Lawrence v Minister for Natural Resources and Mines

[2001] QLC 118

[2001] QLC 118

 

LAND COURT

BRISBANE

14 NOVEMBER 2001

Re:   GHPL 03/6091, Blackall District -

Conversion of Tenure - Land Act 1994
                 An Appeal against the Minister's Review Decision on Purchase Price

Lessees:   AJ & JE Lawrence

(Hearing at Blackall)

DETERMINATION

Background:
           On 20 August 1998 the lessees made application to convert GHPL 03/6091, Blackall District, containing an area of 4,316.6491 ha, to freehold tenure.
The lessees were advised by letter dated 18 September 2000 that the Minister had determined the unimproved value of the land comprised in the holding at $2.75 per ha ($11,870.78). The lessees did not accept that determination and made application for an internal review of the decision, pursuant to s.424 of the Land Act 1994 (the Act).  On 12 February 2001 they were advised that the original decision was confirmed for the following reasons:

"(i)Analysed sales used in the conversion process support the unimproved value of the subject as at 1 September 1998; and

(ii)The grounds for review did not present any evidence to support a reduction in value."

It is assumed that the date upon which the Minister received the conversion application (being the date at which the unimproved value is to be determined - see sub-s.(4) s.170 - was 1 September 1998).
           The lessees remained dissatisfied with the review decision and exercised their rights pursuant to s.427 of the Act and, on 9 March 2001, filed in this Court an appeal against that decision, on the ground that the Minister's determination did not represent the unimproved value at the time of the application.  Their valuation and the outcome sought was a purchase price of $4,300.
           The appeal was heard in Blackall on 27 August 2001.  Mr Lawrence conducted the appellants' case and gave evidence in support of a written submission. 
           Mr K Fisher, barrister with Crown Law, appeared on behalf of the Minister.  The Minister's valuation had been conducted by Mr DP Jones, a senior valuer employed by the Department of Natural Resources and Mines.  He was called as an expert witness.
The Evidence:
           The land is situated 80 km north-east of Blackall, 110 road km via the Landsborough Highway and Tumbar Road with 45 km of bitumen and 65 km formed gravel.  Access is restricted after heavy rain.
           The lessees' evidence was that they had purchased the property known as "Winooka"  in 1994.  "Winooka" included the subject lease which was individually known as "Elsie Hills".  The subject lease lies within Blackall Shire.  The balance of the "Winooka" aggregation comprised "Vannen" Holding, about half of which also lay within Blackall Shire, the balance being in Jericho Shire.  In 1997 the Department of Natural Resources (as it then was) had valued part of "Vannen" together with the whole of "Elsie Hills" in the amount of $11,000 unimproved, pursuant to the Valuation of Land Act1944.  The unimproved valuation of "Elsie Hills" (for rental purposes) was apportioned at that date in the amount of $4,300.  There was no dispute that those valuations were in force for rating/rental purposes as at the relevant date in this matter.
           However, s.434 of the Act relevantly provides as follows:

"(1)   In this Act, the 'unimproved value' of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arm's-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion.

…

(3)    To remove any doubt, it is declared that the Valuation of Land Act1944 does not apply to the meaning of unimproved value in this section."

The lessees were fully aware of sub-s.(3) of s.434 of the Act but submitted -

"However we say that in our case, the valuations for rating and rental purposes because of what they are based on do represent the true unimproved value of 'Elsie Hills' and should be adopted for conversion purposes. …  Those values were based on the unimproved apportionment of  'Winooka' when we bought it, and on the basis that 'Vannen' was considerably more valuable than 'Elsie Hills' … The best example of value must be the actual price we paid for 'Winooka' in 1994. … There has been no change in values between 1994 and 1998 and there have been no comparable sales, to support any basis for increasing the value of 'Elsie Hills' from $4,300 to $11,870 which represents a percentage increase of 276% …"

The evidence was that the unimproved valuation pursuant to the Valuation of Land Act as relied upon by the lessees, had resulted from a challenge by the lessees to a higher valuation applied by the Department subsequent to their purchase of "Winooka".  The lessees were firmly of the opinion that the reduction in valuation had been based on expert and specific analysis of the "Winooka" purchase price.
           To Mr Lawrence's surprise, an analysis of the purchase price of "Winooka" had been adopted by Mr Jones as part of the evidence on which  the unimproved value of "Elsie Hills" for conversion purposes, had been assessed.  The summarised analysis was as follows:

"Total Sale Price  $610,000
  Less:

Plant  $40,000
        Stock  $120,000
        Yards - Including Interest  $30,000
        Structures - Including Interest  $72,800
        Fencing - Including Interest  $124,500
        Water - Including Interest  $68,500
        Timber Treatment - Including Interest           $77,500
        Development Interest  $5,680
  $539,980   (sic)

Unimproved Value of Land  $71,020

Sale shows 15,466 hectares at $4.59 per hectare."

Mr Jones had assessed "Winooka" overall as having a potential carrying capacity of one beast to 40 ha or 387 head, the use being cattle breeding and growing with some opportunity fattening.  The country was classified as comprising 1,600 ha (10%) good silverleaf ironbark/box/pine forest with buffel; 17% fair SLIB/cypress/oak/spinifex desert; 27% poor heartleaf poison desert tableland; 46% rough mostly unavailable lancewood/bendee hills and gorges.  Mr Jones described the overall classification of "Winooka" as "Very similar to subject section of the sale aggregation in terms of country break-up.  Subject is inferior to sale however as most of the sales value lies in the better developed buffel grass developed section of the property in Jericho Shire."  In summary he stated - "Sale is overall superior in country type although the break-up percentages are similar.  The buffel grass areas push up the sale BAV" (beast area value) "above straight desert blocks.  The sale includes the subject land as part of the overall aggregation.  All other features except size are the same."
           Mr Jones' classification of the country types on "Elsie Hills" was as follows:

"280 ha(6.5%)  developed SLIB and pine forest with wattle fringe of brown to grey loam soils recently developed in the north-east;

770 ha (17.8%) Sandier SLIB, Pine and wattle understorey desert with 310 ha previously pulled;

1,650 ha (38.2%) poor rough Yellowjacket tableland with heartleaf poison bush; and

1,616.649ha (37.5%) mostly unusable Lancewood and Bendee ridges and hills."

The potential carrying capacity of "Elsie Hills" was suggested by Mr Jones as being one beast to 30 ha, although that was based on historical records.  It is observed that there seems to be some conflict between that estimate and the estimate of "Winooka" aggregation overall.
           Mr Lawrence had not seen the departmental analysis of the purchase price of "Winooka" prior to these proceedings.  He challenged the values applied to the structures as being too conservative and not representative of the added value of those improvements to a working grazing operation.  He was not however in a position to provide a specific estimate of added value.  He said that one of the features which had influenced the lessees' purchase was the buffel grass feed available at a time when drought conditions had prevailed.  He likened the supply of the available feed to the added value which a harvestable crop would give to an arable property at point of sale.  In his opinion the allowance said to have been made in the departmental analysis for timber treatment (including the development and establishment of the improved pastures) represented nothing more than initial establishment costs, while the available feed supply at the time of purchase added value in his opinion equivalent to an alternative cost of buying feed or agisting stock elsewhere, had such agistment been available.
           Mr Jones was confident that the unimproved value shown by the departmental analysis of the purchase price of "Winooka" was fair.  He was of the opinion that, as the development cost attributable to timber treatment included the establishment of improved pasture the existence of the available stock feed was in fact recognised.  In his view a prudent grazier vendor would endeavour to market a property to its best advantage and the availability of pasture for stock grazing was a desirable management and sale strategy.  He could not accept that a body of pasture should be categorised as having an additional "crop" value, but conceded that the weight to be given to the evidence of a particular sale might be lessened in circumstances where the existence of stock feed was a distinct consideration of the purchaser.
           The evidence is clear that in this case the lessees were of the opinion that the availability of pasture was an important consideration in their purchase.  The expert evidence of Mr Jones as to the added value of the various components in the sales analysis is otherwise accepted.
           There was no real dispute as to the nature of the country comprising "Elsie Hills", except that Mr Lawrence was adamant, based on actual stock losses, while Mr Jones found it difficult to accept, that heartleaf poison bush also existed in sections of the area classified as comprising 770 ha of Sandier SLIB and pine desert.  I have no reason to doubt the veracity of Mr Lawrence's evidence in that regard.
           On the overall comparison of "Elsie Hills" with that of "Winooka" overall, it appears that Mr Jones has considered the worth of the better type of recently developed forest country as an extension of the better forest country on "Vannen", which is the factual situation.  However, as an individual holding that better country on "Elsie Hills" is restricted to fairly limited pockets within the north-eastern quarter, isolated from the second sandier desert classification by the relatively large area of inferior heartleaf desert and unusable lancewood/bendee ridges.
           There can be no doubt that "Elsie Hills", as an individual unimproved holding, would be seen in the marketplace as inferior grazing country with very limited economic use potential.  It was suggested by Mr Jones but not accepted by Mr Lawrence on the basis of its remote location, that "Elsie Hills" would possess "a nominal minimum in situ" value of $10,000.  There was no evidence before the Court to support a finding that a site value market existed in this specific locality at the relevant date.  The highest and best use of "Elsie Hills" would appear to be in association with adjoining lands, but even so its quality would not be expected to generate serious competition amongst adjoining or nearby owners.
           I am unable to accept however the lessees' argument that a fair analysis of their purchase of "Elsie Hills", as part of the "Winooka" aggregation, confirms the low level of value applied under the Valuation of Land Act for rental purposes.  Nevertheless there is obvious difficulty involved in the use of the overall sale of "Winooka" as a primary basis for the valuation of part of that aggregation.  This is particularly so when the relative worth of the lesser relative percentage of better country on "Elsie Hills" requires consideration not as being part of the overall aggregation, but specifically limited to its association with the subject individual holding.
           Mr Jones looked to the sales of three other properties as part of his valuation basis.  Broad details of those details and comparisons with "Elsie Hills" are as follows:

(1)"Wattlevale", 3,850 ha, sold for $80,000 in February 1998, analysed to show an unimproved value of $3.41 per ha, described as a very similar rough block to the subject and only slightly superior country mix, with better location/access to Barcaldine/Blackall.  The block is 61 km east of Barcaldine via the bitumen sealed Capricorn Highway then 1 km of gravel road over a railway crossing. 

Mr Lawrence did not know the country on "Wattlevale" with any particularity but saw the relative location and access as being so far superior as to make a market value comparison with "Elsie Hills" near impossible.

(2)"Helensvale", 4,224 ha, sold for $175,000 in June 1998, analysed to show an unimproved value of $4.43 per ha, described as superior to the subject land in country type but with similar access, location and size, being in the same general location as "Elsie Hills".

Mr Lawrence agreed that "Helensvale" enjoys superiority in the type and mix of country.  He believed that the structural improvements on "Helensvale" were of particular attraction to the use contemplated by the purchasers and as such added greater value to the land than had been found in Mr Jones' analysis.  Nevertheless the only professional valuation evidence in that regard came from Mr Jones.

(3)"Mafeking", 9,330.03 ha, sold for $210,000 in December 1995, analysed to show an unimproved value of $5.56 per ha, described as overall superior in country type, being more open desert, the main similarities with "Elsie Hills" being location and access.  The size of "Mafeking" was noted as being twice that of "Elsie Hills".

Mr Lawrence had no real knowledge of "Mafeking". 
Conclusions:
           From an unimproved valuation perspective the best evidence of value is found in sales of vacant or lightly improved properties where there is no room for argument as to the added value of improvements.  The first sale, that of  "Wattlevale", best meets the lightly improved criterion and it is of generally comparable size with only slightly superior country.  However its location and access is significantly superior and I accept that that feature alone provides it with greater overall superiority than Mr Jones' valuation of "Elsie Hills" would suggest.
           While there is better support for Mr Jones' valuation obtained from the sales of "Helensvale" and "Mafeking", I have formed the opinion that with the poor demand which "Elsie Hills" would be expected to command in the marketplace, even from adjoining or nearby owners, some reduction in Mr Jones' valuation is warranted.
           I will determine the unimproved value as being equivalent to $2.45 per ha, the calculation rounded to the practical real estate figure of $10,500.
Decision:
           Pursuant to sub-s.(3b) of s.419 and sub-s.(1) of s.434 of the Land Act 1994, the review decision is set aside and the unimproved value of the land comprised in "Elsie Hills" determined in the amount of Ten Thousand Five Hundred Dollars ($10,500) (rounded from $2.45 per ha).

RE WENCK
MEMBER OF THE LAND COURT