Lund v Chief Executive, Department of Natural Resources
[1999] QLC 36
•30 April 1999
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LAND COURT
BRISBANE
30 APRIL 1999
Re: AV98-461 –
An Appeal against an Unimproved Value –
Valuation of Land Act 1944 –
Shire of Inglewood
Peter D and Amanda J Lund
v.
Chief Executive, Department of Natural Resources
(Hearing at Inglewood)
D E C I S I O N
As at 1 October 1997, the chief executive's unimproved valuation of land described as Lot 90 MH 63, Parish of Inglewood, County of Clive, containing 43.122 ha, was $45,000. The land was vacant, situated about 5 km north of Inglewood on the bitumen sealed Millmerran Road. Electricity and telephone services were capable of connection.
The valuation was made for the chief executive by Mr MW Malone, registered valuer employed by the Department of Natural Resources. In his valuation report, the land was described as "near level forest country with frontage to Canning Creek" (with good waterholes) "on its southern and eastern boundary. It has fair to good rural views." The valuation was made on the basis that the highest and best use of the land was as a rural homesite.
The land had been purchased by the appellants on 27 August 1996 for $65,000. That sale provided the primary basis for Mr Malone's valuation. The improvements comprised fencing and timber treatment which had been assessed as having total added value of $19,000, leaving an analysed unimproved value of $46,000.
Supporting evidence in Mr Malone's opinion, had been provided by the sale, in March 1996, of a rural site containing 84 ha, situated on the Cunningham Highway, east of Inglewood and to the north of Coolmunda Dam. That site had sold for $35,000 improved with fencing, dams and a shed frame. On Mr Malone's analysis, the sale showed an unimproved value of $23,838. A valuation of $23,500 had been applied as at 1 October 1997. The land was described as comprising "easy sloping forest regrowth country with fair rural views … overall inferior to subject".
It was Mr Malone's opinion that these sales were representative of the rural homesite market throughout the Shire.
An objection against the subject valuation had been disallowed. The owners duly appealed against that decision, estimating in the Notice of Appeal, the unimproved value to be $10,000. The grounds of appeal were that "not all relevant factors had been taken into consideration".
Mr WG Major acted as agent for the appellants and conducted the case on their behalf. It was Mr Major's submission that the land had been purchased and subsequently used for "purposes of farming". The appellants were schoolteachers who had become involved in the business of breeding and educating Arabian horses, together with the breeding of cattle. The subject land was used in conjunction with a 2 ha block in the Town of Inglewood, which enjoyed a 25 megalitre water licence and on which stables, yards and small paddocks had been established. It was Mr Major's evidence that the subject land was subject to flooding suffering total inundation in a major flood. The preferred homesite area, if a residential building would be approved by the Council, would be, in its natural condition, about 60 centimetres below the highest known flood level. The subject land had been purchased specifically to graze brood mares and foals through to maturity, together with breeder cattle. The property enjoyed a water licence which permitted the irrigation of an area of 2 ha from Canning Creek. The appellants' development proposal included the establishment of irrigated cultivation. A set of cattle yards had been constructed and a tractor purchased.
An adjoining area of about 60 ha owned by Mr L Major had been "leased" by the appellants "for enhancement of horse and cattle breeding and to provide high ground during flood". Prior to the purchase of the subject land by the appellants from Mr L Major, a neighbouring grazier (Mr Jason Powell) had negotiated an agreement to agist cattle on the two blocks then owned by Mr L Major at a fee of $100 per month. Mr and Mrs Lund paid Mr Major $100 per month to lease the 60 ha block and Mr Powell then paid the Lunds $100 per month to continue the agistment arrangement. Apparently there had been no specified number of cattle which Mr Powell was entitled to graze for the agistment fee, although the appellants have sought to restrict the number to about 25 head. The appellants allow those agisted cattle to also graze on the land which they lease.
It is the appellants' intention to continue to increase their own herd of cattle to the stage where the agistment of the neighbour's cattle will be discontinued. In the period relevant to the valuation, the appellants were running about six horses, two foals and 12 head of mixed cattle together with about 25 head of the agisted cattle, over the total area comprising the subject land and the adjoining leased area.
It was Mr W Major's contention that the "farming" use of the subject land by the appellants was in its establishment stage at the date of valuation – "and every business has to start somewhere". At the date of the hearing the appellants owned 16 head of horses, which are run on the subject land in conjunction with the land in town, while they also own 16 head of mixed cattle which are run on the subject land and the adjoining leased land. Mr Major estimated that the business of breeding and educating horses "should show a net profit of at least $20,000 in the near future". That type of return, in his opinion, represented a business with a significant and substantial commercial purpose.
In relativity with the valuation placed on an adjoining block, Mr Major suggested the "farming" valuation of the subject land should be $7,725.
In his opinion, because of the flooding disability, the subject land had no value for residential use unless Council approval for building could be obtained. Even then, the cost of extension of electricity; provision of (creek) water; domestic drainage; and vehicular access to the highest point; would be prohibitive.
Mr Major could see no alternative other than to apply a "farming" value to the land.
Mr Malone had taken the view that the land had not qualified to be valued as being used for the purpose of farming. In his opinion the business conducted by the appellants was so small in scale during the relevant valuation period as not to have a significant and substantial commercial purpose. In his opinion, the safe carrying capacity of the land was limited to about 11 breeding cows. That was in contrast to the opinion of Mr Major who suggested about 30 cows.
Mr Malone had not been aware of, or had not considered, the agistment arrangement with the neighbour. That neighbour's land had been valued on the basis that it was used for purposes of farming, in conjunction with other lands, exclusive of the subject land.
If the subject land had been found to have been used for purposes of farming, Mr Malone said his valuation would have been as follows:2 ha suitable for irrigated cultivation @ $1,000/ha $ 2,000
38 ha suitable for dry land cultivation @ $275/ha $10,450
3.122 ha grazing @ $205/ha $ 640
$13,090
Adopt $13,000
Valuation Considerations
Rural Homesite
Prima facie it seems curious that it should be submitted by Mr Major that this land was purchased specifically for purposes of farming yet the price paid did not reflect its value for purposes of farming.
A similar submission was made by Mr Major in Appeal AV98-454 – R and R Privitera v. Chief Executive, Department of Natural Resources, the decision in which is also delivered today. Part of the comments in the reasons for the decision in that matter are repeated here:" However, it would seem more logical to accept that with the price paid for the land being demonstrably higher than the 'farming' value, the highest and best use of the subject land in the eyes of the market was not for farming, but as a rural site which has the potential to combine a residential component with small-scale rural orientated activities.
The evidence in this matter and, indeed in the rural site valuation appeals throughout the Shire, indicates, as would be expected, that rural sites with potential for more intensive use than pure residential (and allied recreational type activities) attract higher sale prices."
While the subject land has recognised disabilities particularly associated with its susceptibility to flooding, it has the advantage of proximity to Inglewood and soils capable of development by cultivation and partly irrigable from the creek frontage. The circumstances surrounding the sale to the appellants, as explained by Mr Major, indicate that full consideration was given to the price asked by the vendor and eventually paid by the appellants. There seems to be no better evidence available to establish the market value of the land, with all its disabilities and potentialities, than the sale price for the land itself, the analysis of which was not effectively challenged.
If the land was not to qualify for valuation as being used for purposes of farming, then Mr Malone's valuation should not, in my opinion, be disturbed.
Use for Purposes of Farming
Section 17(2) of the Valuation of Land Act provides that in making a valuation of land exclusively used for purposes of farming, pursuant to s.17(1) of the Act, "farming" means –"(a) the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or
(b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock;
if the business or industry represents the dominant use of the land, and -
(c)has a significant and substantial commercial purpose or character; and
(d)is engaged in for the purpose of profit on a continuous or repetitive basis."
In the period relevant to the valuation – from the date of valuation (1 October 1997) to the date of issue of the valuation (30 March 1998) – there was dual usage of the subject land. First it was used by the owners for a business of grazing and the rearing of livestock (horses) together with the agistment of cattle owned by a neighbour. Second, it was used by that neighbour for the grazing of cattle under the agistment arrangement.
There was insufficient proof, in my opinion, that even at the date of hearing the grazing and rearing of livestock activities by the owners on the subject land or in conjunction with other lands, could have been regarded as having a significant and substantial commercial purpose or character. The number of animals involved was relatively small and it seems much of the profit potential referred to by Mr Major, resulted from a further business activity – the training and education of horses before their sale. In my opinion that latter activity does not fall within the meaning of farming under s.17(2)(a) or (b). The issue of "significance and substantiality" has been considered in other appeals conducted by Mr Major on behalf of various appellants and will not be further discussed here.
It is clear however that the chief executive had been satisfied that the grazing activities conducted by the neighbour on his aggregation of lands, met the tests under s.17(2), to qualify those lands for valuation as being used for purposes of farming.
It was submitted for the chief executive that in the dual use of the subject land, by the owners and the neighbour, the Court could not be convinced that the owners' use was not the dominant use. Mr Lund was called to give brief evidence as to the actual numbers of stock on the land during the relevant period. I do not accept that the owners' activities were the dominant use during that period. Mr Lund said that a total of about 20 head of horses and cattle using this and the leased land were owned by the appellants while the neighbour's cattle numbered about 25 head. The issue is clouded to a degree by the fact that the overall stock numbers, but particularly the cattle, grazed both the subject and the leased land. However, the use of the leased land by the neighbour's cattle in conjunction with the subject land, resulted from the manner in which the appellants had chosen to manage the agistment segment of their business. It is my interpretation of the meaning of "farming" in s.17(2) that paragraphs (a) and (b) describe the uses which meet the initial tests of qualification. The reference to "dominant use" is not, in my opinion, intended to require identification of separate entities which may be involved in "the" qualifying "business or industry" (eg grazing) on the particular land, but instead the dominance of that qualifying use over some other use. Paragraphs (c) and (d) then, in my opinion, provide for the commercially orientated tests related to the dominant qualifying use whether that use is constituted by a single or dual entities. I am satisfied that the dominant use of the subject land is for "the business or industry of grazing".
Notwithstanding that the use of the land by the owners does not have, in my opinion, a significant and substantial independent commercial purpose or character, the use by the neighbour in conjunction with other lands of the neighbour, for the business of grazing, does have that qualifying commercial purpose. As was found, for example, by the Land Appeal Court in Thomason v. Chief Executive, Department of Lands (1994-95) 15 QLCR 286 at p.306: "it is the use of the land for the relevant purposes which is important, rather than the identity of the person or persons using it. So, for example, the person who owns the land and who will gain the benefit of the operation of s.17(1) need not be the person using the land for the relevant purposes ..."
Finding
For the reasons given I find that, in the period relevant to the valuation, the dominant use of the land was for the business or industry of grazing and that, as part of that activity, the use by the neighbour meets the meaning of "farming" in s.17(2) of the Act. Guided by the finding of the Land Appeal Court, in Thomason (supra), relative to the relationship between "dominant" and "exclusive" use, I find that the land should be valued pursuant to s.17(1) of the Act.
On that basis, I prefer the opinion of value for purposes of farming given by Mr Malone after his specific consideration of that issue. Mr Major's opinion of value was based on relativity with the "farming" valuation of adjoining land and his knowledge of the nature of the country on each block. He had no knowledge however of the basis on which that valuation had been founded. It is observed, for example, that the adjoining land is used, on the evidence, in conjunction with other lands.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined, pursuant to s.17(1) of the Valuation of Land Act 1944, in the amount of Thirteen Thousand Dollars ($13,000).
RE WENCK
MEMBER OF THE LAND COURT
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