Macrae v Department of Natural Resources and Mines

[2008] QLC 184

LAND COURT OF QUEENSLAND

CITATION:

Macrae v Department of Natural Resources and Mines  [2008] QLC 0184

PARTIES:

John Farquhar Macrae
(applicant)

v.

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

FILE NO:

AV2005/1811

DIVISION:

Land Court of Queensland

PROCEEDING:

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

DELIVERED ON:

9 September 2008

DELIVERED AT:

Brisbane

HEARD AT:

Yeppoon

MEMBER:

Mrs CAC MacDonald

ORDER:

1.      The appeal is allowed.

2.      The unimproved value of Lot 11 on BH 100 and Lot 1 on RL 8456 (Road Licence RL 35/8456) in the County of Duaringa, Parish of Pegunny is determined at One Million, Six Hundred and Sixty-Five Thousand Dollars ($1,665,000). 

CATCHWORDS:

Valuation – adjoining owner sale – sale to be approached with caution – beast area value.

APPEARANCES:

Mr JF Macrae on his own behalf
Mr G Smith, Department of Natural Resources and Water on behalf of the respondent

1. John Farquhar Macrae (the appellant) is the owner of a cattle grazing property located about 60 kms north-west of Moura in central Queensland.  Mr Macrae has appealed against the unimproved valuation of his land as determined by the respondent, the Chief Executive, Department of Natural Resources and Mines, at $1,850,000, as at 1 October 2004.  Mr Macrae estimated the value of the land as at that date to be $1,000,000. 

SubjectLand

1. The subject land has an area of 3,698.3113 ha.  The respondent's valuer, Mr D Doyle, described the subject as a developed grazing property with a small area of cultivation on the better scrub soils situated on the north-western portion of the property.  There is a mix of good brigalow scrub country to the north-west with poorer brigalow blackbutt country, which is heavily melon-holed, to the south and east.  A stand of virgin scrub is situated in the south-east corner of the property.  There are also small areas of broad leaf iron bark, box, bloodwood forest and an area of narrow leaf iron bark.  The property is watered via dams and from a waterhole on a permit to occupy to the north.  Mr Doyle estimated the overall carrying capacity of the property to be 1 beast to 4.9 ha or 755 head.

2. Mr Macrae accepted Mr Doyle's description of the subject as heavily melon-holed.  The biggest disadvantage of the melon-holing, Mr Macrae said, was the cost of maintaining the carrying capacity of the block.  To do this it was necessary to reduce the regrowth to ensure that the area remained viable.  The two methods of handling regrowth – blade-ploughing and chemicals – are expensive.  His property is difficult to blade-plough effectively because there are problems with the width of the plough that can be used and, therefore, it is difficult to maintain an appropriate overlap between passes of the machine over the very rough terrain.  Extra power is needed to pull out of the melon-holes while maintaining the depth of the machine in the ground.  Heavy machinery is needed which requires extra diesel.  Rising fuel prices mean that the disadvantage of the subject property will increase in comparison with other types of country.   

3. Mr Macrae tendered a letter from Mr LH Jones, a former contractor in regrowth control, which said that it is 40% to 50% more expensive to treat the type of melon-hole country on the subject as compared with flat brigalow country.  Because Mr Jones was not called to give evidence at the hearing, Counsel for the respondent had no opportunity to cross-examine him on the content of that letter.  In those circumstances, I consider that the letter has little weight and I have not taken its content into account in coming to my conclusions in this matter.  However, both Mr Macrae and Mr Doyle gave evidence that melon-holed country does require more expensive treatment than country without melon-holes and I have accepted that that is a relevant factor in the valuation.

4. Mr Macrae also said that the melon-holes limit the options for future use of the property, e.g. cultivation would not be possible because of the melon-holes.  The small area that is currently cultivated is suitable for forage cropping only as it is melon-holed and cannot be ploughed with the rest of the paddock.  Fencing is very difficult in melon-hole country.  The fences have a limited life because they rot or rust where the water lies.  Cell grazing is not an option.  Bridging is necessary across the melon-holes with the bottom wire further off the ground so that younger cattle can get through.  Wet melon-holes harbour disease and are difficult to muster – motor bikes cannot be used and horses refuse to go through the water. 

5. I have accepted that the subject property is heavily melon-holed and that this adversely affects the value of the property.  Indeed, there is no real contention between the parties on that issue.  Their disagreement is as to the appropriate allowance to be made for that disadvantage. 

Grounds of Appeal

1. Mr Macrae's grounds of appeal were that -   

   "Comparison with the benchmark "Boomerang" sale was unfair because that sale was inflated due to competition between immediate neighbours one of whom was successful because he was cashed up from a previous high value sale which was commonly regarded as an aberration.

   In applying market evidence to value my property, the executive had not fully acknowledged the greater cost of realising and maintaining the estimated carrying capacity in comparison with the benchmark property.  The unimproved value of the benchmark property should have been further reduced in recognition of its extensive development."

Sales Evidence

1. Mr Doyle assessed the unimproved value of the subject at $1,850,000 or $500/ha, by direct comparison with two sales. 

2. Sale 1 is a 3,975 ha improved grazing property, Boomerang, situated about 130 kms south of the town of Duaringa.  The property was sold at auction in March 2004 to an adjoining owner for $6,150,000.  Mr Doyle analysed the sale to $3,133,831 and applied an unimproved value of $2,800,000 or $704/ha.  He described the sale as overall superior to the subject.  The sale has superior country to the subject, is in a comparable location and has a comparable area to the subject.  The sale's overall carrying capacity is 1 to 3.8 ha.

3. Sale 2 is a 5,280 ha improved grazing property, Rhyddings, situated about 41 kms south-west of Moura.  The property sold in April 2004 for $6,550,000.  Mr Doyle analysed the sale to $3,773,239, and applied an unimproved value of $3,400,000 or $644ha.  He described the sale as overall superior to the subject.  The sale has superior country to the subject and is in a comparable location to the subject.  The sale's overall carrying capacity is 1 to 3.9 ha. 

4. The evidence showed that Boomerang was sold at a well attended public auction where two owners of different properties adjoining Boomerang were among the bidders.  The property was ultimately sold to one of those adjoining owners. 

5. Mr Macrae submitted that the Boomerang sale should not be relied on to value the subject property as it was a sale to an adjoining owner.  Mr Macrae did not dispute the evidence that the sale was an arm's length transaction which took place at public auction.  However, he considered that the price paid was artificially high because two of the bidders were adjoining owners who were competing to obtain the property. 

6. Mr Smith submitted that adjoining owner sales should not be excluded but that they should be treated with caution.  (Appeals against determination of Valuer-General – Shire of Chinchilla (1983) 9 QLCR 102; Eastwell v Valuer-General (1987) 11 QLCR 169). He also submitted that when a valuer is criticised for relying on particular sales evidence it must be shown that there is an error. In this case, he said, there was no other sales evidence to show that the value struck in this case was demonstrably wrong.

7. Previous decisions of this Court and those in other jurisdictions establish that although adjoining owner sales should not be excluded automatically as evidence of market value, they should be treated with some caution (Chinchilla Shire Appeals at 108;  Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 at [55]). In this case, where the evidence was that there were two adjoining owners competing with one another to purchase the sale property, there is an additional reason, I consider, to approach the sale with caution.

8. Moreover both the sales were heavily improved – Mr Doyle allowed $3,016,169 for the value of the improvements on Sale 1 and $2,776,762 for those on Sale 2.  The difficulties of assessing the value of extensive improvements are well known and have been referred to in numerous cases – see, for example, Department of Natural Resources and Mines v Spender [2003] QLAC 0086 at [61], [62]. Although that case dealt with the valuation of a residential property, the discussion concerning the difficulty of assessing the added value of extensive improvements is, I consider, generally applicable to all valuations under the Act.

9. As set out above, Mr Doyle analysed Sale 1 to $3,133,831 or $788/ha and applied an unimproved value to the sale property of $2,800,000 or $704/ha.  The only other sale (Rhydding) was analysed by Mr Doyle to $3,773,239 or $714/ha.  Mr Doyle applied an unimproved value of $3,400,000 or $644/ha to that property.  Mr Doyle's descriptions of the sales properties indicate that Sale 1 was superior to Sale 2 both in terms of country types and carrying capacity.  Comparison of the two sales, therefore, indicates that Sale 1 is not out of line with Sale 2. 

10. The sales evidence is, however, very limited.  There was no evidence to establish whether Sale 1 was consistent with general market values in the area.  Given the circumstances of the sale and the fact that both sales properties were heavily improved there is, I consider, some doubt as to whether the sales evidence is sufficient to support the subject valuation.  That being the case I consider that it is necessary to examine the evidence concerning the beast area values of the sales properties and the subject. 

Beast Area Value

1. Counsel for the respondent submitted that valuation on the basis of beast area value was unreliable, at least as a primary methodology, as the size of the area of land necessary to support one beast varied between different properties.  Beast area values were appropriate for valuation of improved properties, he said, but not for ascertaining an unimproved value.  Consequently, Mr Smith submitted, valuation on a rate per hectare basis was more appropriate for determining the unimproved value of a property.  The unimproved value attributed to Sale 1 was $704/ha as compared with $500/ha applied to the subject.  In Mr Smith's submissions the difference in rate per hectare adequately allowed for the disadvantages of the subject property as compared with the sale. 

2. While valuation on a beast area basis may not always be ideal, I consider that the unimproved values attributed to the sales and the subject may be analysed on this basis in order to determine whether those values are consistent.  The unimproved values reflect the potential of the properties for development. 

3. Using the unimproved values of the subject and the sales, the subject (with a carrying capacity of 1 to 4.9 ha) shows a beast area value of $2,450, Sale 1 (carrying capacity 1 to 3.8 ha) shows $2,675 and Sale 2 (carrying capacity 1 to 3.9 ha) shows $2,512.  As Mr Macrae pointed out the beast area value of the subject is 8.4% less than that for Sale 1.  Mr Macrae submitted that that difference was not sufficient to allow for the considerable disadvantage caused by the heavy melon holing on his property. 

4. Comparison of the beast area values of Sales 1 and 2 shows a difference in value of $163 for a difference in beast area of .1 ha.  By contrast, the difference in beast area values of Sale 2 and the subject is $62 for a difference in beast area of 1 ha.  The lack of consistency between those figures was not explained.  I consider that that lack of consistency supports Mr Macrae's contention that an insufficient allowance has been made in the valuation for the disadvantages of the subject.  I am satisfied therefore that there has been an error in the valuation. 

5. Doing the best I can, I consider that a valuation of $450/ha ($2,205 beast area value) would more properly reflect the carrying capacity of the subject as compared with the sales.  The total value is $1,664,240 which should be rounded to $1,665,000. 

ORDERS

1.The appeal is allowed.

2.The unimproved value of Lot 11 on BH 100 and Lot 1 on RL 8456 (Road Licence RL 35/8456) in the County of Duaringa, Parish of Pegunny is determined at One Million, Six Hundred and Sixty-Five Thousand Dollars ($1,665,000). 

CAC MacDONALD

PRESIDENT OF THE LAND COURT