KA Knuth Investments Pty Ltd v Chief Executive, Department of Natural Resources and Mines
[2001] QLC 106
•28 September 2001
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BRISBANE
28 SEPTEMBER 2001
Re: AV00-412
An Appeal against an Unimproved Valuation
Valuation of Land Act 1944
Local Government: Dalrymple
KA Knuth Investments Pty Ltd.
v.
Chief Executive, Department of Natural Resources and Mines
J U D G M E N T
The Chief Executive under the provisions of the Valuation of Land Act1944 placed a valuation of $660,000 on "Glencoe", a property owned by the appellant. The relevant date for the valuation was 1 October 1999. The appellant company lodged an appeal in comprehensive terms though, as it will become apparent later in these reasons, confined the issues which separated the parties before me. The appellant contends for a valuation of $425,000.
Kevin Albert Knuth represented the appellant and gave evidence in this matter. Mr Knuth has been in the cattle industry since 1953 and purchased his first grazing property in 1964. Stephen Brooks Gilbert, a registered valuer provided valuation evidence in support of the Chief Executive's valuation.
"Glencoe" has an area of 23,827.9 ha and is located west of Charters Towers. In his valuation report Mr Gilbert said that the property is situated approximately 131 km from Charters Towers, however accepted Mr Knuth's evidence that the distance was 160 km. I understand the result of that acceptance to be that the access to the property would be described as being by 40 km of bitumen strip Lynd Highway, then 120 km formed earth and gravel road which cannot be considered all-weather access, being impassable during most wet seasons. Whilst Mr Knuth said that he thought Mr Gilbert's inspection of "Glencoe" was rather quick, he had no other criticisms of the description of the subject property provided by Mr Gilbert in his valuation. That description is as follows:
"The property is classified as follows:
1402 hectares (5%) open stony black soil plain with areas of thick ti-tree scrub.
22425 hectares (95%) mainly good open red basalt forest country, timbered with narrow leaf ironbark, box, bloodwood, ghost gum and Mt Coolabah.
Carrying Capacity - 1 beast to 10 hectares (2382 head).
Natural Water - Permanent natural surface water from three springs (one equipped). Other soaks/holes in creeks etc are seasonally dependant. All natural water can become boggy and claim weak cattle.
Weeds/Pests - Grader grass in one small patch, some isolated and scattered mimosa, parthenium along the north eastern boundary. Rubbervine along Bubbling spring Creek and waterways.
Other Disabilities - The attraction of the natural water on 'Glencoe' is offset to some degree by the potential loss of weak cattle.
'Glencoe' is generally between 560m (eastern end) and 700m (height above sea level), and frosts commonly occur through winter. Supplementary feeding is common to the district and required to carry cattle through to the predominately (but unreliable) summer rainfall period. 'Glencoe' is also an odd shape being some 32 km end to end by direct linear path. This is of course much longer on the ground and creates internal access and management problems.
'Glencoe' also faces problems relating to power fluctuation and loss due to the distance from Charters Towers."
In his valuation report Mr Gilbert included three sales which he compared with the subject property in arriving at his value. His first sale was that of "Amelia Downs", which sold for an analysed unimproved price of $667,184 ($32.40 per ha) on 14 January 1998. The Chief Executive applied an unimproved value to that property as at 1 October 1999 of $650,000 or $31.56 per ha. This sale property has an area of 20,595 ha and is located 120 km north-west of Charters Towers via 77 km of bitumen road with the balance formed earth and gravel.
"Amelia Downs" comprises approximately 2,500 ha (12%) open black soil plain with the balance 18,095 ha (88%) good red basalt forest country intersected by areas of gorge along the Basalt River and W Creek. Mr Gilbert estimated the carrying capacity of the sale property at one beast to 10 ha. The property is used for the breeding and fattening of beef cattle.
Sale 2 in Mr Gilbert's valuation was "Junction Creek", which sold for an analysed unimproved price of $753,681 ($31.40 per ha) on 1 July 1996. The applied unimproved value is $640,000 or $26.67 per ha. "Junction Creek" is located approximately 203 km north-west of Charters Towers via a 57 km bitumen road with the balance of the road access being formed earth and gravel. The latter access road would be impassable during most wet seasons.
"Junction Creek" comprises approximately 1,547 ha (6.5%) open to lightly timbered black soil; 17,862 ha (74%) good open red basalt forest; 2,296 ha (9%) good to fair ironbark and box forest; with the balance 2,295 ha (9.5%) generally fair to poor forest ridges of box and ironbark on gravelly forest soils. Mr Gilbert estimated the carrying capacity of "Junction Creek" at one beast to 10.5 ha.
Sale 3, "Lava Plains", sold for an analysed unimproved price of $587,278 ($14.32 per ha) on 19 September 1996. The Chief Executive applied an unimproved value of $570,000 or $13.90 per ha to the property as at 1 October 1999. The sale property has an area of 41,000 ha and is located 260 km north of Charters Towers and approximately 90 km south of Mt Garnet.
"Lava Plains" comprises approximately 84% open red basalt and red sandy forest country, with the balance unavailable lava flow or areas inaccessible owing to lava flow. Mr Gilbert estimated the carrying capacity on "Lava Plains" at 1 to 14 ha overall or 1 to 11.7 ha on the available country.
Mr Knuth made reference to a purchase by him of the subject property on 23 November 1997. The asking price had been $3,200,000, whilst he purchased the property for $3,000,000. The sale included 3,000 head of cattle and a substantial amount of plant and improvements. Mr Knuth said that the property had been on the market for three years and that at least three well-funded, knowledgeable graziers had inspected it but had not proceeded to a purchase. He concluded that either the price was too high or that there was something wrong with the property. Mr Gilbert said that in the case of one of the graziers referred to by Mr Knuth, the price was too high because the vendor wished to dispose of land, plant and cattle, whereas the intending purchaser had a herd of his own. Mr Gilbert said that he was aware of offers lower than the price finally paid, but indicated that the acceptance of Mr Knuth's offer had an element of desperation associated with it. In his report Mr Gilbert said:
"The subject property sold on the 23rd November 1997 for $3,000,000. The sale has been analysed by Valuer Michael McDougall who determined an analysed unimproved value of $505,779. The sale is considered a low sale when compared to the analysed unimproved values shown by other sales over a similar period, and sales since that period. The property had been on the market for a considerable period before Mr Knuth purchased it, however it was fairly common knowledge that the vendor was rumoured to be in financial difficulty."
Mr Knuth said that he thought that the vendor would have traded out of the financial difficulty but that the sale may have been the product of a family rift.
The impression that I gained from the above quotation is that the property sold at less than might be expected in the market. Mr Gilbert said in evidence-in-chief, however, that he accepted that the property sold "at market", but said that the analysed unimproved price calculated by Mr McDougall was low in comparison with the three sales included in Mr Gilbert's valuation. Mr Knuth agreed that there were many more improvements on "Glencoe" than on similar properties in the district, such as Mr Gilbert's three sales.
Although Counsel for the Chief Executive made no submission on this aspect of the matter, I understand that Mr Gilbert's point is that the analysis of such a highly improved sale would be inherently unreliable, given the need for the valuer to form an opinion of the "added value" of a large number of improvements and the value of plant and cattle. That is a proposition discussed in the Land Appeal Court decision of Clough v. The Valuer-General (1981-82) 8 QLCR 70. Mr Knuth did say that his accountant had valued "Glencoe" at $442,000. This is presumably the land content. The accountant was not called nor his "valuation" tendered.
Given:-
1.the view of Mr Gilbert that use of the subject sale for a valuation under the Valuation of Land Act would be unreliable;
2.the appellant has not provided evidence of a sale analysis of the subject sale in accordance with the provisions of the Valuation of Land Act (though given the evidence in point 1 above, any such analysis would not address the difficulty raised by Mr Gilbert);
3.comparison with other sales is an acceptable method, (Redeam Pty Ltd v. South Australian Land Commission (1977) 40 LGRA 151 at 156; River Bank Pty Ltd v. Commonwealth (1974) 48 ALJR 483 at 484 (Stephen J); Cienda Pty Ltd v. South Australian Urban Land Trust (1988) 66 LGRA 360; 34th Philgram Pty Ltd v. The Crown 14 QLCR 13 at 26)
it follows that the valuation should be considered on the basis of the sales included in Mr Gilbert's valuation.
Before I come to those, however, there is a point to dispose of. Mr Knuth expressed concern that Mr McDougall was not called by the Chief Executive with respect to his analysis of the "Glencoe" transaction. Now there is no requirement for the Chief Executive to call Mr McDougall. Before me the Chief Executive relied on the valuation of Mr Gilbert and I see no need for Mr McDougall to be called with respect to that valuation. Had Mr Knuth wanted Mr McDougall to give evidence, it was a matter for him to call him or to subpoena him, if required. I return now to consider Mr Gilbert's sales.
In introducing these sales transactions Mr Gilbert said:
"At the date of valuation, the market for grazing properties in the Dalrymple Shire was strong, driven by a good season and firm cattle prices."
Mr Knuth understood that as expressing the view that the market was booming. Mr Gilbert explained that the market was not booming but was coming out of a drought and that there was a more optimistic air than had prevailed previously.
In his comparison between the subject property and "Amelia Downs" Mr Gilbert said:
"The sale property has similar situation but significantly inferior access to the subject property, being about the same distance to Charters Towers, with a greater distance of formed earth and gravel road.
The sale property is similar in area, however has a higher percentage of fragmented black solid country. This considered to be balanced by the subject's greater area of coolibah on red and chocolate basalt soil. Overall the sale is considered similar in regard to country on a per hectare basis and both are assessed with similar per hectare carrying capacities.
The properties are considered similar in regard of natural water, with both having access to permanent natural surface water, and a number of permanent and non-permanent springs, soaks and holes.
The sale property also suffers from similar disabilities to that of the subject property including frosts, however the subject is at higher altitude and therefore colder. The sale being located on the Basalt River is considered at greater risk from potential weed invasion and currently is considered to have a slightly worse weed problem.
Overall the subject land is considered inferior to sale 1 on a per hectare basis."
Mr Knuth thought the price paid for "Amelia Downs" might be too high, however the evidence shows a consistency between that price and the prices paid for the other two sale properties included in Mr Gilbert's valuation. Mr Knuth thought the subject to be "a bit inferior" to the sale property which he thought had a better mix of country, though he recognised that the Basalt River could be dangerous to breeders during the dry season. Mr Gilbert acknowledged the lighter country provided a relief from frosts and also a quicker response following rain, however, said that the marketplace paid a premium for black soil country and this is demonstrated in his sales evidence. I accept Mr Gilbert's view on this matter.
In his comparison between "Glencoe" and the "Junction Creek" sale Mr Gilbert said:
"The sale property has inferior access and location, with about 55km more formed earth and gravel.
The sale property is of similar area, but has a slightly lighter carrying capacity per hectare, due to the poorer sandy forest on the sale.
The natural water on the sale is limited to waterholes in Junction Creek, surplus from a spring on the boundary with 'Ellenvale', and several permanent and non-permanent springs. Both the quantity and distribution of natural water is considered similar to the subject property.
The sale property also suffers from disabilities including frosts and the need to feed supplements. The sale property does not possess a major weed problem, although the encroachment of black ti-tree on to the black soil areas is an issue. The sale property is oddly shaped causing internal access and management problems.
Overall the subject land is considered similar to sale 2 on a per hectare basis."
Mr Knuth said that access to "Glencoe" is worse than that to "Junction Creek" and this is demonstrated by the fact that in the year 2000 he had to walk cattle out through "Junction Creek" because of the road to "Glencoe" being affected by rain. Mr Gilbert acknowledged that unevenly distributed rain did cut off the subject during 2000 and did not cut off the Sale 2 property, but maintained the view that as a general proposition access to "Junction Creek" was inferior.
In his comparison between "Glencoe" and Sale 3, the "Lava Plains" property, Mr Gilbert said:
"The sale property has an inferior situation, but superior access to that of the subject property.
The sale property is considerably larger than the subject property, being almost twice the area. Although both properties are mostly red basalt forest country, the red basalt forest on the sale property is lighter carrying, and contains areas of lighter sandy loam forest. The sale property also has a significant area that is unavailable to stock.
The sale property has very limited natural surface water in the Nanny Waterhole, and a spring in the south west corner of the property. Subsequently, the natural water is inferior to the subject land.
The sale property also suffers from the similar disabilities to that of the subject property including frosts, the need to feed supplements and weed invasion. The problem with frosts is probably less severe on the sale than the subject land, given its location on the Great Dividing Range, approximately 550m above sea level.
Overall the subject land is considered markedly superior to sale 3 on a per hectare basis."
Mr Knuth said that he thought "Lava Plains" and "Glencoe" were similar, though thought it difficult to compare the two, having regard to the larger area of the sale property.
In an appeal arising under the provisions of the Valuation of Land Act the appellant has the burden of proving that the valuation of the Chief Executive is wrong. That burden is discharged either by the production of cogent evidence or by the process of demonstrating an error of law or a material error of fact in the Chief Executive's valuation. An appellant cannot simply raise a number of propositions and leave it to the Court to construct its case. For example, in the case of the subject sale Mr Knuth appeared to be proceeding on the expectation that I would somehow provide an analysis of that sale to reveal the unimproved value. I cannot do that in the absence of evidence; evidence to be adduced by the appellant.
I conclude that, with one small exception, the appellant has not demonstrated that the valuation provided by Mr Gilbert of the subject property for the purposes of the statute is wrong. That exception relates to the access to the subject property. In that respect Mr Gilbert acknowledged that the error in his adoption of a distance of 131 km as against Mr Knuth's 160 km would result in a minimal allowance being made in the valuation. He was not drawn by Mr Knuth to say what that allowance would be, so I must make an allowance having regard to the evidence as a whole. In particular, I take into account that the subject property should overall remain at a value higher than that applied to the "Junction Creek" property.
In the result, I allow the appeal and determine the value of the subject land at Six Hundred and fifty-eight Thousand Dollars ($658,000).
RP SCOTT
MEMBER OF THE LAND COURT
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