Jones v Chief Executive, Department of Natural Resources
[1997] QLC 132
•5 September 1997
|
BRISBANE
5 September 1997
Re: Appeal against Annual Valuation -
Valuation of Land Act, 1944 -
Valuation Roll No: 13904
Local Government: Pine Rivers Shire.
(AV96-158).Raymond L and Suzanne S Jones
v.
Chief Executive, Department of Natural ResourcesD E C I S I O N
Background:
This matter relates to a property at Samford Road, Samford, and described as Lot 3 on Plan SL 2971, Parish of Samford. The key issues relate to the comparison of sales of comparable lands and the use of the land for farming purposes. The lot has an area of 29.747 hectares and is zoned as "Future Rural Living" under the Town Plan for the Pine Rivers Shire Council of 14 May 1988, and effective at the date of valuation of 1 January 1996.
The subject is located approximately 1.4 kms south-east of the Samford Village Post Office, and has good access to Samford Road, which is a two-lane bitumen sealed carriageway with earth shoulders. An unformed section of McLean Road fronts the south-western boundary of the subject; and Peterson Road terminates towards the south-western boundary of the subject. Peterson Road is bitumen sealed. Access from Peterson Road is fair because of a 3-metre fall from Peterson Road to the subject. Electricity and telephone are connected to the subject.
The subject comprises moderate to steep forest ridges and a portion of easy to broken scrub country. The eastern part comprises moderate and steep sloping virgin forest, and the south-western part comprises about 10 hectares of easy sloping broken scrub with a creek severing the area. The dwelling is situated on the north-western part of the subject, which is moderately sloping forest. In the western part there is about 13 hectares of selectively cleared country, and the balance of 16.747 hectares is fully timbered.
The Chief Executive, Department of Natural Resources, valued the subject as a large rural homesite under Section 17(1) of the Valuation of Land Act, and on 11 March 1996, issued a valuation at $270,000. Following an objection the Chief Executive disallowed the objection and on 20 May 1996, confirmed the valuation at $270,000. The appellants have appealed that figure claiming the property should more properly be valued as "farming" business under Section 17(2) of the Act, at a valuation of $61,000. The Chief Executive on 19 June 1997, advised the Court that in the event of the Court determining that the subject satisfies Section 17(2) of the Act, then the Chief Executive is in agreement that a valuation should be $61,000.
Mrs SS Jones appeared and gave evidence for the appellants; and Mr Gavin Dunn, Senior Valuer, appeared for the respondent, calling evidence from Mr MM Woodbridge, the Departmental Registered Valuer responsible for determining the valuation.
Evidence:
Mrs Jones argues that she has been a primary producer on the property for many years, has run the existing Ayrshire Stud on the subject for the last 27 years, is classified by the Taxation Office as a primary producer, and holds a Sales Tax Exemption Certificate and Diesel Fuel Certificate for those purposes. She is fully aware of the provisions of Section 17 of the Valuation of Land Act 1944, and claims a concessional valuation under Section 17(2) of the Act.
As part of her evidence in respect of the long and continued use of the subject for "farming" purposes, Mrs Jones provided an outline of the history of the land since it was purchased by her great-great-grandfather in 1868. In its early days the property, consisting of about 200 acres, was used by the family for the raising of cattle and horses. The original McCombe property was subdivided in 1915 to provide land for a railway line to the Samford Valley, and in 1927 the property passed to the son and daughter, and was further subdivided into two parcels, each providing an equal portion of mountain and flat ground. The whole area during this stage was used by Thomas McCombe as a dairy farm. Eventually the current subject passed in 1964 to the appellants.
When the appellants acquired the subject in 1964, it had lain virtually untouched since the middle-1940s, and was heavily overgrown with lantana and other rubbish around the rich alluvial creek flats. The higher slopes are retained as timbered country, and have been harvested three times for ironbark, blue, grey and spotted gum, and tallowwood timber, as well as dead timber for firewood sales. Horticulturalists also collect seeds from the subject for cultivation in parks and other public areas. Following a major clearing program lasting several years, the appellants commenced the Ayrshire Stud in 1970 which continues to the present.
While the numbers of cattle are small (up to 30 head), the quality of the breeding herd has been progressively improved, and is now shown and sold at centres throughout Queensland. Mrs Jones currently has six breeding heifers which she values at approximately $10,000, and which form the nucleus of her breeding program. The stock are grazed in several paddocks which are rotated as rest paddocks in order to preserve the quality of the pastures. Mrs Jones also supports the grazing of cattle with additional income from riding instruction, as she is a qualified pony club instructor.
Mrs Jones conceded that the current numbers of cattle upon the subject are about 14 to 16, mainly because of the impact of the current drought. These numbers have been steady since about 1990. She also leases adjoining land in Peterson Road for the agistment of horses. She claims that she currently spends about 30 hours each week in activities associated with the stud and horses, about one quarter of which is riding instruction. She agrees that she does not grow pasture crops for the cattle.
In respect of the general nature of the subject the parties are in agreement. Mrs Jones also agrees that while the relative level of income and expenditure had not varied over the last few years, the appellants' focus had been mainly on improving the quality of the stock, rather than the quantity of cattle. Mrs Jones advised that the riding instruction fees represented about one-third of the total income for the subject.
In clarifying details of income and expenditure supplied, Mrs Jones noted that different figures had been supplied to the Department for objection, and to the Court for appeal.
FOR OBJECTION FOR APPEAL
Year Income Expenditure Profit Income Expenditure Profit
- - - $ 5,257 $ 9,329 -$ 4,072
(Loss)$ 7,106 $ 6,517 $589 $ 2,106 $ 6,517 -$ 4,411
(Loss)$ 6,993 $ 7,672 -$679 (Loss) $11,993 $ 7,672 $ 4,321
$ 6,885 $ 6,229 $656 $ 6,885 $ 6,229 $ 656
- - - $11,205 $ 6,168 $ 5,037
The difference she advised probably represented the quantum of fees for riding instruction, which were not included in the figures supplied to the Department for the objection process in 1994 and 1996. She could not account for the disparity in 1993, which she advised was provided from figures supplied by her accountant. Each year the subject turns off six to ten head of cattle, including calves, some of which go to stud sales, for house cows or for the meatworks.
In support of his valuation, Mr Woodbridge provided the following sales evidence:•Sale 1 - (Basin Road, Mount Samson - Lot 20 on RP807722).
This is a large rural homesite located about 15 kms north of the Samford township. It has an area of 21.36 hectares, with electricity and telephone available. The sale has good access via Basin Road which is bitumen sealed with earth shoulders.
The sale falls moderately to steeply from the northern boundary fronting Basin Road to the south. The western boundary is a scrub gully, and the remainder of the sale is undulating cleared forest. The sale is zoned "Rural" and is outside of the Rural Residential potential area of the Samsonvale Development Control Plan and therefore has no subdivisional potential. The sale is seen as inferior to the subject in area and location, and slightly inferior in access, but superior in topography. Overall it is seen as inferior.
The sale sold in March 1995 for $240,000, which after allowing for improvements, provided an analysed unimproved value of $215,000, and an applied value of $187,500.
•Sale 2 - (Broads Road, Closeburn - Lot 1 on RP 845355).
This is a large rural homesite located about 7 kms north of Samford Township. It has an area of 22.82 hectares, and has electricity and telephone connected. The sale has good access to Broads Road, which is a combination of bitumen sealed and graded crusher dust surface.
The sale consists of steep to very steep forest country, falling to the south with good rural views. There is a dam towards the south-eastern boundary. The sale is inferior to the subject in area, access and location, and slightly superior in topography. Overall it is seen as inferior to the subject. Under the Pine Rivers Strategic Plan, as the sale is zoned "Rural", and an excision has occurred since 1988, the sale has no subdivisional potential.
The sale sold in March 1995, for $252,000, which after allowing for improvements, provided an analysed unimproved value of $235,000, and an applied value of $220,000.
•Sale 3 - (Basin Road, Mount Samson - Lot 18 on RP807724).
The sale is located about 15.5 kms north of the Samford Village, and has an area of 16.9 hectares, and is zoned "Rural". Electricity and telephone are connected, and access is good via Basin Road which is a two-lane bitumen carriageway with earth shoulders and concrete kerbing and channelling. Most of the sale is undulating cleared forest, slightly below road level, with a gentle rising ridge in the middle. The sale is inferior in area and location, slightly inferior in access, and superior in topography. Overall it is seen as inferior to the subject. Under the Samsonvale Development Control Plan, the sale is outside the Rural Residential potential area, and therefore has no subdivisional potential.
The sale sold in March 1995 for $227,000, which after allowing for improvements, provided an analysed unimproved value of $201,500, and an applied value of $165,000.
•Sale 4 - (Hills Road, Clear Mountain - Lot 8 on RP890980).
This sale is about 8 kms north of the Samford Township, and about 1 km north-west of Sale 2. It has an area of 2 hectares, and is zoned "Future Rural Living". Telephone and electricity are available. Access is via Hills Road which is formed gravel and dirt with earth shoulders.
The sale is a well-elevated rural homesite consisting of moderate to steep cleared forest broken by gullies. It has a rural outlook. The sale was supplied merely to demonstrate the approximate 30% difference in the Clear Mountain area to the Samford Valley. The sale sold in August 1994 for $110,000, which after allowing for improvements, provided an analysed unimproved value of $105,000, and an applied value of $105,000.
•Sale 5 - (Riverine Court, Samford - Lot 4 on RP 882257).
This sale is about 2.5 kms west of Samford Township, and about 4 kms west of the subject. The sale has an area of 1.5 ha and is zoned as "Rural Residential". Telephone and power are connected. Access is via Greggs Road, which is bitumen sealed with earth shoulders, and then into Riverine Court which is bitumen sealed with concrete kerbing and channelling.
The sale is a corner lot, above road level, and gently to moderately falling towards the south, with good rural views. The sale was supplied merely to demonstrate the approximate 30% difference between the Samford area from the areas of Sales 2 and 4.
The sale sold in October 1994 for $152,000, which after allowing for improvements, provided an analysed unimproved value of $149,000 and an applied value of $129,000.
The appellants outlined details of two properties of land currently for sale in Samsonvale. The first has an area of 16.8 hectares at an asking price of $120,000; the second has an area of 22 hectares at an asking price of $150,000.
Mr Dunn argues that the subject was valued as a large single residence rural homesite under Section 17(1) of the Act. For this reason only sales of comparable rural homesites were chosen for comparison. Sales 4 and 5 were selected to merely demonstrate the significant premium (about 30%) which attaches to properties in the Samford Valley. Mr Dunn argues that if valued for its highest and best use as rural subdivision, the subject would be worth about $2,000 per hectare. It has more than one potential homesite, and like other parcels nearby to the Samford Township, if not treated as a concessional value under Section 17(1), the subject would have subdivisional potential.
In respect of the current land use of the subject, Mr Dunn agrees that the land is used for the grazing and rearing of livestock, however he believes the dominant use of the subject is as a rural homesite. He also agrees that it is used on a repetitive basis for grazing purposes, and agrees that the subject satisfies parts (a), (b) and (d) of the second limb of Section 17. However, based upon the figures provided by the appellants, Mr Dunn can not agree that the subject satisfies Section 17(2)(c) of the Act, in that it does not demonstrate (a) "significant and substantial commercial purpose or character".
He believes it has been used as a hobby farm for the last 27 years, and has about reached its potential earning capacity for that reason.
In respect of the appellants' evidence that the use of the timber reserves was also a matter for consideration, Mr Dunn sought support in the decision of HE Corbould v. The Valuer-General (1975) 2 QLCR 191. Mr Dunn conceded that the harvesting of timber could be an acceptable farming activity, but argues that the subject demonstrates no evidence of major commercial activity from the sale of timber at this time.
Decision:
The key issue in this matter is whether the subject satisfies the concessional requirements of the Act in respect of "farming" activities. If the subject is determined to qualify under the Act, then both parties agree in the quantum of the valuation for this purpose at $61,000. In seeking to understand the nature of the subject, I turn to the wording of the Act:
"17.(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 sub-section (1) -
A 'single dwelling house' means -
(a)a dwelling used solely for habitation by not more than one family; and
'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;
if the business or industry represents the dominant use of the land, and -
(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. "
I note firstly that the subject has been, and continues to be, used for the grazing and rearing of cattle and horses. As such it clearly satisfies the requirements of Section 17(2)(a)(b). The evidence also supports the appellants' claim that the business undertaken is done so on a repetitive and continuous basis, as the appellants sell livestock to many areas of the State, and also provide evidence of income from the sale of cattle at least since 1992. From the long history of family involvement with the land, I have no doubt that Mrs Jones sees her activities as a continuum of pastoral pursuits upon the land, involving considerable care and husbandry of the resources. The fact that the appellants have been afforded "primary industry" status by the Federal Government, does not in itself, prove the eligibility of the subject in respect of the requirements of the Valuation of Land Act. The key issue for the appellants is whether they satisfy the requirements of Section 17(2)(c) of the Act, as a farming business or a significant and substantial commercial purpose or character, and whether that is the dominant use of the land.
In seeking to understand the nature of the Ayrshire Stud business, I note the actual sales of cattle are quite low, representing about 6 to 10 cattle, including calves, each year. However, I also note that the business is a breeding establishment, focussing on the quality of the cattle, and not merely just upon fattening for slaughter purposes. Mrs Jones estimates that her major breeding nucleus of six heifers is worth about $10,000. However, I also note that average yearly income from the sale of cattle during the period 1993 to 1995 was approximately $7,000, while average yearly expenditure incurred for that purpose was approximately $6,500, and in fact in 1994 a loss of $679 was incurred.
In seeking guidance in this matter, I note the decision of the Land Appeal Court in Chief Executive, Department of Lands v. KW Whackett (1995)(LAC) to be reported. In that matter the Land Appeal Court considered a grazing business undertaken upon the land with an area of 105.83 hectares in the Beenleigh region, which carried about 70 head of cattle, 40 of which were breeders. Over a period of three years from 1990 to 1992, Mr Whackett had on average sold approximately 25 head of cattle each year, at an estimated gross return of about $5,000 per year. The Court found at page 18:"No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming.
We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant or substantial commercial purpose of character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts' business activities are presented in more detail, the matter could again be considered, with quite different results. "
Clearly what the Court found was that with a grazing business of 70 cattle, including 40 breeders, Mr Whackett may have demonstrated a "significant and substantial" business, but on the evidence he had not done so. The Land Appeal Court in its decision considered the findings of various other precedents in these matters and concurred that in order to satisfy the meaning of the words "significant and substantial commercial purpose or character" any farming business would appear to require a business activity of important or considerable size. While the words "important or considerable" are relative in their definition, the intent of the changes to the Act which were introduced by the former Government in 1991, were to ensure only bona fide farming enterprises qualified for the concession, and excluded the hobby farming type of activity. The Whackett decision also went on to confirm at page 17:
".... There can be no artificial base for determining the scale of any particular activity which will satisfy the criterion in paragraph (c) of the definition. "
For these reasons each business must be assessed on a case-by-case basis, and it would be inappropriate for the Chief Executive to seek to define some quantum of income below which an appellant would not be seen to qualify for the concession under Section 17(2). However, in the Whackett decision, the Land Appeal Court went on to say at page 14:
"So for the business or industry to have a commercial purpose there must be some intention or desire on behalf of those engaged in the business or industry to pursue commercial goals rather than merely to be engaged in the enterprise for recreational or some other purpose. "
I turn now to the current case and note that the grazing and breeding of cattle occupies about 30 hours each week of Mrs Jones' time. I note also that the appellants "show" their cattle throughout country Queensland, which is clearly a key interest for them. I note also that as breeders of Ayrshire cattle, their strategy has been to concentrate on raising the quality of the breeding line rather than on the commercial return on the investment. I believe the business has more of the nature of a consuming interest or hobby than that of a commercial business. On balance I am not persuaded that the subject meets the intention of Section 17(2)(c) of the Act, and therefore does not qualify as a "farming" business under the Act.
In respect of whether the grazing of cattle is really the dominant use of the land, I note that the "riding instruction" also provides a significant part of the income from the property. While the time spent upon riding instruction represents only 25% of the total time each week, the income received from that purpose contributes a greater percentage to the total income. I believe, however, the dominant use of the subject is really as a rural homesite, rather than the house being merely incidental to the Ayrshire Stud.
In respect of the potential future income from the sale of timber or dead timber from the subject, I note that the timber has been harvested three times already, and no doubt has potential for further harvesting. In the matter of the use of dead timber as firewood, I note also there could be potential income, but note that this Court has determined in previous matters that the collection and harvesting of such in the absence of substantial evidence of commercial activities, has been found to be more of as "opportunity harvesting" than a primary industry activity. In The Humbug Company Pty Ltd v. The Valuer-General (V89-515)(16 February 1990), unreported, the Land Court found at page 6:"The activity is no different in my opinion from that of collecting odd or art forms of dead timber from land for sale or for that matter the collection of firewood for sale. Commercial though such an activity may be or become, it is not an activity in primary production. "
In the matter of the use of timber reserves as a form of "forestry" under Section 17(2)(a) of the Act, I also note the caution that was adopted in HE Corbould v. The Valuer-General (1975) 2 QLCR 191, where the learned Member noted at page 195:
"No attempt has been made to plant or tend the trees and it would be unreasonable to say that allowing land to lie idle is using it for the purpose of the business of forestry. "
In the current matters I find the timber reserves add little to the overall compliance by the subject of Section 17(2).
I turn now to the matter of the value of the subject as a rural homesite. I note that Mr Woodbridge has valued the subject as a single residence under Section 17(1) of the Act, and has discounted any potential for future rural subdivision. On that basis I accept his comparison of comparable single rural homesites. I note also that the appellants only provided two potential sales to support their case. I note also that the appellants have not challenged the relevance of the sales evidence of the respondent.
In respect of the relevance of Sales 4 and 5, I note that those sales are merely to indicate that corresponding land in the Samford Valley has a significant attraction to purchasers, for which they appear to pay a higher loading than for corresponding parcels in surrounding areas such as Mt Samson and Clear Mountain. I make no other conclusions from Sales 4 and 5, except to note that Sales 4 and 5 are much smaller in area than Sales 1 to 3.
In comparing the subject with Sales 1 to 3, I note that Mr Woodbridge has adopted a comparison on a site basis and not on a per hectare basis. This follows the principle agreed in AT Dewer v. The Valuer-General (1980-81)(LAC) 7 QLCR 114, at page 115:"The market for rural homesites demonstrates that they are purchased on a site basis and not on a pro rata per hectare basis. "
And also in DF and M Ward v. The Valuer-General (1983)(LAC) 9 QLCR 48 at page 50:
"Sites are valued overall and not on a rate per hectare basis. The experience of the market place reflects the former and not the latter practice. "
In comparing Sales 1, 2 and 3, I note that all three sales are seen as inferior to the subject:
Sale Applied Value Area
Sale 1 $ 187,500 21.36ha (Mt Samson)
Sale 2 $ 220,000 22.82ha (Closeburn)
Sale 3 $ 165,000 16.9ha (Mt Samson)
Sale 4 $ 105,000 2ha (Clear Mountain)
Sale 5 $ 129,000 1.5ha (Samford)
On this basis Mr Woodbridge has concluded a loading of about 30% for properties in the Samford Valley which he has applied to the value of the subject. Mrs Jones argues that as a rural residential homesite she feels the valuation should be between $180,000 to $200,000. She bases this upon a comparison with the two potential sales currently on the market in Samsonvale. She has made no allowance for the more attractive features of the Samford Valley as claimed by Mr Woodbridge.
In seeking to weigh the comparison of the subject with the sales, I note that Sale 2 at $220,000 (applied value) is seen as inferior in area, access and location, and only slightly superior in topography. Clearly the subject has an applied value greater than $220,000. If I were to apply the "loading" for the Samford Valley, apparently demonstrated in the difference between Sales 4 and 5, a value of $270,000 would be applied to the subject, which is the claim of the respondent.
I am aware that the comparison of only two sales (Sales 4 and 5) provides a very small basis upon which to compare relativity between Samford and the surrounding areas, but it is not the role of this Court to challenge those relationships. That is more properly the role of the appellants who have not successfully done so.
In using his experience of relativities in the areas adjoining Samford Valley I am aware that Mr Woodbridge has followed the principles outlined by the Land Appeal Court in H & E Grahn v. The Valuer-General (AV89-246/7) 13 December 1990, unreported, at page 5:"A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot. "
In making that comparison, Mr Woodbridge has relied upon not only some direct sales, but also his knowledge and experience of the area. See King Ranch Pastoral Company Pty Ltd v. The Valuer-General 35 CLLR 255, at page 259 where the Land Appeal Court found:
"In not attempting to do this, Mr Walker adopted a method of valuing based on knowledge and experience rather than one lacking precedent and authority. "
In this matter the findings of Bingham v. Cumberland County Council (1954) 20 LGR 1 are also noted where Sugarmann J found:
"In the absence of sufficient guidance to be had from sales, the valuer may find himself in the positioning resembling that to which Lord Romer referred in the Raja's case (1939) AC at pp.312 and 313, in which he `will have no market value to guide him, and he will have to ascertain as best he may from the materials before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land'. "
In the King Ranch Pastoral Company Pty Ltd the learned Member went on to note at page 262:
"The valuer in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience and other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant. "
In the final analysis, the onus of proof rests upon the appellant under Section 33 of the Act:
"Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered. "
Summary:
In summary I find that the appellants have not demonstrated that the subject satisfies the requirements of Section 17(2) of the Act, and is to be valued under Section 17(1) as a rural residential homesite. The appellants have also not demonstrated that the Chief Executive has made any error in his determination of the valuation at $270,000.
Conclusion:
After having examined the whole of the evidence, I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the Chief Executive's valuation on Lot 3 on Plan SL 2971 at $270,000 is confirmed.
Member of the Land Court
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