Loader v Department of Natural Resources and Mines

[2008] QLC 150

LAND COURT OF QUEENSLAND

CITATION:

Loader v Department of Natural Resources and Mines  [2008] QLC 0150

PARTIES:

Robin L, Kathy L, Brian E and Lynette M Loader
(applicants)

v.

Chief Executive, Department of Natural Resources and Mines
(respondent)

FILE NO:

RV2005/1584

DIVISION:

Land Court of Queensland

PROCEEDING:

Appeal against rental valuation under Valuation of Land Act 1944 – General Division

DELIVERED ON:

22 July 2008

DELIVERED AT:

Brisbane

HEARD AT:

Emerald

MEMBER:

Mrs CAC MacDonald

ORDER:

1.    The appeal is allowed.

2.    The unimproved value of Lot 10 on CP DSN 805047 GHPL 37/3316 in the County of Denison, Parish of Osmondthorpe is determined at $1,085,000 as at 1 October 2004. 

CATCHWORDS:

Evidence – expert witness - valuer acting as witness and advocate – evidence admissible but may affect weight.
Valuation – principles of valuation – Spencer test – whether long term owner had more detailed knowledge of property than hypothetical prudent purchaser – owners classification accepted.
Valuation – analysis of sales – sale applied at less than half analysed figure – sale rejected as being too high to apply in absence of explanation.

APPEARANCES:

Mr RL Loader for the appellants
Mr WA Isdale, Crown Law, for the respondent

1. This is an appeal under the provisions of the Valuation of Land Act 1944 (the Act) against a determination by the Chief Executive, Department of Natural Resources and Mines (the respondent) of the unimproved value of certain land at $1,400,000 as at 1 October 2004.  The property, Wongabell, is held by the appellants, Robin L, Kathy L, Brian E and Lynette M Loader under a Grazing Homestead Perpetual Lease and is used principally for cattle breeding purposes. 

2. Mr PD Schefe, a registered valuer employed by the respondent, compiled a written report and gave evidence at the hearing.  The appellants' case was conducted by Mr RL Loader and both Mr Loader and Mr PJO Turner, a registered valuer of Turner Valuers, gave evidence. 

3. Mr Schefe described Wongabell as an irregular shaped holding of 6,188 ha located about 7 kms from Springsure.  All weather access to the property from Springsure is available via the Dawson Developmental Road which severs the southern portion of the property.  Mr Schefe considered the highest and best use of the land to be grazing purposes.  His valuation of $1,400,000 (6,188 ha at $226/ha) was reached by direct comparison with two sales.

4. Mr Loader said that Wongabell comprised large areas of steep tableland dropping down to steep rocky ridges which run all the way through the property.  The ridges surround the black soil areas and cause severe erosion making them unsuitable for cultivation.  The soil is also very shallow so that no dams can be constructed on the property and water is supplied from bores, which is very expensive.  The subject also adjoins Minerva National Park and the spread of feral animals and weed into the property from the park adversely affects carrying capacity. 

5. Mr Turner said in his report that he had assessed the unimproved value of the subject "by direct comparison of sales and relativity of the Department's unimproved value assessments on adjoining holdings".  He valued the subject land at $866,000 ($140/ha). 

6. The grounds of appeal were –

   "Relativity of valuation on subject property to neighbours valuations being "Rainworth" … and "Minerva Hills" … is not consistent with comparison of country types and quality of the properties".

7. The major issues to be determined are -   

   ·    the credibility and weight to be attached to Mr Turner's evidence including his written report; 

   ·    the classification of the subject land;

   ·    whether the sales relied on by Mr Schefe were comparable with the subject land; 

·    the carrying capacity of the subject land; 

·    whether the valuation of the subject is in relativity with the valuations of two properties identified in the grounds of appeal, Rainworth and Minerva Hills. 

Mr Turner's Report

1. Counsel for the respondent, Mr Isdale, objected to the admission of Mr Turner's report on a number of grounds -   

   ·    the report had not been filed 21 days before the hearing as required by the Court's order of 13 August 2007 but was tendered on the morning of the hearing; 

   ·    the report did not purport to provide a comprehensive valuation of the subject land but was simply advocacy material responding to the respondent's valuer's report; 

·    there was a blurring by Mr Turner between the roles of independent expert and advocate.

1. In response, Mr Loader said that he had not received the Court's order requiring that all witness statements be filed 21 days before the hearing.  Mr Turner said that he was not familiar with Land Court procedures and that, in compiling this report, he had followed Family Court procedures where valuers simply identify their points of difference.

2. I decided to accept the report into evidence, despite the failure to comply with the time schedule for filing, having given Mr Isdale the opportunity to apply for an adjournment. I pointed out to Mr Turner that there was a conflict between the role of advocate for the appellants and independent expert and directed that he elect to adopt one role or the other.  Mr Turner elected to give evidence and Mr Loader conducted the appellants' case.  Mr Turner strayed into the role of assisting Mr Loader from time to time during the course of the hearing such that he may be said to have had an interest in the outcome of the proceedings.  This does not make his evidence inadmissible but may affect the weight to be given to the evidence (FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33). My findings as to the evidence are set out, as relevant, below.

Classification of the subject land

1. There was considerable difference between the parties as to the classification of the subject land.  Mr Schefe's classification was -    

   ·    Approximately 5,468 ha (91%) of undulating open forest ridges to shaded downs, timbered with mountain coolibah, bloodwood and ironbark;

   ·    Approximately 540 ha (9%) of unavailable mountain.

   He estimated the carrying capacity at 1 mixed head of cattle to 6.5 ha (952 total).

2. Both Mr Loader and Mr Turner said that the classification was -     

   1.  1,237 ha (20%) inaccessible high peaks and tablelands
   2.  2,166 ha (35%) very steep rocky ridges
   3.  1,795 ha (29%) steep ridges
   4.  186 ha (3%) high ironbark ridges with wattle and scrub
   5.  804 ha (13%) creek flats, gentle slopes, blacksoil flats.

3. There is no obvious way to reconcile the appellants' classification of their land with Mr Schefe's.  There is a clear difference of opinion as to the area of inaccessible country, the appellant saying that 20% is inaccessible high peaks and tablelands whereas Mr Schefe says that 9% is unavailable mountain.  Further, the appellants have categorised the balance land into four categories (as set out above) including 35% very steep rocky ridges, whereas Mr Schefe has allocated the remaining land into one category only, undulating open forest ridges to shaded downs. 

4. Mr Schefe said that he had formed his opinion as to the appropriate classification of the subject as the result of a full inspection of the subject property that he had carried out, accompanied by Mr R Loader, in March 2007.  Mr Schefe said that he spent about 3½ hours inspecting the property.  For his previous valuation of the subject he had relied on departmental records for the purposes of the classification and his inspection for the purposes of this valuation revealed nothing to cause him to change his mind. 

5. The evidence showed that the appellants' classification was reached as a result of joint input by Mr Turner and Mr Loader.  Some two years before the hearing, Mr Loader had obtained a large aerial photograph of Wongabell from the Department of Natural Resources and Mines and had marked the different types of land on the photograph, numbering them from 1 to 4 as appropriate.  The remaining areas constituted category 5.  Mr Turner then measured each section with a planimeter and thus determined the areas of each category.  It appears that Mr Loader had initially divided the land into about eight categories but at Mr Turner's suggestion that had been reduced to the five categories set out above. 

6. Mr Turner said that he had also inspected the subject property from the road and he was able to identify the various types of country described in his report.  His observations were supported by the aerial photograph and his discussions with the owner and he rejected the suggestion that it was very difficult to distinguish between the different types of country on the subject. 

7. Counsel for the respondent, Mr Isdale, was critical of Mr Turner's role in classifying the subject land and compiling his report.  Mr Isdale suggested to Mr Turner that he had failed to fulfil his obligations as a professional valuer because he had not verified the areas independently but had relied solely on the information supplied by Mr Loader.  Further, there was room for misunderstanding between Mr Turner and Mr Loader because Mr Turner had changed the categories initially developed by Mr Loader.  There was also some discrepancy between Mr Turner's written report where he said that he had marked the various areas on the aerial photograph with Mr Loader's assistance, and his oral evidence that it was Mr Loader who had marked the areas.

8. Although Mr Turner's report cannot be described as a comprehensive valuation of the subject land, I have accepted the classification of the land set out in the report because that classification is based primarily on Mr Loader's knowledge of the property.  Mr Loader has owned the property since 1994 and I have no reason to doubt that he is very familiar with the property.  I also consider that Mr Loader acted honestly in identifying the various types of country on the aerial photograph.  Further, there is no evidence to suggest that the reduction of the number of categories from eight to five caused any confusion or that the areas of the different types of country identified on the photograph have been wrongly measured. 

9. The respondent sought to suggest that Mr Loader's knowledge of Wongabell was more detailed than that of a prudent purchaser and that it therefore should not be relied on for the purpose of determining the unimproved value of the subject land. 

10. Section 3(1)(b) of the Act provides that -

    "unimproved value of land means—

    …

    (b) in relation to improved land—the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist."

    In Spencer v The Commonwealth (1907) 5 CLR 418 Isaacs J said (at 441) -

    "To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.  We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

11. I do not accept that Mr Loader's knowledge of the property as demonstrated by his identification of the various types of land on the subject went beyond the knowledge that a prudent purchaser would acquire from making appropriate enquiries.  As Isaacs J said, such a person must be supposed to be "perfectly acquainted with the land and cognizant of all circumstances which might affect its value". 

Sales Evidence

1. Sale 1 is a 4,193 ha property, Eumara, which sold on 30 August 2002 for $3,100,000 ($739/ha).  Mr Schefe analysed the sale to $1,494,621 or $356.46/ha and applied an unimproved value of $333.89/ha. 

2. Mr Schefe described the sale property as, overall, superior to the subject.  The sale was superior in location, country type (25% developed brigalow blackbutt scrub with some box influence and 75% developed coolibah forest), carrying capacity (1 to 5.4 ha for the sale and 1 to 1.65 ha for the subject) and availability of water.  It was similar to the subject in terms of access and both properties have telephone and electricity available.  The subject property is 1.48 times the area of the sale. 

3. Mr Loader said that Eumara contained some of the best country in the Springsure district.  It was very open throughout with brigalow scrub, buffel and green panic country down to very deep soil coolibah flats.  There was no comparison with the subject.  He considered that the carrying capacity of Eumara had been understated by Mr Schefe and that the  correct carrying capacity was 1 to 7 acres (1 to 2.8 ha). 

4. Mr Turner assessed Eumara as being, overall, vastly superior to the subject with good natural waters and undulating to rolling contour all cleared and sown to pasture.  It was, he said, some of the best grazing country in the district.  He had described Eumara in the schedule to his report as 100% creek flats, gentle slopes, black soil flats.  In his oral evidence he said that was not a land classification but what was intended was that 100% of Eumara's land was productive and was similar to the creek flats, gentle slopes and black soil flats on the subject and the relativity properties. 

5. Mr Turner pointed out that Eumara had been analysed to $356/ha and that it had been discounted by 36% to apply a valuation of $226/ha to the subject.  In his opinion, therefore, it was not a relative sale.  Under cross-examination as to his knowledge of the sale property, he said that he had travelled through the property some years ago.  For the purpose of these proceedings he had recently gone to look at it from the roadside with Mr Loader, spending about a half to three quarters of an hour there. 

6. Sale 2 is a 4,042 ha property, Lexington, which sold on 10 October 2003 for $3,400,000 ($841.17/ha).  After allowing for improvements, Mr Schefe analysed the sale to $2,267,108 ($560.89/ha) and applied an unimproved value of $1,115,000 ($284/ha).  He described the sale as superior to the subject. 

7. I do not consider that this sale should be used in the valuation of the subject.  The sale analysed to an unimproved value of $560.89/ha yet Mr Schefe applied an unimproved value of $284/ha which is less than half the analysed value per hectare.  In the absence of any explanation from Mr Schefe that difference between the applied and analysed values leads me to infer that he considered that the sale price was well above market value.  That being so, I do not consider that the sale provides reliable evidence of market value.

8. That leaves the sale of Eumara as the only available sales evidence.  As Mr Schefe carried out a thorough inspection of Eumara following the sale I have accepted his description of the property in preference to Mr Loader's and Mr Turner's.  However, as discussed above, I have accepted the appellants' classification of the subject land which means that I accept that Wongabell contains more inaccessible, very steep and steep country than Mr Schefe described.  It follows that the subject must be less comparable with Eumara than Mr Schefe recognized. 

Carrying Capacity

1. Mr Schefe estimated the carrying capacity of the subject to be 952 mixed head of cattle or 1 mixed head to 6.5 ha which gives a beast area value of $1,469.  He assessed the carrying capacity of the sale property, Eumara, at 1 to 5.4 ha which calculates to a beast area value of $1,803. 

2. Mr Loader said that the carrying capacity on Wongabell was about 1 beast to 20 acres (1 to 8 ha) or 600 head of grown cattle.  He agreed that, as at the date of valuation, the respondent's estimate of the carrying capacity at 952 head of mixed cattle was accurate but said that that included 400 calves.  In recent times he had been finding it more difficult to maintain the ratio of 1 to 8 ha because there was less feed available due to the impact of the Vegetation Management Act.  The effect of the Act was that he was not able to clear land 50 metres on either side of any waterway and, for the three named creeks on the property, clearing was prohibited within 100 metres either side.  He estimated that he could clear another 2,000 acres of coolibah black soil flat country if the legislation did not exist.  

3. Although Mr Loader and Mr Schefe agreed that there were about 952 cattle on the subject property at the date of valuation, Mr Loader's agreement with that figure needs to be understood in conjunction with the rest of his evidence which was that the carrying capacity of Wongabell was 1 to 8 ha or 600 head of grown cattle.  In order to compare Mr Schefe's assessment of the carrying capacity with Mr Loader's, it is necessary to establish the carrying capacity of the subject in common terms - mixed head appears most appropriate.  Mr Loader's evidence that the carrying capacity is 1 to 8 ha calculates to about 775 head.  That figure appears to refer to mixed head since it is consistent with his evidence that there were 600 grown cattle and 400 calves on the property.  I have accepted Mr Loader's evidence that the carrying capacity of the subject is 1 to 8 ha and, therefore, I find that the carrying capacity of the subject is 775 mixed head.   

Conclusions as to value

1. The evidence has established that the respondent's classification of the subject does not take into account the substantial areas of difficult country on the subject.  I have found also that the carrying capacity of the subject has been overstated by the respondent.  I am satisfied therefore that there has been an error in the valuation.  Considering the evidence as a whole I consider that the most appropriate way to value the property is by using a beast area value.  For the reasons set out above, I consider that the beast area value of $1,469 attributed to the subject is too high and it should accordingly be adjusted.  Doing the best I can, I have decided that a beast area value of $1,400 would be consistent with my findings as to the carrying capacity of the subject and with Mr Schefe's evidence as to the carrying capacity of the sale (Eumara).  On that basis, the valuation of the subject becomes $1,082,900 which should be rounded to $1,085,000 ($175/ha). 

Relativity

1. In view of my conclusions in the previous section it is unnecessary to consider the relativity evidence in any detail.  Mr Turner said that he had not been able to find any comparable sales and, therefore, he had relied on a relativity comparison to make his valuation.  He compared the unimproved value applied by the respondent to the subject with the unimproved values applied to two properties adjoining Wongabell, Rainworth and Minerva Hills.  Rainworth was valued at $214/ha and Minerva Hills at $137/ha.  Having classified the relativity properties into the same categories as he had used for the subject, Mr Turner's opinion was that the subject was more comparable with Minerva Hills than Rainworth so he applied a value of $140 per hectare to the subject. 

2. Mr Loader said that Rainworth has large areas of deep soft black soil flats which allow dams to be built in most areas.  It has small areas of high country and larger unbroken areas of undulating grazing country.  The Minerva National Park did not have the same impact on Rainworth as on Wongabell because Wongabell acted as a buffer to the feral animals and weeds.  He estimated the carrying capacity of Rainworth at 1 beast to 15 acres (1 to 6 ha), which was much higher than the subject's carrying capacity.  Mr Loader considered that Wongabell was much more similar to Minerva Hills than Rainworth.  Minerva Hills has very similar soil types to those on Wongabell, he said, but the hills are much higher. 

1. Mr Schefe considered that the subject was vastly superior to Minerva Hills and slightly superior to Rainworth.

2. The result of my determination of value is that the unimproved value of the subject is less than that attributed by the respondent to Rainworth but more than the value attributed to Minerva Hills.  This is consistent with the appellants' evidence as to the relative superiority of the three properties although the value I have determined for the subject is higher than that assessed by Mr Turner. 

Orders

1.The appeal is allowed.

2.The unimproved value of Lot 10 on CP DSN 805047 GHPL 37/3316 in the County of Denison, Parish of Osmondthorpe is determined at $1,085,000 as at 1 October 2004.

CAC MacDONALD

MEMBER OF THE LAND COURT