Libella Dion Pty Ltd v Chief Executive, Department of Natural Resources
[1997] QLC 30
•21 March 1997
|
BRISBANE
21 MARCH 1997
Re: AV95-581
An appeal against an unimproved valuation -
Valuation of Land Act 1944 -
Local Authority: Gold Coast
Libella Dion Pty Ltd
v.
Chief Executive, Department of Natural Resources
(formerly Department of Lands)
(Hearing at Coolangatta)
D E C I S I O N
The appellant in this matter, Libella Dion Pty Ltd, is one of a group of companies which I will call the Galli Group, which includes Libella Dion, Galli Developments (Qld) and Natwide Property and Financial Services, the last mentioned company trading under the name “Arundel Homes”. Galli Developments has carried out a substantial townhouse development at Mudgeeraba on the Gold Coast and continues to develop subdivisions at Arundel Park and Arundel Crest Estates.
Libella Dion acquired the land which is the subject of this appeal in either late 1988 or early 1989, the land having been part of a larger parcel. The local authority approved rezoning of the land to “Special Facilities - Hotel, Service Station, 4 Shops” some time after the acquisition, however, development did not ensue. Mr Bryan Kelaher, a registered valuer in private practice, gave evidence on behalf of the appellant and he said that a feasibility study had been carried out with respect to the subject land and that study revealed that development of the land “would not be economic for some years - if ever”. Details of the feasibility study were not put into evidence, nor was it explained what plans Libella Dion had at the time of purchasing the subject land. The directors of the appellant company decided that some use needed to be made of the land and in due course a plant nursery facility was established on part of the land and an area was sown to turf: details of these matters appear later in this decision.
Mr Kelaher said that the subject land has an area of 6.946 ha and is located on the corner of the Gold Coast Highway and Arundel Drive, Parkwood, on the Gold Coast. He said in one part of his evidence that the land is level with both streets and slopes upwards to a flat-topped hill; however, said elsewhere that the land is level with Arundel Drive, but considerably below the Gold Coast Highway and is being filled in stages, and slopes gently upwards to a flat-topped minor hill. Nothing turns on this apparent discrepancy in land description. The purpose of the filling of the low land was not explained in evidence, in particular, whether it was connected with possible future redevelopment.
The respondent Chief Executive has placed a valuation of $1,250,000 on the subject land as at a relevant date of 1 January 1995 pursuant to the provisions of the Valuation of Land Act 1944 (the Act). The appellant objected to this valuation and, having failed to convince the Chief Executive to reduce this figure, appealed to this Court. The appellant contends that the land ought to be valued as “farming” land pursuant to the provisions of s.17 of the Act and for such a use the valuation of the land should be $300,000. In the alternative, the appellant said that the valuation of the Chief Executive on the basis of the highest and best use of the land is too high and such valuation should be reduced to a figure of $900,000. Mr Kelaher gave evidence in support of the appellant’s figures. Mr Shane Raymond Stirling Montgomery, a registered valuer employed by the Department of Natural Resources, which includes the former Department of Lands, gave evidence in support of the proposition maintained by the respondent that the subject land should be valued on the basis of its highest and best use and not in accordance with the “farming” definition of s.17 of the Act. Valuation evidence was not tendered by the respondent.
The Chief Executive respondent put into evidence, through Mr Montgomery, a document referred to in evidence as a “primary production form” which includes a series of questions posed by the Chief Executive seeking information from the relevant landholder concerning the use of the land in question. The form had been supplied to the appellant company as part of the process of the Chief Executive placing a valuation on the subject land following objection and the company responded on 22 May 1995 in accordance with the directions and questions on the form. I will detail the relevant contents of the primary production form later in this decision, however, I should mention now that it was the information supplied by the company on that form which formed a basis of the decision of the Chief Executive or his delegate that the subject land should not be valued as farming land pursuant to s.17 of the Act.
This appeal is essentially concerned with the question of whether the use of the subject land satisfies the definition of “farming” supplied by s.17 of the Act. Mr Kelaher’s valuation of $300,000 for the land as land used for the purposes of plant nursery and turf production is accepted as being appropriate by Mr Montgomery, so I will not descend into the detail of how Mr Kelaher arrived at his figure. The valuation of the land for its highest and best use, however, is marginally more complex in that, whilst there is disagreement between the parties as to the value that ought to apply on this basis, Mr Kelaher’s figure of $900,000 was not supported by either sales evidence or other valuation evidence. He said that sales relied upon by him in another matter heard by the Court supported the figure that he contended for, however, no detailed reference was made to these sales, either in identifying them or in making any comparisons and there was no agreement between the parties that I should take into account evidence in another matter in considering the question of the valuation in this case.
The High Court case of Brisbane City Council v. The Valuer-General (1978) 5 QLCR 283 at 303 provides the guide as to what is required for an appellant to show that the Chief Executive's valuation is wrong:-
"The question then is whether a court on appeal is bound to accept the Valuer-General's figure as correct unless it is positively established that the true value is lower, or whether it is enough to show that the value was reached as the result of an error in principle. In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle, or made a serious error of fact, the presumption created by s.13(7) is rebutted."
The relevant section in the current Act is s.33:
“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.”
Clearly the appellant has not discharged the onus of proof on the question of the valuation which would apply to the land if it is to be valued for its highest and best use. It follows that if I find that the use made of the subject land satisfies the definition of “farming” contained in s.17 of the Act then the valuation of the subject land would be $300,000; however, in the event that that definition is not satisfied, the valuation of $1,250,000 determined by the Chief Executive would remain undisturbed.
Evidence concerning the subject land and dealings between Libella Dion and Galli Developments was given by Mr Kerry Finn, the general manager of the appellant company and of other companies in the Galli Group. Mr Finn has held the position of general manager since 1990 and prior to that was a consulting surveyor and, in that capacity, had been professionally involved with the principal of the Galli Companies, Mr Lorenzo Galli, since 1982. Mr Finn explained that Galli Developments (Galli) needed plants as part of a scheme which involved Galli supplying an issue of free plants to purchasers of its developed land. An opportunity was seen for Libella Dion to make use of its land, and to meet Galli’s needs, so the appellant proceeded to develop a plant nursery and to establish an area of turf. Mr Finn said that the land has been put to no other use. Following the establishment of the plant nursery, plants were sold almost exclusively to Galli, though on occasions sales to builders at Arundel Park had taken place. Galli did buy from other sources if Libella Dion was unable to supply the needed stock, however, purchased exclusively from Libella Dion when suitable stock was available. I was not told, but I assume that turf was also sold to Galli.
Mr Kelaher gave evidence that similar “internal” nurseries operated at the Robina and Villaworld subdivisions. He added that the Chief Executive had valued the relevant lands at those locations as “farming” lands, though no further detailed evidence was provided concerning the scale of use or the method of operation in those two instances.
Mr Finn said that each of the companies in the Galli Group has to be financially viable in its own right and the companies are arranged to operate at “arm’s length”. He did say, however, that some, though not all of the directors, are common to each company and it occurs to me that the arrangement between the companies concerning the sale of plants is evidence of a close relationship between the companies. In addition to this, I note that there is a sign on the subject land which at the relevant date said -
“ Galli Developments Nursery
For Parks and Garden Beautification of Arundel Park, Arundel Crest, Arundel Gardens”
The relevance of this sign will become apparent when I deal with the Chief Executive’s submissions concerning the application of s.17 of the Act in the subject case.
There is commonality in the evidence of the parties that an enclosure containing plants is on the subject land and turf is grown on part of it, but beyond that, the facts are not agreed to. There was a lack of agreement about the size of the plant nursery enclosure; the number and type plants it contains; whether the potting of plants occurs on the subject land; the date at which the nursery usage commenced; the size of the area of turf; as well as the financial information in the form of expenditure and income of the enterprise on the land. I will need, therefore, to consider these questions of fact first of all.
Mr Finn gave evidence that the plant nursery and turf growing commenced in the 1992-93 financial year and that the site preparation activities included: clearing, the importation of topsoil, spreading and preparation of that soil, the application of weedicide, the construction of a dam, the installation of a pump and associated irrigation, the construction of an enclosure around the actual nursery area and the initial purchase of plant stock. Mr Montgomery’s evidence is, however, that when he inspected the subject land in company with a Mr John Dewar on 14 April 1994, a plant nursery was not on the site but that a “new” nursery had been established between that date and the date of a later inspection on 24 June 1994. Mr Kelaher said that he thought the nursery started in 1993, but certainly before June 1994. I assume the source of this information was his client. A schedule of expenditure and income, which I refer to in detail later in this decision (called by me the “financial schedule”) and which was tendered by Mr Kelaher, suggests that the establishment of the plant nursery and the turf planting commenced in the 1992-93 financial year.
Whilst I have no evidence to explain why Mr Montgomery did not see the nursery enclosure during his inspection of the subject land in April 1994, the weight of the evidence indicates that the establishment of the plant nursery and turf commenced in the 1992-93 financial year. Certainly, it is clear that the parties agree that an area of turf had been established prior to April 1994 and that the plant nursery enclosure and plants were in place on 1 January 1995, which is the relevant date for the purposes of valuation.
Mr Montgomery said that the nursery enclosure covered an area of 1,000 m², that he did not measure this by use of a measuring tape or by pacing out, but that he calculated this area by reference to the number of fencing panels he had observed. He explained that there are between 10 and 12 fence panels on each side of the enclosure, with each panel being about 3 metres in length. He said that after he had arrived at his calculation of the area of the plant nursery enclosure, he had read the primary production form referred to above which indicated, in answer to a question on that form, that the plant nursery had an area of about 6,000 m². This “rang alarm bells” with him, so he arranged for another officer to check the size of the enclosure. The name of the officer and the time of inspection by him was not put into evidence, however, according to Mr Montgomery, the officer agreed with his calculation of the nursery enclosure area. For Mr Kelaher’s part, he said that an area of 1,000 m² “sounds small to me”. He estimated the nursery area at 4,000 m², but apart from saying that he had not measured the enclosure, gave no indication as to how he had arrived at his estimate. Mr Finn was not asked about the size of the enclosure. The weight of evidence supports Mr Montgomery’s conclusion that the area of the plant nursery enclosure approximates 1,000 m² and this is the figure that I will now adopt.
There was evidence from Mr Finn that Libella Dion acquires plant stock in two ways. He said that one method is to purchase advanced stock or semi-advanced stock from other nurseries or enterprises that are struggling financially and to grow them on for a period of time and then resell them to Galli. Alternatively, Libella Dion purchases stock in the form of plant tubes, which are one step above a seed, and these are, in due course, potted and grown on for up to a year before being sold. He said that average stock held in the plant nursery enclosure in the year leading up to 1 January 1995 numbered 3,000 to 4,000 in total. I understand these figures to include small plant tubes as well as larger plants. Mr Montgomery’s estimate of the number of plants in the enclosure when he visited the site on 24 June 1994 was a total of 200 potted plants, most of them being palms. He said that he saw no plant tubes of the type described by Mr Finn. Mr Kelaher estimated “thousands” of plants ranging from small ones to palms with a height of 24 feet, though he said he had made no attempt to count the plants. He did, however, provide a photograph taken in September 1994 which appears to show substantially more than 200 plants and his photograph seems to me to be supported by two less clear photographs provided by Mr Montgomery. Two hundred plants spread over 1,000 m² of plant nursery would mean that each plant would occupy an average of 5 m², resulting in either a large number of plants being concentrated in one part of the enclosure or in plants being separated by some considerable distance. In this instance, the weight of evidence supports there being thousands as distinct from hundreds of plants in the plant enclosure, on average, in the year up to 1 January 1995 and, given Mr Finn’s evidence, I will proceed on the basis that the plant nursery contained an average of 3,000 to 4,000 plants during that period ranging from small tubes to large palms.
In contrast with Mr Finn’s evidence concerning the potting activities carried out on the subject land, Mr Montgomery said that he saw no evidence that such activities were carried out. He said that he saw no greenhouse for seedlings, no potting shed, nor any piles of potting mix or pots. Certainly there was no evidence from the appellants regarding the presence of a potting shed or a greenhouse, nor, in fact, any evidence as to the facilities used in the potting process. Similarly, there was no evidence of the number of stock propagated by the potting process, nor of what resources were actually devoted to producing plants in this manner as distinct from simply purchasing stock and holding it for on selling in due course. Nevertheless, I accept Mr Finn’s evidence that potting, indeed, did take place on the subject land. Mr Finn said that a Mr Lucianno Miniutti is employed as a nurseryman at the site and that his role was to pot on tubes, keep the plants weed free, fertilise and water them as required. There was no evidence as to Mr Miniutti’s experience or qualifications in the practice of a nurseryman, however, Mr Finn did say that he is employed for about 30 hours a week “almost every week”.
I will now deal with the evidence concerning turf growing. Mr Kelaher said that he estimated about 2 ha of land was used for turf production on a “rotational” basis. I understand the term “rotation” to usually refer to the agricultural practice where a crop is grown on a certain piece of land then, following harvest, a different crop is grown there, followed then perhaps by the replanting of the initial crop. Rotation would generally therefore be used for annuals, not perennials of the type usually grown in the production of turf. I take it then that Mr Kelaher’s reference to “rotation” should probably be taken to mean that the growing and harvesting of turf on the subject land was associated with a sequence which was not fully explained to me. Perhaps it simply means that mature turf was harvested and then allowed to regenerate by remaining runners. What is important about Mr Kelaher’s evidence in this regard is that neither Mr Finn nor Mr Montgomery agreed with his estimate of 2 ha. Mr Finn agreed that in April 1994 about 4,750 m² of turf was established, this area having been estimated by Mr Montgomery who said that the turf area approximated 190 metres in length by 25 metres in width. Mr Kelaher agreed that about 4,750 m² of turf would be in production at the one time. He tendered a photograph showing turf in full growth and preparations for another turfed area, the photo having been taken in September 1994. The photograph tends to corroborate Mr Montgomery’s written statement which said that in March 1995 he found that a further area of about 7,000 m² had been prepared for turf production, an estimate again apparently agreed with by Mr Finn. As I understand it, the 7,000 m² area would have been the area identified as being in preparation in the photograph tendered by Mr Kelaher though he was not asked whether he agreed that it covered 7,000 m².
Mr Finn gave evidence that two crops of turf had been taken off the subject land leading up to 1 January 1995, the first being a crop of about 5,000 m² in, as I understand it, late 1993 and another crop of about 2,000 m² in the 1994-95 year. I take it that the second crop came from the same parent area as the original 5,000 m². Given the apparent agreement of area between Mr Montgomery and Mr Finn and a consistency between that and the area of crop taken off; and that Mr Kelaher advanced no cogent reason why his estimate of 2 ha was the more accurate, I will accept that, at the relevant date, about 5,000 m² of turf was developed on the subject land and another approximately 7,000 m² of land was prepared for turf planting, but was not planted. Before leaving the evidence regarding the turf grown on the subject land, I should mention that it was Mr Kelaher’s view that, as far as turf farms go, the soil on the subject land is poor and, in association with this description, he used the descriptive phrase “lower class” of turf farm.
The pricing policy which applied to plants sold from Libella Dion to Galli was, according to Mr Finn, based on estimates of prices that would be charged by other nurseries. In other words, commercial prices were paid. He said that turf was sold at $1.80 per m², though there was no evidence that for the type, quality and quantity of turf produced, this was a market price, however, there was no suggestion from the Chief Executive’s side that the price was not to market. Mr Finn also described the bookkeeping procedure involved whereby plants are booked out of the nursery by way of a claim form which is provided to the central office which records the transactions in the internal group accounting system. Mr Finn’s role, amongst others, was to ensure that the number of plants that are supplied by the nursery are properly recorded but that from that point the accounts people would take over. The record of plants is taken by both the nurserymen and the building supervisor who was employed by Arundel Homes and, presumably, such records are countersigned or reconciled in some manner. It seems to me that the method of stock control and charging would be consistent with acceptable practice, given the circumstances of associated companies.
Mr Kelaher tendered as part of his valuation a document entitled “Libella Dion Pty Ltd - Nursery Cost and Return” (financial schedule), which revealed costs of development, running costs and income from sales for the years 1992-93, 1993-94 and 1994-95. The document also includes figures for 1995-96, however, I have excluded those from my consideration, as I should exclude any evidence regarding the use of land which falls outside the period of jurisdiction. That period concludes on the date of issue of the valuation: 20 February 1995 (RG McMurray v. The Valuer-General (1983) 9 QLCR 35). I similarly excluded such out of jurisdiction evidence sought to be relied upon by the respondent. In his written statement, Mr Kelaher referred to “the attached minute of Mr Kerry Finn” when referring to the financial schedule; however, Mr Finn said that the schedule had been prepared by the financial controller of the company as a summary to give an indication of the income and expenditure of the nursery site over the last several years. Neither Mr Finn nor Mr Kelaher was able to swear to the accuracy of the document. All that Mr Finn was able to say was that he believed the schedule to be true and correct because “our financial controller is a very competent person”. Certainly there is no disagreement between the parties that funds have been expended on the land in the manner described by Mr Finn, however, there are differences in material fact between the financial schedule tendered by Mr Kelaher and the primary production form put into evidence through Mr Montgomery. The financial schedule set out these figures:
COST AND RETURN TO 20.5.96
COST OF DEVELOPMENT
Clearing, Grubbing & Site Prep $3,650
Import treated topsoil (2500m @ $14.50/m) $33,750
Spreading & Preparation $1,860
Pre-emergent weedicide seed, fertiliser $3,028
Dam excavation & removal surplus material $5,780
Chain Wire enclosure $5,625
Irrigation pipes & fitting $5,426
Irrigation pump & motor $1,940 $61,059
RUNNING COSTS 92/93 93/94 94/95
Cost of sales - tube, plant stock
Potting mix, pots, turf seedlings $9,400 $12,855 $19,975
Maintenance, watering, weed control $10,500 $20,210 $22,000
Fertiliser - turf $0 $1,080 $2,228
$19,900 $34,145 $44203
SALES 92/93 93/94 94/95
Plants - Townhouses contract $9,840 $14,600 $21,000
Plants - houses $12,000 $12,000 $10,000
Turf $10,400 $4,000
TOTAL $21,840 $37,000 $35,000
In the primary production form there were a number of questions and answers, four of which I now set out:
“ Please Advise the Following Details (If Applicable)
(1)The area and type of crop (including orchards/plantations) grown each year during the last three years.
(Answer) Turf - 3 strips of about 6000 m² each rotating
Nursery - about 6000 m² plants grown on site
(2)The number and type of livestock depastured on the land each year during the last three years.
(Answer) Turf - about 5000 m² pa
Nursery - about 20,000 plants pa
(3)Details of income received from the sale of crops or livestock each year during last three years.
(Answer) About 20,000 dollars pa and increasing
(4)Details of expenditure incurred in the production of the above income each year during the last three years.
(Answer)Overall about 185,000
Plants & materials - about 18,000 dollars pa & increasing
Wages - 1 gardener - about 25,000 dollars pa and increasing.”
Now I notice that the figures relating to the area of turf, size of nursery and number of plants differ from those mentioned earlier in this decision, however, I have preferred not to have regard to the contents of the primary production form in deciding the questions of fact that I have thus far, particularly given that I have had sworn evidence from witnesses in respect of each of the matters upon which I have drawn conclusions.
The primary production form’s figures, as far as I can understand them, appear to show a business undertaking which has not yet come into profit, whilst the figures produced by Mr Kelaher in the financial schedule show a modest profit for each of the first two years and a loss in the third. Mr Finn explained the financial schedule figures by saying that the nursery and turf facility was, during these years, in the process of being established; and that particularly in the 1994-95 year this was the case as much of the stock was in the growing stage and so could not be sold to Galli for use.
I have attempted to, but cannot reconcile, the expenditure and income figures between the primary production form and the financial schedule and it is a matter of regret that no attempt was made by either party to address this matter during the hearing. Significantly, it appears that the primary production form was signed by Mr Finn in May 1995, yet the contents of the form and the conflict between those contents and the financial schedule were not put to him in cross-examination. Mr Montgomery’s written evidence, including the primary production form, was tendered for identification whilst Mr Finn was giving his evidence-in-chief, and Mr Cronin, for the appellant, put certain questions to Mr Finn arising out of the contents of Mr Montgomery’s statement, yet put nothing to Mr Finn concerning the contents of the primary production form. It seems to me that Mr Finn and, perhaps, the financial controller of the appellant company are the only persons who may be in a position to explain the contents of the primary production form, whilst the financial controller is the only person who may attest to the accuracy of the contents of the financial schedule. For completeness, I should add that Mr Crowley, for the respondent, objected against my receiving the financial schedule, not because it was hearsay evidence but because the respondent had previously received and had acted in reliance on the contents of the primary production form. I did not allow the objection. I now find that as the evidence fell, I am left without evidence of any cogency concerning financial aspects of the enterprise carried out on the subject land.
I come now to the question as to whether the evidence meets the definition of “farming” in s.17 of the Act. It is clear from Mr Montgomery’s evidence that the Chief Executive or his delegate made his decision on the application of s.17, based on Mr Montgomery’s inspection of the subject land and on the contents of the primary production form. Both Mr Cronin and Mr Crowley questioned Mr Montgomery about the application of the elements of the “farming” definition in s.17 to the evidence, however, with regard to the questions of law that I have to decide, I intend to rely on submissions made and not on the opinions expressed by Mr Montgomery.
Section 17(1) of the Act provides for what I might term a protective valuation for land used for the purposes of “farming”:
“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.”
The definition of “farming” is provided by s.17(2):
“(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.”
The definition of “farming” was considered by the Land Appeal Court in Thomason v. Chief Executive, Department of Lands (Land Appeal Court not yet reported - 3 March 1995) and following its consideration of the statutory provisions, the Court said:
“If land is to be valued under section 17(1) on the basis that the land is ‘exclusively used ... for purposes of farming’, each of the following questions must be answered in the affirmative:
1.Is the land used for the purposes of:
(a)the business or industry of a type specified (namely, 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 an activity of a type specified (namely, the cultivation of soils, the gathering in of crops or the rearing of livestock)?
2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land?
3.Does the use of the land for the purposes of that business or industry have:
(a)a significant and substantial commercial purpose; or
(b)a significant and substantial commercial character?
4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on:
(a)a continuous basis; or
(b)a repetitive basis?”
I will consider the evidence in the instant case and whether its application to the above questions results in affirmative answers.
The Chief Executive conceded that a business or industry of turf growing was carried out on the subject land, however, submitted that the “plant nursery” was not a nursery in the accepted sense, but simply a storehouse for plants which were in due course utilised by Galli. Mr Montgomery agreed in cross-examination that the tending and maintenance of plants for a period would constitute “horticulture”, as far as he understood it, however, the evidence goes somewhat further than this, as I have accepted Mr Finn’s evidence that there was an activity of potting and growing out of tubed plants carried out on the subject land.
The Macquarie Dictionary supplies the following definition of “horticulture”:
“1.Commercial cultivation of fruit, vegetables, and flowers, including berries, grapes, vines and nuts.
2.The science or art of growing fruit, vegetables, flowers or ornamental plants.
3.The cultivation of a garden”;
and the following definition for the word “cultivate”:
“1.To bestow labour upon (land) in raising crops; till; improve by husbandry.
2.To use a cultivator on.
3.To promote or improve the growth of (a plant, etc.) by labour and attention.
4.To produce by culture.”
In placing a broad connotation on the word “commercial” employed in the above definition, I hold that the business or industry of “horticulture” was carried out on the subject land by virtue of the activities conducted in association with the nursery and that the turf growing carried out on the subject land satisfies paragraph (b) of the “farming” definition.
The second question posed in Thomason asks whether the business or industry represents the dominant use of the land. The Land Appeal Court said in that case:
“In our opinion, the expression "dominant use" implies that some other use may be made of at least part of the land.”;
that is, some use other than the farming use. Elsewhere in its decision the Court said:
“In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in section 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole.”
In the case before me the objective observer would see that the only active use of the land is for horticulture and turf growing, and that the bulk of the land is put to no use at all. On my conclusions on the evidence, 5,000 m² is used for turf production and 7,000 m² is prepared for that purpose, whilst 1,000 m² contains a nursery enclosure. This adds up to about 1.3 ha out of a total of 6.9 ha. The question arises as to whether the absence of any use of the bulk of the land is a factor which calls for consideration. Having regard to the language of Thomason quoted above, I am led to the view that it is the presence of the active uses of horticulture and turf growing to which I must have regard, therefore, if these are the only active uses on the land, then the land is being exclusively used for those uses and the question of “dominant use” does not arise. Section 17 of the Act is concerned with the protection of the use and is not concerned with whether the user is the owner or some other party (BB Smith v. The Valuer-General (1983) 9 QLCR 22) nor with the level of protection that the landholder receives. For example, if one were to carry out farming on a block of land fronting Brisbane’s Queen Street Mall which would otherwise attract a very high value, the land would be valued as farming land, even though the level of “discount” in value would be substantially greater than that which would apply in a case where the highest and best use of the land attracts a value which is only marginally higher than its farming value. The presence of a farming use is sufficient. I therefore conclude that the fact that part only, indeed a proportionately small part of the subject land, is put to the use of horticulture and turf growing, and that the balance of the land is not used (apart from what I say in the next paragraph) is not relevant to the question of whether the subject land is used for “farming”.
It was submitted on behalf of the Chief Executive that the presence of the sign referred to earlier in this decision suggests an additional use is made of the subject land to those of plant nursery and turf growing; that is, the use of advertising Galli Land Development Estates. Certainly, there is no clear need for the sign to advertise the nursery for its business purposes, as sales are not made direct to the public. The presence of the sign and its language is clearly for the benefit of Galli and its business, though the benefit would appear to be indirect in terms of promoting the sale of land. Perhaps it enhances the corporate profile of Galli. Whatever the benefit perceived by Galli in locating a sign on the subject land, it is a use which is collateral not incidental to the plant nursery and turf growing use, however, having regard to the matters that the Land Appeal Court said in Thomason are relevant considerations in deciding the question of “dominant use”, I conclude that the nursery and turf growing activities constitute the dominant use of the land.
Before coming to the third question posed in Thomason, I will deal with Question 4 relating to whether the business or industry is engaged in for the purpose of profit on a continuous or repetitive basis. I think it can be safely assumed that the activities carried out on the subject land are carried out for the purpose of profit. If I have regard to the nature of the improvements on the land and the obvious expense in carrying them out; and the pricing of products for sale to Galli, to name but two matters, a profitable outcome appears to be in the mind of the directors of Libella Dion.
I am not convinced, however, that the nature of the use of the land for the purpose of a plant nursery and turf growing satisfies the requirement of being engaged in for the purpose of profit “on a continuous or repetitive basis”.
I note that in clause (d) of the definition of “farming” the statute uses the present tense, that is, “is engaged”. It follows that in considering this element of the s.17 definition it is appropriate to have regard to not only the history of the use of the land and its past
profitability, but a prospective view must also be taken. Indeed, I would have thought that it is the prospect of a continuity in profit that is the hallmark of being a business. If on 1 January 1995 one is engaged “in a business or industry”, of the types mentioned in s.17(2), “for the purpose of profit on a continuous or repetitive basis”, one should be able to demonstrate the prospect of a profit emerging or continuing for the foreseeable future. Such a prospective view may be amply supported by evidence of a strong history of business management and trading where such is available and where there is no evidence which leads to a conclusion that the future will be other than a continuation, or possible growth of the enterprise. In cases where a profit has yet to be produced by the enterprise or where it lacks sufficient trading history, there will be a greater need for evidence (other than evidence of an historical nature) which indicates the continuation of the enterprise and the prospect of future profits. The present case is one of that type. It has traded since the year 1992-93 only and, as such, does not have a strong history of management and profitability which might indicate what the future holds. In short, there is nothing in past trading figures which leads me to a clear conclusion that future trading should be profitable even if I disregard the figures contained in the primary production form.
The plant nursery and turf growing commenced as an opportunistic use of the land as in the mind of the directors of the appellant company the commercial development of the land was not economically timely, however, there is no evidence before me to say whether a development might be deferred one, two or 10 years. Whilst Mr Kelaher said that the feasibility study carried out by the appellant “revealed that it would not be economic for some years - if ever” for development to be carried out, he carried out his valuation of the land on a commercial basis using a method that is sometimes referred to as the “top down” method. That is, a value is placed on the land as if it were ripe for commercial development, then that value is discounted, having regard to such matters as the time lapse until development should occur. In Mr Kelaher’s approach he has discounted by an amount of 25% only which would support the proposition that commercial development of the land would emerge in the foreseeable future.
My concern about this issue is compounded by the failure of the appellant to tender or even orally outline a business plan for the enterprise carried out on the subject land. In his written valuation report, Mr Kelaher described the areas of the subject land being used for plant nursery and turf growing then added these words: “balance area held for expansion”. This suggests that a business plan does exist, though it was not expressly referred to. Presumably such a plan would need to take into account Galli’s future needs and whether they would expand sufficiently to allow the utilisation of more of the subject land, indeed, of the “balance area”. On the evidence that I have heard, I am unable to draw a conclusion that the use of the land for plant nursery and turf growing purposes has the characteristic of continuity usually associated with a business. I am unconvinced on the evidence that the enterprise will continue into the foreseeable future and will generate sustainable profits.
Before leaving Question 4, I should comment on an issue initially raised by me in passing, then pursued by Mr Crowley on behalf of the Chief Executive. That issue is whether the value of the subject land should be taken into account in calculating figures of profit or loss. In the case before me, the evidence is clear that the land has a higher value for commercial purposes than it does for plant nursery and turf growing purposes. If the plant nursery and turf growing uses were not carried out on the land, Libella Dion would be obliged to cover the costs of holding and maintaining the land until development, either at its current or historical value without the benefit of any offset from income. The plant nursery and turf growing activities, to the extent that they may, provide the opportunity for revenue and an offset of expenses and, as such, it would not be appropriate at least in the instant case, for the value of the land for either commercial or nursery purposes, to feature in an assessment of the profitability of the enterprise carried out on the land.
I return now to the third question posed by the Land Appeal Court in Thomason and that is to ask whether the use of the land has a significant and substantial commercial purpose or character. The respondent’s first submission with regard to this question is that the activities carried out on the subject land are not commercial in that Libella Dion is not selling to the public and the arrangement between itself and Galli are not at arm’s length. Whilst the evidence indicates that the two companies are not totally at arm’s length, this is not a matter of concern to me. If, for example, Galli owned the subject land or managed the plant nursery and turf growing activities there for its own purposes, there would be elements of commerciality about such an arrangement for it may allow Galli to buy product in bulk and in circumstances when a price advantage is presented. It follows then that I do not see the present arrangement between Galli and Libella Dion as lacking in commercial features. Whether Galli could have purchased plants and stored them and cared for them on its own land and whether this might have resulted in a lower cost for Galli, is not relevant. Section 17 of the Act directs me to consider the use of the land. Whether companies, having common directors, arrange companies’ affairs in a way that is beneficial to them or otherwise, is not a matter which the Valuation of Land Act requires that I take into account.
Having said this, there is a significant difficulty which I have in dealing with this third question arising out of s.17 of the Act and that is whether the undertaking on the subject land is either “significant” or “substantial” in its commercial purpose or character.
The Land Appeal Court had this matter to consider in Chief Executive, Department of Lands v. Whackett (Land Appeal Court not yet reported - 3 March 1995) where these words are recorded:
“The commercial purpose or character must be both ‘significant’ and ‘substantial’. Each word is imprecise.
The dictionary definitions of ‘significant’ include ‘noteworthy, of considerable amount or effect or importance’ (Australian Concise Oxford Dictionary) and ‘important; of consequence’ (Macquarie Dictionary). In Hope v. Bathurst City Council [1979] 2 NSWLR 471 at 477, Samuels JA suggested that, although the word ‘significant’ as used in the expression ‘significant commercial purpose’ is ‘perhaps inadequate for the work here required of it’, it is intended to mean ‘important’, or ‘real’, or ‘genuine', or ‘weighty’ (see also Hope v. Bathurst City Council (1980) 144 CLR 1 at 9 per Mason J).
The word ‘substantial’ has been judicially described as ‘not a word of fixed meaning in all contexts’ (Terry's Motors Ltd v. Rinder [1948] SASR 167 at 180 per Mayo J) and as a word that ‘is not only susceptible of ambiguity’ but that is "calculated to conceal a lack of precision" (Tillmanns Butcheries Pty Ltd v. Australasian Meat Industry Employees Union (1979) 42 FLR 331 at 348 per Deane J). In the present context, it would seem to connote something of real importance, worth or value and of considerable amount which pertains to the essence of the purpose or character (see Australian Concise Oxford Dictionary, Macquarie Dictionary).
It is difficult, and unnecessary, to state a precise and compendious meaning of the expression ‘significant and substantial commercial purpose’ and ‘significant and substantial commercial character’. Bearing in mind the various connotations of the words ‘significant’ and ‘substantial’ it is perhaps sufficient for present purposes to say that for section 17(1) of the Act to apply to the subject land there must be evidence that:
(a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or
(b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit.”
Further on in the Land Appeal Court’s decision the Court referred to Taylor v. Chief Executive, Department of Lands (1993) 14 QLCR 477 and in particular endorsed the following words in that decision:
“... it will still be necessary to consider each case on its own merits and it is still not possible to pose a simple test in this regard ... Each enterprise is different and it is not possible to set numerical or financial requirements which would be applicable for all or any of them." (p.489)
Whilst the physical dimension of the undertaking cannot by itself be a reliable indication of significance or substantiality, it can provide an initial guide. The question I ask here is whether a 1,000 m² nursery enclosure containing an average 3,000 to 4,000 plants and with the limited facilities described earlier in this decision; together with 5,000 m² of turf and a possible further 7,000 m² constitutes a significant and substantial enterprise of the type carried out on the subject land. I have no suitable evidence to answer this question, the only evidence being in the form of comments made by Mr Kelaher about his nursery sales, where the relevant nurseries without turf growing are said to have areas of about 1 to 1.5 ha. Even if I take that to be an over-estimate, the nursery enclosure on the subject land is substantially smaller than those mentioned in the sales. Of course, there is nothing to say that the nurseries in the sales are representative of a standard of plant nursery found in the marketplace, however, in the absence of more suitable evidence, I would be loath, having regard to the nurseries in the sales, to conclude that the nursery activity on the subject land has a significant or substantial character.
I have a similar difficulty with regard to the area of turf grown on the subject land, however, am inclined to the view that 5,000 m² of turf on poor quality soil is a rather small planting.
In his written valuation Mr Kelaher said that the income of the subject nursery “bears favourably with other nursery sites”. If such evidence is available, it should have been provided so that some reliable measure of the significance of substantiality of the enterprise carried out on the subject land could be utilised.
The concerns that I have raised could possibly have been disposed of either by evidence of what occurs in the marketplace or by more reliable financial information concerning the enterprise carried out on the subject land than was provided, and evidence of a business plan. In appeals before this Court the appellant has imposed on it by the statute a burden of proof:
“Section 45(3) An appeal shall be instituted by filing a notice of appeal in the Land Court registry.
(4)Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner.”
I have not been convinced by the appellant in this case that the activities of plant nursery and turf growing carried out on the subject land constitute “farming” as provided for in s.17 of the Act. In Thomason the Court said:
“Section 17(1) provides an exception to the general principle that land should be valued having regard to its highest and best use, and that potential forms part of the unimproved value. The exception should not be applied too readily.”
Accordingly, the appeal is dismissed and the valuation of the Chief Executive in the amount of $1,250,000 is affirmed.
RP SCOTT
MEMBER OF THE LAND COURT
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