Menzel v Chief Executive, Department of Natural Resources and Mines

LAND COURT

BRISBANE

8 MARCH 2002

Re: Appeals against Annual Valuations

Valuation of Land Act 1944
Property ID:   5220370 (AV2001/0493)
  5220402 (AV2001/0494)
  Local Government:    Burdekin

Max Richard and Margaret Frances Menzel

Chief Executive, Department of Natural Resources and Mines

(Hearing at Ayr)

J U D G M E N T

Pursuant to the provisions of the Valuation of Land Act 1944 the respondent Chief Executive valued two parcels of land owned by the appellants as at a relevant date of 1 October 2000. Lot 54 on Crown Plan 894359 in the Parish of Barratta (Lot 54) was valued by the Chief Executive at $650,000 or $4,229 per ha. Lot 25 on Crown Plan 887202, Parish of Barratta (Lot 25) was valued at $480,000 or $4,615 per ha. The appellants do not agree with those values and have appealed to this Court with respect to them, contending that in the case of Lot 54 the value ought to be $486,000 ($3,162 per ha), whilst Lot 25 ought to be valued at $358,200 ($3,444 per ha).
With the consent of the parties both matters were heard together. Evidence was given by Max Richard Menzel, one of the co-owners, whilst evidence for the Chief Executive was given by John Robert Hoult, a registered valuer, who also holds a Bachelor Degree in Agricultural Science, with a major in soil science.
Both properties are located about 40 to 45 km south-westerly of the Ayr Township Central Business District and are used for the purpose of sugarcane growing. Lot 54 has an area of 153.7 ha of which 3.7 ha it is described as "fair arable irrigable – class two" in Mr Hoult's valuation. An area of 131 ha is described as "class three", whilst 19 ha is described as "poor non allocated arable – class four and five".
Lot 25 has an area of 104 ha and Mr Hoult classified that property as follows:

"23.4 ha fair arable irrigable – class two
77.5 ha fair arable irrigable – class three
3.0 ha poor non allocated arable – class four and five"

Both lots enjoy the benefit of a nominal water allocation of 8 megalitres per ha, which applies to the arable irrigable area on each, that water emanating from the Burdekin River irrigation water supplies.
The grounds of appeal in each case were expressed in similar terms as follows:
"In the past 2 years canefarm sales in the Burdekin or in my area have dropped around 40% from $8,000 to I understand one to be $9,000 per acre before the price of sugar fell with farm prices now from $4,000 per acre to $5,400 per acre in the past year."

There was agreement between the parties that a reduction in values had taken place since the previous statutory valuation in 1998, though I should emphasise that Mr Hoult did not approach his valuation by making an assessment of the level of value reduction as such. Mr Menzel proceeded on the basis that the correct approach in cases such as these is to attempt to determine the percentage reduction in value between valuation dates and to apply that percentage to the subject properties. That is an approach that I do not accept. Whilst it may be appropriate for the Chief Executive to carry out mass appraisal by such a method, the task of the Court in these matters is to consider the unimproved value of the relevant land in accordance with the provisions of the Valuation of Land Act. A method of valuation of particular properties based on the adjustment of a previous value by a percentage has two defects in my view. First, in determining the percentage rate to apply, there is a process which necessarily involves a consideration of average market changes rather than the actual values of properties. Second, such an approach proceeds on the basis that the earlier valuation is accurate, whereas there is generally no evidence provided to support the level of accuracy.
The method of valuation to be employed in cases such as these has been considered by the Land Appeal Court previously and the views of that Court are recorded in Clough v. The Valuer-General (1981-82) 8 QLCR 70 at 76:
"It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value."

In utilising such sales evidence the correct approach is to consider the material features of both the sale property being compared and the subject property being valued and to make adjustments having regard to the differences between the properties (see Waalt Homes Pty Ltd v. Road Construction Authority (1987) 64 LGRA 346 at 353-356).
Mr Hoult supplied valuations which accord in principle with the two authorities that I have mentioned above. Given this and given my comments concerning the methodology presented by Mr Menzel, it follows that there is no real need for me to provide a discourse on Mr Menzel's evidence purporting to demonstrate the claimed percentage drop. Nevertheless, some comment is warranted.
Mr Menzel attempted to calculate the suggested 40% reduction in value by utilising improved sales without analysing the sales to an unimproved value. Some of the sales referred to by Mr Menzel had been so analysed by Mr Hoult, however, all of the sales were not analysed in this way, thus precluding an accurate assessment in the reduction of the unimproved value of the relevant sale lands. In carrying out a valuation under the Valuation of Land Act, this Court is concerned with the question of unimproved value and a broad-brush approach utilising improved values cannot be relied upon in dealing with appeals such as these.
The sale property that Mr Menzel relied on as indicating the 1998 level of value involved the sale of a property in the Delta area, an area which Mr Hoult said had superior soils and demonstrated higher values for cane land than in the area of the subject properties in the Burdekin River Irrigation Area. I accept Mr Hoult's opinion on this. He is uniquely qualified as both a registered valuer and agricultural scientist who has had nine years' experience as an agricultural extension officer with the Bureau of Sugar Experiment Stations. I did not dismiss Mr Menzel's experience as a canegrower or his positions as a member of the Burdekin Canegrowers' Executive and on the Invicta Mill Suppliers' Committee, however, Mr Hoult's experience and on-the-ground work in this regard is to be preferred.
Mr Menzel said, further, in support of his calculation of a 40% value reduction that his bank, as part of its security arrangements with the appellants, recently assessed the subject properties at a value 40% lower than had been in place three years previously. Even if I were to proceed on the basis of a percentage reduction approach to valuation, such evidence would need to be provided directly by the relevant bank officer or valuer for that evidence to be of any weight. Mr Hoult, for his part, said that there was no market evidence of which he was aware of showing a 40% reduction in values.
In his valuations of the subject properties Mr Hoult relied on five sales transactions, which he compared with the subject lands in drawing his conclusions as to the values that ought to apply. The same five sales were used in each valuation. I will consider them first in the context of the valuation of Lot 54 as the parties did before me.
Sale 1 occurred on 24 July 2000 and involved the sale of an area of 133.8 ha for a price of $1,653,050. Mr Hoult deducted the value of improvements to arrive at an analysed unimproved value of $4,573 per ha, however noted that the Chief Executive applied a value of $3,961 per ha to that property. I will not detail the comparison between the sale property and Lot 54 as Mr Menzel agreed with Mr Hoult that Lot 54 is superior. Mr Menzel did, however, take issue with one aspect of Mr Hoult's valuation in which he said in respect of the Sale 1 property, "This property at the time of sale had uncertain Cane Production Area circumstances and presently has only temporary Cane Production Area." Mr Hoult said that he had spoken to the purchaser who said he recognised that there was a gamble involved in purchasing the sale land in circumstances where there was uncertainty as to whether a permanent Cane Production Area (or "assignment", as it is often called) would be approved for the land. He made an allowance for this aspect in comparing the sale with Lot 54, though the level of that allowance was not detailed in his valuation. He said that as a result of representatives from various landholders who found themselves in similar circumstances he had, in 1997, allowed $500 per ha for this negative feature.
Mr Menzel agreed that there would have been some uncertainty associated with the position regarding a cane assignment, but said that that was better described as a "technical hitch" rather than as a gamble. He said that the Invicta Mill Suppliers' Committee and the Invicta Mill had agreed that an assignment would ultimately be granted, however, Colonial Sugar Refineries Ltd insisted that there be ACCC approval before it proceeded. It did proceed in the end, with 85% of Lot 54 receiving an assignment in early December 2001. Mr Menzel said that the purchasers had approached him for advice before buying the farm and he told them that he believed there would definitely be an assignment granted.
The issue between the parties concerning the application of this sale is the degree of allowance that needs to be made with respect to the uncertainty surrounding the prospect of a permanent assignment of a Cane Production Area to the land. No particular figure was put on that aspect by either side. I recognise that arriving at a particular figure would have been a matter of subjective judgment, however there is no way in which I can bring a more precise assessment to the direct application of this sale than that presented to me by the parties. The best that I can do is to take into account the issue which divides the parties with respect to the sale and see whether, in the context of the sale evidence overall, some greater clarity emerges.
Sale 2 in Mr Hoult's valuation took place on 12 March 2001. The sale property has an area of 127.6 ha and sold for $1,600,000. After the deduction of the value of improvements Mr Hoult calculated an unimproved figure of $4,584 per ha, which was applied at the rate of $3,996 per ha. In his comparison Mr Hoult said that the subject Lot 54 has a slighter higher proportion of class two and class three soils and a lesser proportion of poor non-allocated soils. He concluded that, therefore, overall the soils of the subject property are superior to that of the sale. He also concluded that overall on a per ha arable basis Lot 4 is superior to the sale property.
Mr Menzel had been on the sale property on one occasion and formed the view that it had slightly superior fertility to Lot 54. He said that he was aware of the sale property having higher productivity than the subject lands, however provided no details. Productivity levels can, of course, be influenced by seasons and management, so claims of the type raised by Mr Menzel need to be exposed fully so that they can be analysed. Mr Hoult's conclusion as to the comparative quality of each property's soils was based on a Department of Primary Industries' soils map combined with his own expert inspection. I prefer his evidence.
The third sale in Mr Hoult's valuation took place on 20 November 2000. The sale land has an area of 44.86 ha and sold for $480,000. Mr Hoult analysed that sale price to show an unimproved value of $5,007 per ha, but the Chief Executive applied a value of $5,127 per ha to the property. Mr Hoult said that on a per ha arable basis Lot 54 is inferior to the sale property. He also observed that the sale is considered to be a forced transaction, though provided no detail as to the nature of the pressure that the vendor was apparently under. Whilst Mr Hoult said that the sale was not "highly desirable as evidence" he observed that the sale price revealed a level of value only marginally below that applied by the Chief Executive.
Mr Menzel accepts the overall comparison made by Mr Hoult, but expressed the view that all of the sale relied upon by Mr Hoult were effectively forced sales as none were carried out for benign reasons such as a desire of the vendor to move into retirement. Judicial authority with respect to the notion of "value" is to be found in Spencer v. Commonwealth (1907) 5 CLR 418 and I refer in particular to the judgment of Isaacs J at 441 where he said:
"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."

For a sale to be identified as a forced sale, there needs to be evidence of a nature that demonstrates or at least raises an arguable proposition that the transaction is not one that accords with what His Honour had to say. I have no evidence from Mr Menzel that any of the sales relied upon by Mr Hoult failed to meet this test. Mr Hoult, on the other hand, has not adequately explained why Sale 3 should be described as a forced transaction.
Mr Menzel said also with respect to Sale 3 that since the purchasers owned other farms in the area of the sale property, they had obtained an advantage by being able to use their cane harvester more efficiently in harvesting from all of their properties. Mr Hoult's response to that was to say that the farm had been on the market for some time before sale, therefore indicating no sense of urgency on the part of the purchaser to acquire the property for the particular advantage suggested by Mr Menzel. Mr Menzel's explanation for the delay was that the purchasers had to first obtain sufficient funds to purchase the property and that those funds became available following the sale of the Sale 1 property. I note that the contract for that sale was in July 2000, whereas the purchase of the Sale 3 property did not take place until November 2000. I would have thought such a period would have been sufficient to test the market, assuming that the Sale 3 property was on the market at the time Sale 1 was contracted.
Sale 4 involved the sale of a property of 158 ha for $1,798,400 on 24 August 2000. Mr Hoult analysed the sale price to a figure of $4,922 per ha unimproved, which was applied at $4,746 per ha. He concluded that the subject property is inferior to the sale property – a conclusion not disputed by Mr Menzel.
The fifth and last sale in Mr Hoult's valuation took place on 30 November 2000. The sale land has an area of 151.8 ha which sold for $2,300,000. Mr Hoult deducted the value of improvements to show a price of $8,053 per ha, however, the sale was applied at a level of $4,677 per ha only. Mr Hoult said that the subject Lot 54 is inferior to the sale property, a comparison accepted by Mr Menzel.
In his valuation of Lot 25 Mr Hoult relied on the same five sales. Mr Menzel accepted the comparisons made between those sales and the Lot 25 property, except that in the case of Sale 2 where Mr Hoult concluded that the subject Lot 25 is superior to the sale property, Mr Menzel expressed some uncertainty, saying that whilst the subject has a fairly even standard of soil quality, the sale has some better soil and some of a worse quality. Nevertheless, he did not assert that the comparison provided by Mr Hoult was defective in any way – he simply expressed difficulty in making his own comparison.
I am not convinced that Mr Hoult has made any serious error of fact or any error of law in his valuations. His sales, considered overall, do support the values applied by the Chief Executive to the subject lands. I therefore dismiss the appeals and affirm the valuations of the Chief Executive.
In so concluding, I wish to make it clear to the appellants that I proceed not on the basis of conducting my own inquiry as to the value of the subject lands, nor in obtaining evidence other than that presented to me. The appeals must be determined on the basis of the evidence provided and the submissions made. That proposition was expressed clearly by the Land Appeal Court in the case of Qualischefski v. The Valuer-General (1979) 6 QLCR 167 at 172:
"However upon appeal a statutory onus of proof is cast upon the appellant and he has to accept, within the confines of the grounds set out in his Notice of Appeal to the Land Court, the burden of proving the Valuer-General incorrect. Neither this Court nor the Land Court in the subject jurisdiction may assume the role of an investigating tribunal requiring the Valuer-General to substantiate his case. This is in contradistinction to jurisdiction conferred under the Land Act.
In appeals of the nature of the subject, the onus which the appellant must assume is not an easy one to discharge without the assistance of a registered valuer who can lead evidence as to sales analyses and/or comparison with valuations made by the Valuer-General in respect of comparable properties."

RP SCOTT
MEMBER OF THE LAND COURT

[2002] QLC 23

8 March 2002