claiming that was evidence of their intention of making a profit from the farming business. In his submission it was quite possible to turn off 80 head of cattle a year. There was evidence that the appellants intended to run 30 head at a time and turn them off three times a year. He conceded that the business was at a very early stage at the date of valuation, but he observed that every enterprise has to start somewhere. He submitted that the evidence demonstrated that the purpose of the enterprise was to make a profit and was not simply of a lifestyle or recreational nature.
The respondent was represented by Mr J O'Rourke, Principal Legal Officer of the Department of Natural Resources. Mr O'Rourke submitted that in a case like this where the business was being established and results were not available, other objective evidence, such as a business plan, was necessary to indicate whether the business had a significant and substantial commercial purpose or character. In his submission the terms "purpose" and "character" needed to be determined by objective criteria. Where there were no results available, the Court would need to receive cogent evidence to indicate the intentions were realistic and capable of support. However, as found by the learned Member, no profit and loss exercise had been carried out to show how the business goals might have been achieved. In his submission, the expenditure on improvements falls short of providing that objective evidence and is no substitute for a proper business plan.
In this case the sole ground of appeal is that the property should be valued pursuant to s.17 of the Act. It has emerged that the only real issue is whether the business or industry conducted on the land has a significant or substantial commercial purpose or character.
That matter has been considered by the Land Appeal Court on a number of occasions. Mr O'Rourke referred us to Chief Executive, Department of Lands v. Whackett (1995) 15 QLCR 311 and Peck v. Chief Executive, Department of Natural Resources (1997) 18 QLCR 59. In the latter case, the Land Appeal Court found that unlike the requirements of paragraph (d), which makes the genuineness of the purpose alone a condition 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 that case the Court was considering the valuation of a property upon which was an established enterprise. The owners of the property were conducting an intensive orchard which, despite their best efforts, for each of the financial years from 1987 to 1994, ran at a loss. Despite considerable expenditure the enterprise had never made a profit. In discussing the objective evidence required to demonstrate that the enterprise could be considered to be significantly and substantially commercial in purpose or character, the Court said at p.71:
"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. Such a conclusion was clearly open in this case, as was a conclusion that the appellants' business lacked the requisite significant and substantial commercial character."
The Court then went on to say that where a business or industry is in the process of being established then other objective criteria, such as a credible business plan, would be appropriate. In the present case there is little in the way of objective evidence. There is the unchallenged evidence of Mr Major of the appellants' expenditure on machinery, equipment and improvements. There is also his opinion of the net profits that are possible. However, there is no evidence of the gross returns that could be made and there is no evidence of the costs of running the property. These were matters which weighed heavily on the mind of the learned Member below.
Before us Mr Major attempted to rationalise the expected net return of $16,000 per annum. However, there was no science in his calculations and they were not supported by fact. There were no details of the break-up of cost of the improvements. They were simply submitted as a gross figure.
We have come to the conclusion that the case as presented by Mr Major was long on speculation but short on facts. In the absence of those facts, such as a factually substantiated business plan setting out the expected profit or loss from the enterprise, we cannot find that the appellants have established that the property had at the relevant date a significant and substantial commercial purpose or character.
Mr Major made the point in the course of submissions that not all businesses, even successful ones, resort to business plans. That may be accepted, even if the trend in business is towards increasing sophistication in planning. The relevance of an appropriate business plan for present purposes though is that its very existence assists in showing commercial purpose and character. More importantly, it will tend to provide a ready made framework or guide for the sort of evidence relevant to proving that the subject business meets the criteria in the definition of "farming" in s.17(2).
We can find no reason for disturbing the conclusion of the learned Member below. Accordingly, the appeal is dismissed.
(Muir J) JUSTICE OF THE SUPREME COURT
(JJ Trickett) PRESIDENT OF THE LAND COURT
(NG Divett) MEMBER OF THE LAND COURT
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