Manthey v Chief Executive, Department of Natural Resources
[1997] QLC 158
•10 October 1997
|
BRISBANE
10 October 1997
Re: Appeal against Categorisation
Local Government Act 1993
Shire of Laidley.
(VC97-21).
WJ and N Manthey
v.
Chief Executive, Department of Natural Resources(Hearing at Gatton)
D E C I S I O N
This is an appeal by landowners in the Shire of Laidley against the categorisation of their land for differential rating purposes.
Mr and Mrs Manthey are the owners of land described as Lot 92 on Plan CH 311099, Parish of Mort, containing an area of 24.28 hectares. The land is situated in Schluters Road, Mt Berryman.
At the Budget meeting held on 31 July 1996, the Laidley Shire Council resolved to make and levy differential general rates on the rateable value of rateable land within the Shire for the financial year ending 30 June 1997. The Council decided that the rateable land in its area was to be categorised into seven categories according to various criteria.
In carrying out the categorisation of rateable land, the Council included the Manthey's land in Category 3. The owners objected against that categorisation on the basis that the land had been included in the wrong category, contending that it should have been included in Category 5. Their grounds of appeal are as follows:"This property is used exclusively for small cropping and livestock rearing and we are dependent on it as our only source of income.
This property was rated rural prior to 30 June 1993. "
The Relevant Legislation
Under the provisions of the Local Government Act 1993, when a local government intends to implement a system of differential rating, it must embark upon a scheme of categorisation of all rateable land in its area. It is required to decide by resolution (a) the categories into which the rateable land in its area is to be categorised and (b) the criteria by which the land is to be categorised. (Section 573).
The local government may itself undertake the process of categorisation and identify the category in which each parcel of rateable land is to be included, or alternatively, it may request the valuation authority (in this case the Department of Natural Resources) to identify the category in which each parcel of rateable land is to be included. For the relevant rating period, the Council has adopted the latter course and the Department has carried out the categorisation on behalf of the Council.
The scheme of the Act provides for objection to the categorisation on the sole ground that, "having regard to the criteria decided by the local government", the land should have been included in another category. (Section 580). Mr and Mrs Manthey objected against the inclusion of their land in Category 3, contending that it should have been included in Category 5. After their objection was disallowed, they appealed to the Land Court.
The criteria adopted by the Laidley Shire Council for the relevant categories are as follows:"Category 3.
All rateable lands (except those in Category 7) in the Area of the Shire of Laidley which are vacant and vacant englobo rural residential land or used for dwellings or outbuildings on rural residential and coded with primary land use codes 04 to 06 and 72. "
"Category 5.
All rateable lands (except those in Category 7) in the Area of the Shire of Laidley which are used for the business of farming and are coded with primary land use codes 60 to 71 and 73 to 89. "
The Case for the Appellants
Mr Manthey gave evidence on behalf of the appellants. Their case was that the land had been used for the business of farming since they purchased it in August 1991. They bought the land with the intention of farming it. At the time of purchase, the land was improved with a house, sheds and other farming infrastructure. It had been cleared and some of it had been cultivated. However, it was in a very rundown state.
Since then they have cleaned it up and presently cultivate about 23 acres which they irrigate by trickle irrigation from a bore and from a waterhole. There is also a dam which they regard as a standby supply.
Mr Manthey said that their main crop was pumpkins, with about 14 acres planted, producing two crops per year. They also grow between 2,000 to 3,000 eggplants which bear for two years, three acres of cucumbers, three acres of sweet potatoes, and about 1.5 acres of tomatoes.
Mr Manthey admitted that so far the enterprise has not proved to be very profitable, because of poor crop yields and prices. The only year they looked like making a reasonable profit, their crops were wiped out with hail and a flood.
A summary of the profitability of the enterprise was given in evidence by Mr Manthey:
1991 and 1992 were dry years with very little produced;
1993 was "a disaster";
1994 was slightly better;1995 produced a net profit from crops of $1,089.50; there was also income from spelling a racehorse on the property and from the agistment of 15 steers at $3 per head per week;
1996 was a loss year; the crops wiped out by a flood in May and hail in November.
Mr Manthey agreed that the figures to date could not be regarded as significant or substantial. However, the owners are optimistic for the future and with assistance from the Department of Primary Industries have worked out a financial plan for the property. This plan shows that if all goes well, the property should produce a gross return of $35,680 and a net return of $28,867 for the present financial year. However, Mr Manthey agreed that achievement of these returns depended upon favourable prices and seasonal conditions.
The Case for the Respondent
Evidence for the respondent was given by Mr E Ridley, a Registered Valuer employed by the Department of Natural Resources. Mr Ridley said that the respondent interpreted the first criterion of Category 5 of the Council's Differential Rating Categories, that is, land "used for the business of farming", to mean land used "for the purposes of farming" in accordance with Section 17 of the Valuation of Land Act. He explained that the respondent had not valued the subject land under Section 17, because it was considered that the use of the land to date did not qualify it for such a valuation.
Mr Ridley went on to say the respondent understood the second criterion of Category 5, that is, "primary land use codes 60 to 71 and 73 to 89", to refer to the Department's land use codes. The relevant codes corresponding with those numbers referred to various types of farming activities. He explained that if land was not considered to be used for one or other of those activities, it would not be so coded. In this case the Department had coded the subject land as 05, which indicated that it was rural land with a dwelling. Mr Ridley was of the opinion that the land use and coding of the subject land complied with the criteria for inclusion in Category 3.
Application of the Criteria
This is not an appeal against the valuation of the subject land, but an appeal against the categorisation of that land. However, on the evidence presented, it is not possible to deal with those matters in isolation. If the respondent is correct in the interpretation of the categorisation scheme as explained by Mr Ridley, then there is an irrevocable linking of the method of valuation of the lands in the local government area and the way in which they are categorised.
There is nothing contained in the resolution of the Council to indicate that the land use or land use codes adopted as the criteria for differential rating are linked to the method of valuation or to the land use codes used by the Department of Natural Resources. However, the unimproved valuation used for rating purposes is provided to the Council by the respondent and the Council has requested the respondent to undertake a categorisation of the land. In addition, the criteria for that categorisation include terms which are similar, but not identical to, terms used in the Valuation of Land Act. It is therefore not unreasonable to interpret those criteria as referring to lands used for purposes of "farming" and coded with the appropriate land use codes adopted by the respondent.
If that reasoning is correct, then in order to qualify for inclusion in Category 5, the subject land must first, be used for the purposes of "farming" and second, have primary land use codes between 60 and 71, or between 73 and 89.
Section 17 of the Valuation of Land Act 1944 relevantly provides:
"(1) In making a valuation of the unimproved value of land ... used ...for purposes of farming, any enhancement in that value for that the land ... has a potential use for ... 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.
(2) in subsection (1) -
...
`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. "
The provisions of Section 17 and its predecessor (Section 11(1)(vii)) have been the subject of considerable judicial consideration, which has been discussed at some length by the Land Appeal Court in Whackett v. Chief Executive, Department of Lands (AV93-163 and AV93-164, unreported, 3 March 1995). In that case a cattle grazing enterprise with an annual gross return of about $5000, was held not to have a significant and substantial commercial purpose or character.
In CH and MC Peck v. Chief Executive, Department of Natural Resources (A95-94), unreported, 1 August 1997), the Land Appeal Court recently considered the application of Section 17 to a parcel of just over 4 hectares of land situated at Mt Nathan, upon which was situated an orchard of macadamia, lychee and other trees, which ran at a loss in the financial years 1987 to 1994, despite considerable expenditure in both capital terms and in operating costs. The actual returns fell far short of those which would be reasonably expected from such a venture. In considering the application of Section 17, the Land Appeal Court said at page 5:"The definition of `farming' in the section has the effect of imposing four conditions which must be satisfied before the farming concession can apply: first, the land must be used for the purpose of a business or industry specified in either paragraphs (a) or (b); secondly, the business or industry must have been the dominant use of the land; thirdly, the business or industry must have had a significant and substantial commercial purpose or character (paragraph (c)); and fourthly, the business or industry must have been engaged in for the purpose of profit on a continuous or repetitive basis (paragraph (d))."
In the present case, as in Peck's case, the first and second conditions have been satisfied. I am also persuaded that the fourth condition has been satisfied. The appellants have demonstrated the necessary persistence and financial motives, although their efforts have so far met with little success.
It is now necessary to consider the third condition contained in paragraph (c). It is again helpful to turn to what the Land Appeal Court said in Peck's case about this condition at page 7:"The third condition concerns one purely objective matter, the commercial character of the business or industry. The commercial purpose of the business or industry is a matter which requires consideration of a subjective matter, again the genuineness of the purpose, but the use of the adjectives `significant' and `substantial' to qualify the expression `commercial purpose' in our view calls for consideration of objective criteria when assessing that purpose. The use of both adjectives leads us to that conclusion, but, of the two, `significant' is the more important in leading to that result.
So whereas paragraph (d) makes the genuineness of the purpose alone a condition and so concerns an exclusively subjective matter, paragraph (c) requires assessment of that purpose by reference to objective facts to determine if it can properly be described as `significant' and `substantial'. In making such an assessment it is permissible - and necessary in our view in a case like this in which a business has been established for some time - for consideration to be given to the results achieved by the business after a reasonable interval has elapsed following its establishment. Full allowance must, of course, be made for such things as the uncertainties of the weather, the vagaries of markets, and fluctuations in exchange rates. Having given those factors proper weight, one may conclude that an owner, though genuinely pursuing profits, is engaged in such an unpromising enterprise that it could not be said, in accordance with any ordinary or reasonable standard, to have a significant and substantial commercial purpose. "
In Peck's case, although the business had been established for some seven years and although large amounts of capital had been invested, the business had not made a profit. The Land Appeal Court held that the requirements of paragraph (c) had not been met. Similarly in the present case, despite the best efforts of the appellants, the returns so far could not be described as "significant" and "substantial". The appellants contend that if all goes well both in terms of seasons and prices, they stand to make returns in the future which will be significant and substantial.
While it is to be hoped that the appellants do achieve the expected returns, it has been well established that future intentions, hopes and aspirations, however sincere, are not sufficient to qualify the land for a concessional valuation (see MacAdam v. Valuer-General, Land Appeal Court, unreported, 18 September 1981). Having regard to the reasoning in Peck's case, it is quite clear that the results achieved so far from the business could by no means qualify it in terms of Section 17.
Therefore, I have come to the conclusion that the subject land does not satisfy all the requirements of Section 17 of the Valuation of Land Act. It does not qualify to be valued as land used for purposes of "farming" as defined by that section.
It follows that the land does not meet the first criterion in Category 5. Although I have no evidence of what farming activities are covered by primary land use codes 60 to 71 and 73 to 89, I accept the evidence of Mr Ridley that they relate to various primary production activities. I am told by Mr Ridley that the land use code 05 has been applied by the respondent to the subject land, which code refers to rural land with a dwelling.
Decision
In this case the onus of proof is upon the appellants and they have not convinced me that the land was included in the wrong category. For the reasons explained above, it cannot be included in Category 5. Therefore the appeal must fail.
Accordingly, the appeal is dismissed and the decision of the respondent to include the subject land in Category 3 is affirmed.
(JJ Trickett)
President of the Land Court
0
0
0