Marrable v Chief Executive, Department of Natural Resources
[1997] QLC 68
•16 May 1997
LAND COURT, BRISBANE 16 MAY 1997
[1997] QLC 68
Re:Determination of Unimproved Value - Gold Coast City Council (Albert Division) - (Refs. V96-45 and AV96-66).
HW and DM Marrable v.
Chief Executive, Department of Natural Resources (formerly Department of Lands)
D E C I S I O N
These appeals lie against the determinations by the Chief Executive of unimproved values of $320,000 as at the relevant date of 1 January 1995 (Appeal Ref. V96-45), and of
$380,000 as at the relevant date of 1 January 1996 (Appeal Ref. AV96-66) for a 63.22 hectare parcel of land described as Lot 340 on Plan Wd4267, Parish of Tallebudgera. Lot 340 is located off Currumbin Creek Road in the locality of Tallebudgera, about 10 kms south-west of the Currumbin Waters Shopping Centre. The land is zoned "Rural" under the Albert Shire Council Town Planning Scheme which was gazetted on 24 February 1995. Under the 1995 Albert Shire Council, Albert Corridor, Development Control Plan No 5, Lot 340 has been classified into the preferred future dominant land use of "Rural". It is to be noted that the current Albert Shire Council Town Planning Scheme was promulgated shortly after the relevant date for the Appeal Ref. V96-45 valuation of the subject land. The appellants contend within the Notice of Appeal in re Appeal Ref. V96-45 for an unimproved value of $145,000 and in Appeal Ref. AV96-66 for an unimproved value of $180,000.
There is but one issue falling for determination in these cases. It is whether as at the respective relevant dates, Lot 340 falls to be valued (a) under the provisions of s.17(1) of the Valuation of Land Act 1944 as land being used for the purposes of farming, or (b) whether the land, again at each relevant date, should have been valued as land not qualifying to be so valued, but to have been valued as a large rural residential homesite. I say one issue, since there is in evidence copies of correspondence from the Chief Executive to a former authorised agent for the appellants (John H Frew & Co Pty Ltd Valuations) dated 6 February 1997, and from McLaughlins Solicitors, who are instructing solicitors in these cases, to the office of the Land Court dated 13 March 1997 confirming an agreement between the parties as to the valuations of the subject land on each of the bases (a) and (b) as at the respective relevant dates. The agreement endorses the valuations under appeal and the valuations contended for by the appellants. It is summarised as:
Ref AV96-45 - Farming land (s.17) $145,000
Non-farming land $320,000
| Ref AV96-66 - | Farming land (s.17) | $180,000 |
| Non-farming land | $380,000 |
It is by now well recognised, in accordance with the authority of the Land Appeal Court in G A & B H Walker v. Valuer-General (1978 5QLCR 347 P349) that the period during which activities carried out on land qualify it to be valued under the “purposes of farming” arm of s.17(1) of the Valuation of Land Act commences on the relevant date for the valuation and ends on the date of issue of such valuation. In these cases the periods are -
In Re Appeal Ref V96-45 - commencing on 1 January 1995 (relevant date) and ending on 16
October 1996 (date of issue) and
In Re Appeal Ref AV96-66 - commencing on 1 January 1996 (relevant date) and ending on 19
February 1996 (date of issue).
The judgment of the Land Appeal Court in Thomason v. Chief Executive, Department of Lands, dated 3 March 1995 (AV93-103) - not yet reported - sets out the guidelines against which farming activities carried out on land are to be considered when a decision is to be made as to whether they qualify land to be valued as used for the purposes of farming. The guidelines read:
"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? "
In support of the contention by the appellants that their land should have been valued as
land used for the purposes of farming, two witnesses were called. They are David Charles Newcomb, who has been the secretary of a firm named Gold Coast Bakeries Pty Ltd for about the last 20 years, and Harvey Warren Marrable, one of the appellants in the matters.
Mr Marrable, who has been in the bakery industry for many years, along with his wife (the other appellant), own the firm Gold Coast Bakeries (Q) Pty Ltd in conjunction with members of their family. The firm has been operated by them since 1956. Mr Marrable told us that part of the waste product of a large bakery business is the return of unsold bread. Some of this bread can be made into breadcrumbs but there is always some bread which has to be disposed of. Mr Marrable considered the possibility of, instead of merely dumping the waste bread, using it as part of the feedstock of a primary production business. To this end, the appellants searched for a suitable property and purchased the subject land in the late-1960s. They initially raised pigs on it but over a period of experimentation changed to running beef cattle.
Mr Marrable says that initially the appellants ran this primary production business in their own names but since 1986, for corporate reasons, they have run the primary production activities through their corporate structure as a division of Gold Coast Bakeries (Q) Pty Ltd under the registered business name of Gold Coast Pastoral Company. For corporate purposes, a lease was entered into between the appellants and the company Gold Coast Bakeries (Q) Pty Ltd. The conditions of lease originally drawn up by Mr Marrable's solicitors in 1986 are incorporated into the current lease. Mr Marrable submits that as well as the primary production on the subject land, the business also runs a cattle grazing property at Kerry but that business is conducted totally separately to that on the subject land.
Mr Marrable says that the subject land is totally cleared except for some steeper slopes and for belts of trees along some of the fencelines which provides shade and shelter for cattle. The operating company usually runs some 300 to 350 head of cattle on the property, which is more than the natural carrying capacity of the area. The company achieves this by feeding the cattle on the waste bread mixed with other feed. Mr Marrable has found through experimentation that the best mix of feed is barley straw or cane waste and soya bean stubble ground up with the old bread. The bread provides the nutrient and the straw or cane waste, the fibre. This feed is prepared five days each week and fed to the cattle in troughs in various paddocks. Mr Marrable says the waste bread provides good feed and following the successful use of it with the cattle, other farmers in the valley now purchase waste bread from other bakeries to feed to their cattle. When this feed is not supplied to the cattle in the troughs, they rely on natural grazing, with the waste bread being distributed over the property.
Mr Marrable submits that although there are costs involved in the labour and machinery involving grinding the bread, these costs must be measured against the costs involved to the bakery group, were this bread carted to the Council tip. Mr Marrable says that he has personally always disliked the fact that the bakery industry has so much waste bread, and it was his dislike for merely dumping that bread which led to him to seek a profitable means of better disposing of
it. He believes he has found these means with the company's cattle grazing business on the subject land. Mr Marrable confirms that the subject land was specifically bought for utilising waste bread by feeding it to cattle on the property.
Mr Marrable does not consider his operations on the subject land to be a "hobby farm". He says it is intended to be, and is operated so as to be a profitable division within his various company businesses, allowing for the fact that some of the expenses within Gold Coast Pastoral Company resulted in savings in expenditure for the bakery division. Mr Marrable says the operation of the cattle business on the subject land varies from year to year depending on the usual things in the cattle industry, the seasons, and especially the cattle market. He says that prices for cattle have been historically low for the last five years. Depending on the season and cattle prices which in turn affect the number of cattle the company sells each year, cattle are brought in to graze or sometimes dependence is upon the natural increases in the herd.
Mr Marrable told us that there was a small farm house on the property when it was purchased by the appellants. They try to keep this house rented out as it is best if there is someone living at the property to keep a general eye on it and the cattle and to deter passers by or intruders. The house is leased to the present tenant as and from 16 April 1996, for a rent of $150 per week, less $10 per week if the tenant complies with one of the conditions of the lease which is that she is to advise the Gold Coast Bakeries' office if any problems occur such as cattle sickness, fences broken or failure in the water pumps. The tenant has also been requested to report on incidents such as cattle being shot and slaughtered as has been the case in the past.
The formal leasing agreement which is in place between the owners of the subject land and Gold Coast Bakeries (Q) Pty Ltd allows the company to use the land for the purpose of primary production. There is a copy of the most recent lease in evidence (dated 25 August 1995). It is for a period of three years and the annual rental for the first year is $4,000 per annum. This rental is paid by way of an inter-company fund transfer.
Describing the farming/grazing activities carried out on the subject land, Mr Marrable stresses that the grazing business has suffered badly in recent years due to the well-recognised severe economic downturn in the cattle industry, but he has the expectation and hope that it will run profitably and generate income for the parent company. Mr Marrable says that cattle prices started to fall in 1992 after which time cattle sales were withheld and the cattle numbers increased during 1992 to 1995 to a stage where he decided to sell about 90 head in the latter half of 1996. Partly the reason for these sales was that the property had become overstocked. Although the cattle grazing business was generally not profitable during the period 1992 to 1995, Mr Marrable says if cattle prices return to a satisfactory level, then the business will "be in the black". Mr Marrable says that his cattle breeder prices on sale averaged $370 per head in 1993,
$508 per head in 1994, $336 per head in 1995, and $396 per head in 1996.
Mr Marrable informed the Court about the method of operation of the grazing business on the subject land. Cattle grazing in six to seven paddocks and are supplementarily fed from open feeders or undercover feeders with varying amounts of hammer-milled product with the
waste bread being added without any milling, but delivered into a feed mix unit by the use of augers.
Mr Newcomb was called to give evidence as to the economic performance of the firm Gold Coast Pastoral Company. He produced in evidence a schedule showing the income and expenditure from the grazing activities carried out on the subject land for the financial years ending 30 June 1987 to 30 June 1996. These schedules have been compiled for this case after Mr Newcomb had discussions with Mr Marrable's legal representatives. These returns show income from cattle sales, the cost of cattle purchases, and the operating profit (loss) for the years as follows:
Year ending Sales Purchases Operating Profit 30.06.87 $19,390 NIL $ 29,601 30.06.88 $61,337 $13,702 $ 43,273 30.06.89 $56,747 $21,750 $ 38,140 30.06.90 $60,229 $59,229 loss $ 18,219 30.06.91 $68,009 NIL $ 36,830 30.06.92 $20,463 $ 3,375 loss $ 11,131 30.06.93 $51,076 NIL $ 591 30.06.94 $34,042 $ 625 loss $ 5,160 30.06.95 $25,207 NIL loss $ 27,424 30.06.96 $30,500 NIL $ 650
Livestock movements on the property were:-
Year ending Sales Purchases 30.06.87 47 NIL 30.06.88 150 50 30.06.89 129 77 30.06.90 214 193 30.06.91 180 NIL 30.06.92 128 15 30.06.93 138 NIL 30.06.94 67 1 30.06.95 75 NIL 30.06.96 77 NIL
No rental income from the rented house on the subject land is included in the returns, nor is the lease rent book entry of $4,000 per annum which is paid to the appellants.
Mr Newcomb has enquired with the Gold Coast City Council as to the cost of the disposal of such part of the waste bread product as is suitable for feeding cattle from the operations of the Gold Coast Bakeries Pty Ltd and which is utilised on the subject land as part of the "farming" activities. Council's advice is that, for the dumping of the necessarily volume of bread in 10 cubic metre bins, the current cost would be $68,610 per annum. Mr Newcomb has adjusted in his exhibited figures for the total cost for fodder to allow for, in present cost terms, the value to the baking operation (and/or the cost to the farming operation) of fodder used in the
form of bread on the property. He has included an allowance for wages paid to a bakery employee (Mr Terry Henderson) whose responsibility is to collect surplus bread at the bakery each day, transport it to the property and to arrange for its distribution as part of the supplementary cattle fodder supply. The adjusted cost to the grazing operations for the supply of fodder is $42,610 in present day terms. Although Mr Henderson is engaged in the business on salary ($26,000 per annum), this has not been charged in full to the income and expenditure figures for Gold Coast Pastoral Company as produced by Mr Newcomb. In summary, Mr Newcomb says that over the last 10 year period, the profit from the farming operations carried out on the subject land by Gold Coast Pastoral Company has aggregated $87,150. He further submits that if the adjusted figure for fodder cost of $42,610 is added back into the overall working cost of the farming operation, then it would show a loss for say the year 1991 whereas the schedule shows a profit of $36,830. This presumably, would also be the case for the periods relevant to the consideration of the central “purpose of farming” issue in these cases.
Mr Arend Boudewyn Van Hees, who is a registered valuer in the employ of the respondent Chief Executive was called in the case to briefly say that he had not heard any evidence in the proceedings which would convince him that the subject land should be valued as land used for the purposes of farming.
It is not contended by the Chief Executive that the farming activities carried out by the Gold Coast Pastoral Company on the subject land during the relevant time do not meet the tests set out by the Land Appeal Court in Thomason in questions 2, 3 and 4. Indeed, on the evidence furnished by the appellants, it is clear that the cattle grazing business of Gold Coast Pastoral Company is the dominant use to which the land is put, the business has a substantial commercial purpose or character, although indeed not profitable of recent years. This, it could be said, would be the case for many legitimate and sizeable cattle grazing businesses of recent years due to the well-recognised severe downturn in the economics of the cattle industry. Nonetheless, I accept the evidence of Mr Marrable, that given a beneficial turnaround in cattle prices, the Gold Coast Pastoral Company grazing business should return to a level of profitability as displayed by the financial returns in evidence during the late-1980s. I come to this finding notwithstanding that I do not agree that the cost of supply of the surplus bread to the farming operation from Gold Coast Bakeries (Q) Pty Ltd has been assessed on an appropriate basis. In my view, it is not the saving to the Gold Coast Bakeries Pty Ltd in not having to incur the costs of dumping the bread in an environmentally suitable manner which is to be considered, but the cost to purchase the bread, or other suitable supplementary fodder (for use in the grazing operation) which is to be considered as it no doubt is with farmers in the area who also purchase bread to supplement their stockfeeding programmes.
The case for the respondent Chief Executive really is that the grazing business carried out on the subject land by Gold Coast Pastoral Company fails to meet the test in Question 1 in Thomason in that it is not solely a business of grazing, but because it receives waste bread from Gold Coast Bakeries (Q) Pty Ltd then the grazing business is inextricably bound up or integrated
with the business of baking. This being the case then, it is submitted by the respondent that the subject land is not exclusively used for the business of farming as contemplated by s.17 of the Valuation of Land Act.
Now, I cannot adopt this submission as I consider the farming activities on the Marrables' land constitutes a grazing business. As contended for by the appellants, it seems to matter not that the supplementary feed is provided to it by the parent company, nor that any profits made by Gold Coast Pastoral Company benefit the company group as a whole. It is the actual use of the subject land which is to be considered, and it would be unreasonable to find otherwise than that the land is used for the business of grazing, irrespective of the source of supplementary fodder such as bread. I am assisted in coming to this conclusion by the submission on behalf of the appellants that, while the Chief Executive has conceded that there is a business conducted on the subject land, the fact that that business is ancillary to the appellants' main business of baking bread is not part of the qualifying test.
In the result then, both appeals are allowed and the following determinations are made:
Appeal Ref. V96-45 - The determination of the Chief Executive is set aside, and the
unimproved value of Lot 340 on Plan Wd 4267, Parish of Tallebudgera, is determined in the sum of One hundred and forty-five thousand dollars ($145,000).
Appeal Ref. AV96-66 - The appeal is allowed, the determination of the Chief
Executive is set aside, and the unimproved value of Lot
340 on Plan Wd 4267, Parish of Tallebudgera, is determined in the sum of One hundred and eighty thousand dollars ($180,000).
CH CARTER MEMBER OF THE LAND COURT
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