Johnson v Department of Natural Resources and Mines
[2003] QLC 39
•2 June 2003
LAND COURT OF QUEENSLAND
CITATION: Johnson v Department of Natural Resources and Mines [2003] QLC 0039 PARTIES: Brian Noel Johnson
(appellant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NOS: RV2001/0561, RV2001/0563 and RV2001/0564 DIVISION: Land Court of Queensland PROCEEDING: Appeals against unimproved valuations under the Valuation of Land Act 1944 DELIVERED ON: 2 June 2003 DELIVERED AT: Brisbane HEARD AT: Ingham MEMBER Mr RP Scott ORDER: · The appeals are allowed
· In Appeal RV2001/0561 the value is determined in the amount of Thirty-four Thousand Dollars ($34,000)
· In Appeal RV2001/0563 the value is determined in the amount of Forty-three Thousand Dollars ($43,000)
· In Appeal RV2001/0564 the value is determined in the amount of Thirty-nine Thousand Dollars ($39,000)
CATCHWORDS: Valuation of Land Act - Sugar-cane farms - Cane Production Area formed part of unimproved value - Sale with adjacency factor not rejected - Sales do not usually move directly in relation to commodity markets APPEARANCES: Mr PE Sheedy acting as agent for the appellant
Mr AP Cradick, Senior Legal Officer, Department of Natural Resources and Mines for the respondent
These three matters arise under the provisions of the Valuation of Land Act 1944 pursuant to which the Chief Executive placed values on lands of the appellant as at a relevant date of 1 October 2000. The appellant contends that these values are too high and consequently has appealed to this Court. By consent the appeals were heard together.
The appellant, Brian Noel Johnson, gave evidence in support of his appeals and he was assisted in that regard by Peter Edward Sheedy. Peter Geoffrey Simmonds, a registered valuer, gave evidence on behalf of the Chief Executive. Mr Simmonds explained that in each case the Chief Executive elected to lead evidence to valuation figures lower than those originally notified to the appellant. The reduced figures resulted from a more fine-grained consideration of the individual values and the relativity between values in the area. The following table sets out the original values of the Chief Executive and those led before me, as well as the values contended for by the appellant.
Appeal No Original Chief Executive Values Chief Executive Before Me
Appellant's Value RV2001/0561 $47,000 $37,000 $18,000 RV2001/0563 $45,000 $43,000 $20,000 RV2001/0564 $42,000 $39,000 $16,000
The properties, the subject of these appeals, are located in an area to the north-west of the coastal centre of Ingham. The properties in Appeal RV2001/0563 and RV2001/0564 virtually adjoin and are separated only by an access road. The properties lie approximately 7 km north-east of Abergowrie township and 35 km north-west of the Ingham CBD. The property the subject of appeal RV2001/0561 is to the west of the other two appeal properties, being located about 43 km north-west of the Ingham CBD.
Each of the subject properties comprises a Special Lease held from the Crown under the provisions of the Land Act 1994.
The grounds of appeal relied upon by the appellant were sufficient to encompass the issues raised in debate between the parties, however I think it fair to say that the appellant was more concerned about the fact that the level of values contended for by the Chief Executive would result in land rental and rates levels that would lead to a continuation of farming on the land becoming unviable. The appellant complained that the rental of leases held from the Crown ought not be based on the value of the land as if it were freehold. That issue is not a matter that I can properly address as it is not the task of this Court to do other than apply statutory law as it is enunciated by Parliament.
The arable land on each subject property is used for cane-growing purposes and the valuations for the Chief Executive were prepared on the basis of that highest and best use. The appellant also approached the question of value on that basis, however submitted that the unimproved value should not include any allowance for the Cane Production Area (CPA)allocated to the land and which allows sugar cane to be grown on it and purchased by the relevant sugar mill, as such a CPA is fully transferable. Mr Simmonds explained that he did not add any particular allowance for the presence of a CPA on each property, but simply recognised that the land had a highest and best use as cane land. Given that the appellant employed a similar approach, I see no issue arising with respect to this matter.
Appeal RV2001/0561 comprises Lot 178 on Plan CWL3263, having an area of 10.5 ha. The land has frontage to El Alamein Road, which is gravel and which is not maintained fully by the local authority. Access is via 40 km of bitumen-sealed road, 1.3 km of formed gravel road and 1.7 km of gravel track.
Appeal RV2001/0563 comprises Lot 131 on Plan CWL2265, having an area of 8.451 ha. The property has frontage to Copleys and Barra Roads and obtains access from Ingham via 30 km of bitumen carriageway and 5 km of formed gravel road. Access to Appeal RV2001/0564 is similar. That property is Lot 140 on Plan CWL2637 and has an area of 7.803 ha.
Lot 178, whilst further from Ingham, has a rail siding 3.5 km away, whilst Lots 131 and 140 have a distance of 6.5 km between them and the nearest rail siding.
Lot 178 comprises undulating coastal forest with stony outcrops and, according to Mr Simmonds, about one-half of the property is prone to inundation and flood-wash damage. There is a creek which adjoins the property along its west and south-west boundaries and flooding from that creek constitutes a disability for the land. The land adjoins a large parcel of land managed by the Wet Tropics Management Authority and is a source of vegetable and animal pests. Mr Simmonds made note of the poor drainage of the land, the small paddock areas and the presence of substantial amounts of stone in the arable soils. The appellant was concerned to emphasise the presence of stone in the soils. There are two ridges which run through the property and there is a concentration of stone in each of these. In addition, however, there are stones described by the parties as "floaters", being stones which come to the surface of the land as cultivation is carried out. The presence of stones makes cultivation difficult and results in less efficient harvesting and damage to machinery. Mr Simmonds was aware of the presence of stone on the property and said that he took this issue into account in striking his value.
The creek adjoining the property flows with a great deal of force following rainfall events of 12 to 15 inches. The creek has a stony bottom and Mr Johnson has bulldozed the stone out in past years in an attempt to contain the flow of floodwater within the creek itself. He has been provided with a permit under the Water Resources Act 1989 which would allow a further excavation of the creek which has become filled once more with stone following the earlier excavation. The permit issued on 15 January 2001 and expired in December of that year and was not acted upon by Mr Johnson owing to cost factors. Nevertheless the presence of the permit, though subsequent to the relevant date for valuation purposes, is a clear indication of the disability which the creek poses to the subject land.
Mr Simmonds was not aware of the permit and, on perusal of the details contained with it, formed the view that part of the subject land would be sacrificed in implementing the works permitted. He said that in consideration of that factor alone, a reduction in the area of arable land would result in a calculated value figure of $36,500 to $36,600, which he said he would probably round up to $37,000. Even though the works have not yet been carried out, the disability nevertheless exists and, I think, can be taken into account.
Mr Simmonds classified Lot 178 as having 5 ha of fair to poor arable country and 5.5 ha of very poor arable. Mr Johnson suggested that about half of the property should be described as very very poor. In 2001 the part of Lot 178 that he would describe thus yielded 12 tons per acre, whilst the balance yielded 21 tons per acre. In his opinion the property needs to yield 38 tons per acre for the enterprise on that land to break even. Mr Simmonds assumed a 10-year average yield for that lot of 28 tons per acre or 68 tons per ha. This difference in yield figures indicates that Mr Simmonds considered the land to be of higher quality to that suggested by the appellant.
Lots 131 and 140 were described by Mr Simmonds as comprising gently undulating light to medium forest country with problematic natural drainage and some poor arable soils. He classified Lot 131 as having 5 ha of fair arable country and 3.45 ha of country classified as very poor arable. Mr Johnson accepted those classifications.
In the case of Lot 140 Mr Simmonds classified the land as having 5 ha of fair arable country, 2.5 ha of very poor arable and 0.303 ha of non-arable balance land. Mr Johnson suggested that, viewing the land at the date of valuation, there ought to be a little less of the property classified as fair arable. I was not, however, presented with evidence from the appellant's side which would demonstrate the difference in areas as suggested by Mr Johnson, so conclude that the areas suggested by Mr Simmonds are to be accepted.
Mr Johnson outlined the history of Lot 140 from the time of purchase from his father. At the time of purchase it was poorly drained, so he had it laser levelled and cut drains through it. It now has a drain along Barra Road, one through the central area, another on the southern boundary and three cross-drains draining towards the centre. It has three soil types, each of which is cultivated and planted in order that manageable drill lengths can be obtained.
Lot 131 was also laser levelled by the appellant and had drains cut through it. It was further laser levelled, along with Lot 140, in 2002, however any evidence concerning that operation and its result is a matter for a subsequent valuation.
The appellant tendered photos showing the poor quality of cane grown on Lots 131 and 140. In the year 2001 crops were affected by grubs for the first time and yields were reduced accordingly. That evidence, again, is evidence that might be taken into account in later valuations than the ones appealed before me.
In his valuation report Mr Simmonds summarised the arable cane-land property market as he saw it. He said that it had been buoyant with sale prices on the increase from 1991 through to the end of 1998. Since that time world sugar markets have downturned and local weather patterns have resulted in a number of years of poor returns. The sales evidence demonstrates a large decrease from the 1998-1999 peak in values, with the values undertaken by the Chief Executive for 1 October 2000 reflecting a 5% decrease on valuations previously applied. He observed that generally the market was still optimistic that better weather patterns and commodity prices would return and as a consequence of that mind-set, the sales evidence was limited with property being held tightly. He said that rarely one would find a sale of over 150 ha of cane land and that most sales were in the range of 20 to 150 ha. Small area farms below 20 ha in size generally sell at a premium in his understanding of the market, given that there is a higher availability of purchasers and purchaser capital for this size of farm which can then be worked in association with other land. Mr Johnson generally accepted Mr Simmonds' appreciation of the arable cane-land property market.
In his valuation Mr Simmonds provided the details of six sale properties to which he had regard. He reasoned that only Sales 4 and 6 satisfied the test of value enunciated by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418 and that the other four sales were tainted because of adjoining-owner influence. Each of those sales revealed sale figures which were higher than the market level to various degrees, in his opinion. Taking this into account, Mr Simmonds expressed the opinion that each of those four high sales indicated that the level of values demonstrated by Sales 4 and 6 were appropriate for valuation purposes.
Mr Sheedy gave evidence that there was an adjoining-purchaser influence in the case of Mr Simmonds' Sale 6 and that on that basis the sale ought to be rejected. His evidence was that two sons of a lady owning land near the sale property were the purchasers and that they and their mother operate the purchased property and the adjacent property in partnership.
Mr Simmonds said that he interviewed the purchasers using a set proforma used by departmental valuers and that that proforma included a question concerned with the issue of adjacency factor, amongst others. He therefore concluded that he would have asked the purchasers a question on that issue, however has no independent recollection of having done so. I understand that the issue of adjacency would not have been easily ascertained from records as the mother had her name changed.
Notwithstanding the evidence from Mr Sheedy concerning the adjacency issue, Mr Simmonds was of the view that the sale was at market and could be used as a comparison property.
The mere fact that a sale is to an adjoining owner does not operate to exclude that sale as a property that might be relied upon for valuation purposes without evidence also indicating that the level of value revealed by the sale is inconsistent with the market. I find support for such reasoning in a number of authorities (Barber v Valuer-General (1969) 17 LGRA 409 and Hurdis v The Minister(1957) 2 LGRAQ 132) and think that the view expressed by Mr Barry in Ussher v The Valuer-General (1986-87) 11 QLCR 169 at 177 is a useful guide to use on this issue:
" Mr Ussher says that the Shepperson to Ferris sale cannot be used as it is an adjoining owner sale. This submission can be quickly dealt with for there is no law or practice which says that such sales must be rejected as not providing evidence of land values. It is accepted that, where there are no other sales of comparable land, they may well provide a sound basis for valuation purposes. It would require to be shown that the neighbour purchased under some strong pressure at a price in excess of the level to be found from other sales."
Accordingly, I am prepared to place reliance on Mr Simmonds' Sale 6, as well as his Sale 4. I should point out that the appellant provided no sales evidence.
The Sale 4 property has an area of 20.07 ha and sold on 2 June 2000 for $240,750. Following the deduction of improvements, Mr Simmonds analysed the sale property to have an unimproved value of $137,144 with an arable area value of $6,833 per ha. The Chief Executive, however, applied the sale property at a value of $5,858 per ha. The sale property has flat to gently undulating arable soils and is classified as having 15 ha of good arable sandy clay loam to loamy clay soils and 5 ha of very poor arable heavy clay soils.
The Sale 6 property has an area of 44.31 ha and sold on 14 July 2000 for $380,000. That sale price was analysed to an unimproved value of $215,203, which was applied by the Chief Executive at a rounded $215,000 overall. That applied value calculates to an overall value per ha of $4,851 and an arable value per ha of $5,000. The sale property was classified as having 5 ha of good arable soil, 38 ha of fair arable and 1.31 ha of balance land and drains. The sale property experiences drainage water logging and flooding difficulties.
In commenting on the sales, Mr Simmonds said that he had no clear sale of stony country, therefore in applying these two sales to the appeal property, Lot 178, the concluded value resulted from the application of his professional opinion.
Mr Sheedy said that the sale dates of both Sales 4 and 6 were too far removed from the relevant date for valuation. He suggested that the year 2000 was a poor year in terms of yield and market and that the influence from these sources was not felt until late in the season. There was no sales evidence to which I was referred which would demonstrate the point sought to be made by Mr Sheedy. In general, I would have thought that sales in June and July would be most suitable for striking a valuation for a relevant date of October in the same year. In addition, I would suspect that it would be most unusual to find that sales levels so closely track the good or bad fortunes of a commodity market to such an extent that they would reflect movements in sale prices in concert with the movements in those markets.
In his valuation reports Mr Simmonds provided comparisons between the sale properties and the subject properties. His approach was to compare the properties having regard to the percentage of arable land, the quality of land, disabilities such as flooding, erosion and wash damage, the level of working inputs needed to maintain long-term average production, access and remoteness from rail sidings and from Ingham. Having carried out a comparison with those factors in mind and making allowances for each, Mr Simmonds then added an allowance for the small-size premium that he considered would apply following the general observations of the arable cane-land market that he had made. In the case of Lot 140 the value that he had arrived at prior to the addition of the size allowance was a value of $4,436 per ha, that of Lot 131 was $4,316 per ha and that of Lot 178 was $3,068 per ha.
In addition to these figures, Mr Simmonds supplied the values that he had applied to each classification of land that he had settled on for each of the subject properties and which supported the overall value that he had applied to each parcel of land.
The appellant farms each of the subject lots together, with other lands, giving a total farm area of 82 ha. Mr Johnson gave evidence that planting costs (excluding seed cane) plus costs of repairs and overheads (other than land rates and rent) and fuel bills totals $2,195 per ha. Mr Simmonds said that the district average is $1,850 per ha, therefore the costs experienced by Mr Johnson are 18% above that average level. I understand that the equivalent costs applying to each of the subject lots would have been higher than to the farm overall.
The cost differentials are useful in indicating the comparative disabilities of the subject properties and it seems to me that, subject to one qualification that I make below, Mr Simmonds has in the comparison that he has made between the subject properties and the sale properties sufficiently taken into account the various disabilities.
I referred in para [13] to the difference in yields for Lot 178 between that assumed by Mr Simmonds and the figure supplied by Mr Johnson. It seems to me that the quality of land on Lot 178 is such that some further reduction in value ought to be made. In saying this I also take into account the problems associated with the adjoining creek discussed in para [12]. I encounter a difficulty in working out precisely what level of allowance ought to apply, but take some guidance from the difference in yield figures between those relied upon by Mr Simmonds and those presented by Mr Johnson. I do not, however, apply those figures in a mathematical manner and only utilise them to the extent that they indicate some further allowance ought to be made. Mr Simmonds has made substantial allowances already between the values represented by the sales and those applied and this needs to be acknowledged. I also notice that Mr Simmonds took into account information supplied by him by Mr Johnson in reducing the previous value of Lot 178.
I conclude that the value that ought to apply to Lot 178 ought to be reduced to $34,000.
The main concern of the appellant is that the rental rate would be too high based on the values assessed by the respondent which represent substantial increases over previous valuations. The statute requires the Chief Executive and, in turn, in the case of an appeal, this Court to determine the unimproved value of land. Whilst I acknowledge that a particular valuation figure will have a mathematical impact on the level of rates and rents that apply to the subject properties, those consequences and the level of either increase or reduction in those imposts are not matters which the Court ought to take into account. This is consistent with what the Land Appeal Court said in Tow v The Valuer-General (1978) 5 QLCR 378 at 381:
"It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation."
It might be useful if I also include reference to the case Qualischefski v The Valuer-General (1979) 6 QLCR 167 where at p.172 the Court said:
"However upon appeal a statutory onus of proof is cast upon the appellant and he has to accept, within the confines of the grounds set out in his Notice of Appeal to the Land Court, the burden of proving the Valuer-General incorrect. Neither this Court nor the Land Court in the subject jurisdiction may assume the role of an investigating tribunal requiring the Valuer-General to substantiate his case. This is in contradistinction to jurisdiction conferred under the Land Act.
In appeals of the nature of the subject, the onus which the appellant must assume is not an easy one to discharge without the assistance of a registered valuer who can lead evidence as to sales analyses and/or comparison with valuations made by the Valuer-General in respect of comparable properties."
I conclude that each of the appeals is allowed and that the value of Lot 178, that is Appeal RV2001/0561 is determined in the amount of Thirty-four Thousand Dollars ($34,000); that the valuation of Appeal RV2001/0563, that is Lot 131, is determined in the amount of Forty-three Thousand Dollars ($43,000) and that Appeal RV2001/0564, being Lot 140, is determined in the amount of Thirty-nine Thousand Dollars ($39,000).
RP SCOTT
MEMBER OF THE LAND COURT
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