Ogg v Department of Natural Resources, Mines and Water
[2010] QLC 90
•30 June 2010
LAND COURT OF QUEENSLAND
CITATION: Ogg & Ors v Department of Natural Resources, Mines and Water [2010] QLC 0090 PARTIES: David Ernest Ogg
John William Ogg
Peter Gordon Ogg
(applicants)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NO: VLA135-06 (formerly AV2006/0135) and VLA136-06 (formerly RV2006/0136) DIVISION: General Division PROCEEDING: Appeals against annual and rental valuations DELIVERED ON: 30 June 2010 DELIVERED AT: Brisbane HEARD AT: Winton PRESIDENT: Mrs CAC MacDonald ORDER: 1. The appeals are dismissed.
2. In Appeal VLA135-06 and Appeal VLA136-06, the unimproved value of “Eldorado”, being Grazing Homestead Perpetual Lease No. 23/16268 in the County of Douglas, Parishes of Stamfordham and Harriet, is affirmed at One Million, Eight Hundred Thousand Dollars ($1,800,000) as at 1 October 2005.
CATCHWORDS: Unimproved value – grazing property – highest and best use – relativity – sales evidence preferred – allowance for prickly acacia infestation – Valuation of Land Act 1944 APPEARANCES: Mr A Boyd, agent, for the appellants
Mr W Isdale of Crown Law for the respondent
These are two appeals against determinations by the respondent Chief Executive, Department of Natural Resources, Mines and Water of the unimproved value of land under the provisions of the Valuation of Land Act 1944 (the Act) as at 1 October 2005.
Both appeals concern the same property, Eldorado, which is a Grazing Homestead Perpetual Lease owned by the appellants, David E, John W and Peter G Ogg. Appeal VLA135-06 challenges the determination by the Chief Executive of the unimproved value of the land for the purpose of an annual valuation; Appeal VLA136-06 concerns the determination by the Chief Executive of the unimproved value of the land for rental purposes.
In both cases, the respondent's valuation was $1,800,000 or $116.50/ha. The appellants lead evidence to an unimproved value, as at the relevant date, of $79.19/ha or $1,221,750 (rounded).
The subject land is a grazing property of 15,427.932 ha situated approximately 50 kms south-west of Hughenden in the Flinders Shire Council local authority area. Access to the property is gained via the Hughenden-Winton Road which is a dual-lane bitumen sealed road.
Mr RJ Quaite, a registered valuer who gave evidence on behalf of the respondent, described the subject land as comprising undulating, open to lightly shaded brown soil downs which are stony and pebbly in parts. He said that the property is located on top of a watershed and there are heavy infestations of prickly acacia around the water facilities. The extent of the prickly acacia infestation and its impact on the unimproved value of the subject was in issue between the parties. There are no natural water supplies of any consequence on the subject land. The property is artificially watered by bores, earth tanks and dams and troughing fed from the "Warrianna" stock route facility.
Mr Quaite said that the subject land was being used to graze sheep and cattle as at the date of valuation and he valued the property by comparison with sales of cattle properties in the area of the subject land. The valuation of the subject property as a cattle property was contested by the appellants who submitted that, because they used the property for sheep grazing, it should be valued as a sheep property.
Mr Quaite estimated the carrying capacity of the subject land at 1 beast (cattle) : 13 ha or 1,186 head. The appellants’ estimate was 1 sheep : 1.75 ha overall. At a conversion rate of 1 head of cattle to 7 sheep, Mr Quaite’s carrying capacity becomes 1 sheep : 1.86 ha which is slightly higher than the appellants’ estimate. However there is no significant difference between the parties on this issue.
The major issues between the parties were the description of the subject land, the effects of the prickly acacia infestation and the appropriate valuation methodology to be adopted.
Evidence was given on behalf of the appellants by Mr PG Ogg, one of the appellants. No valuation evidence was called by the appellants who were represented at the hearing by their agent, Mr A Boyd.
Land Description
The major point of contention between the parties as to the description of the country comprising the subject property concerned Mr Ogg's assertion, in his statement of evidence, that 98% of the total area of the subject property is completely open country with no shade. Photographic evidence was tendered to support that statement. However, Mr Ogg also said that the appellants' property is heavily infested with prickly acacia.
Counsel for the respondent sought to highlight the inconsistency between these two statements – that is, that there is only 2% shade on the subject land compared with heavy infestation of prickly acacia. Counsel suggested that Mr Ogg was exaggerating the extent of the acacia.
At the end of the day I do not consider that the apparent inconsistency is real because it appears that since the prickly acacia is a declared weed, it cannot be described as natural shade in the sense referred to by Mr Ogg. In any event it is clear that an appropriate allowance should be made, in the valuation of the subject property, for the extensive infestation.
Mr Quaite's evidence was that he had made an allowance of 6% for the prickly acacia in 2001 and that that had been carried forward into the current valuation. Mr Ogg's case was that an allowance of 12.5% would be appropriate given the extent of the infestation. This issue is discussed further below.
Valuation Methodology
The major issue between the parties as to valuation methodology concerned selection of appropriate evidence for the purposes of determining the unimproved value of the subject land. Mr Quaite relied on the sales of four cattle properties for the purpose of his valuation. This was appropriate, he said, because the major demand for property in the area was from cattle buyers.
Mr Ogg's opinion was that because the subject property was used for sheep grazing, the appropriate comparison was with other sheep properties. He did not rely on direct sales evidence but rather on Land Court determinations of the unimproved values of several sheep properties which he considered to be comparable with the subject property.
Mr Quaite's valuation evidence
Mr Quaite said that the value he had attributed to the subject property was based on his general knowledge, valuation experience and assistance from the sales of four properties.
Sale No. 1, Maranie, is a property of 11,659.80 ha located at one property removed from the subject land. Maranie was sold on 3 April 2003 for $2,210,000 which Mr Quaite analysed to an unimproved value of $1,362,112 or $116.82/ha. Mr Quaite did not disclose the applied values of any of the sales properties in his written sales report.
The sale property is used for grazing beef cattle and has a carrying capacity of 1:13ha (896 head). Mr Quaite considered that the subject property was slightly superior to the sale in situation and access and similar in water, country and carrying capacity. Overall he considered that the subject was comparable with the sale.
Sale No. 2, Stamford Downs, is a 16,847.92 ha which sold on 20 November 2003 for $2,900,000. Mr Quaite analysed the sale to an unimproved value of $1,962,132 or $116.46/ha. The sale property adjoins the subject land on the north-north-eastern side and adjoins Sale 1 on its south-south-eastern boundary. The sale property is used for grazing beef cattle and has a carrying capacity of 1:13 ha (1,296 head). Mr Quaite considered the subject to be similar to the sale in situation, access, water, country and carrying capacity. Overall his opinion was that the subject was comparable with the sale.
Sale No. 3, West Evandale, is a 7,942.36 ha property which sold on 11 April 2005 for $1,650,000. Mr Quaite analysed the sale to an unimproved value of $1,193,042 or $150.21/ha. The sale property is used for grazing beef cattle and has a carrying capacity of 1:12 ha (661 head). Mr Quaite said that the subject is superior to the sale in situation and access, similar in water, inferior in country and carrying capacity. Overall he considered that the subject was inferior to the sale.
Sale No. 4 Afton Downs is a 16,775.65 ha property which sold on 6 May 2005 for $4,600,000. Mr Quaite analysed the sale to an unimproved value of $3,270,936 or $94.98/ha. Of Mr Quaite's sales, this property is the most removed from the subject land. The property is used for grazing beef cattle and has a carrying capacity of 1 beast to 11 ha (1,525 head). Mr Quaite said the subject is similar to the sale in access and water and inferior in location, country and carrying capacity. Overall he considered that the subject was inferior to the sale.
Mr Ogg's valuation evidence
Mr Ogg relied on two determinations by the Land Court of the unimproved value of two sheep grazing properties, Eyriewald and Moreena.
In Mitchell v Department of Natural Resources and Water[1] the Land Court determined the unimproved value of the aggregation of Eyriewald at $2,719,000 or $112.50/ha as at 1 October 2005. Eyriewald is located approximately six properties south of the subject land. It is a sheep grazing property and the departmental assessment of the carrying capacity of Eyriewald was 1 sheep to 1.6 ha. However the Land Court considered that the Department's traditional carrying capacities had been arbitrarily revised and the Court declined to assess the unimproved value on the basis of carrying capacity or sheep area value. Accordingly, the Court determined the value of Eyriewald on a direct comparison basis.
[1] [2008] QLC 0112.
Mr Ogg estimated the carrying capacity of the subject property at 1 sheep to 1.75ha. He considered that the country on Eyriewald was superior to the subject land being tighter and firmer country, with a lot more shade and with superior lambing capabilities. There is no prickly acacia on Eyriewald and therefore Mr Ogg considered that an allowance should be made for that difference between the properties.
The second Land Court determination relied on by Mr Ogg was the decision in Kelly v Department of Natural Resources and Water.[2] In that matter the Land Court determined the unimproved value of Moreena at $1,260,000 or $88.42/ha as at 1 October 2005. The Court accepted the departmental estimate of carrying capacity at 1 sheep to 1.8ha as there was no dispute between the parties on this issue.
[2] [2008] QLC 0154.
Moreena is situated approximately 10 properties south-west of Eldorado, the subject property, in the Shire of Aramac. Mr Ogg considered that Moreena was a slightly better property than Eldorado, leaving aside the effect of the prickly acacia problem.
Because the determined value of Eyriewald is 21% higher than the determined value of Moreena and because Moreena is slightly better than Eldorado, Mr Ogg estimated that the value of the subject land, Eldorado, should be 20% less than Eyriewald, that is $90/ha. He then estimated the value of Eldorado as compared with Moreena on the same basis and reached a value of $91/ha. His final estimate of the value of the subject was $90.50/ha which after allowing 12.5% for prickly acacia, he reduced to $79.19/ha.
Conclusions as to valuation methodology
Leaving aside for the moment the effect of the prickly acacia infestation on the subject property, the issue to be determined is the appropriate methodology to be adopted for valuing the subject property.
Mr Quaite relied on the sales of four cattle properties in support of his valuation of $116.50/ha for the subject land. The appellants objected to this because they use their property for sheep grazing.
Section 13 of the Act requires the Chief Executive to decide the unimproved value of the land to be valued for the Acts under which local authorities are established. Section 3(1)(b) provides that unimproved value, in relation to improved land, means the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be determined for the purposes of the Act, the improvements did not exist.
It is well established that to determine the unimproved value of the land within the meaning of the Act, it is necessary to determine the market value of the land, that is “the fair price of the land, which a hypothetical prudent purchaser would entertain, if he decided to purchase it for the most advantageous purpose for which it was adapted”.[3] Thus land is to be valued in accordance with its highest and best use, that is the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential.[4]
[3] Spencer v The Commonwealth (1907) 5 CLR 418 at 440, 441 (Isaacs J).
[4] Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at 415.
The appellants’ use of the property for sheep grazing does not of itself lead to the conclusion that the property is to be valued as a sheep grazing property. Rather, the land is to be valued for its highest and best or most advantageous use. The highest and best use of a property is a question of fact to be determined in the market place. Mr Quaite relied on values analysed from the sales of cattle properties which point to a higher value than the Land Court determinations of sheep grazing properties relied on by the appellants. Mr Quaite’s opinion was that the demand in the market as at the date of valuation was for cattle grazing land. On the basis of that evidence, I consider that the highest and best use of the subject property is cattle grazing.
However, because Sale 1 took place approximately 30 months before the date of valuation and Sale 2 approximately 2 years before the date of valuation, the appellants submitted that the sales should not be relied on as they were too distant from the date of valuation.
Mr Quaite’s evidence was that prices had increased from the date of the previous valuation, 2001, until the date of the current valuation, there having been a more rapid increase immediately prior to the date of valuation. In his view the middle of the valuation period, 2003/2004, represented a conservative timeframe on which to base the 2005 revaluation. If he had relied on the later sales in the valuation period, the valuation of the subject property would have been higher than that issued.
While it is standard valuation practice to determine market value by selecting comparable sales which took place as close as possible to the relevant date, I am not persuaded that Mr Quaite’s selection of sales that occurred some two years prior to the date of valuation was an error that affects the validity of the issued valuation. Mr Quaite’s explanation for selecting older sales was that he considered it appropriate to apply a conservative valuation in the face of a market which, by the date of valuation, was increasing rapidly. Since that approach has the effect of benefiting both the appellants and landowners generally, I am not prepared to dismiss the valuation on that basis. In other respects, Sales 1 and 2 are ideal evidence of the value of the subject land. The sales are in very close proximity to the subject and the country description of each is very similar to that of the subject.
Sale 3 is less suitable as a comparison with the subject land because the sale is approximately half the size of the subject. Further, there was evidence from Mr Ogg that the property had been purchased under pressure because the purchaser was in need of grass to feed his cattle during the drought. The sale certainly demonstrates a higher rate per hectare ($150.21) as compared with Sales 1 and 2 and does not appear to directly support the issued valuation.
It was agreed by both parties that Sale 4 is significantly superior to the subject property as is reflected in the analysed sale rate of $194.98/ha. It is of no real assistance in determining the value of the subject land.
As noted above, Mr Quaite did not reveal the values he applied to the sales properties in his written report. Under cross-examination he said that the reason for this was that he had compared the subject property with the analysed sales figures. When questioned, Mr Quaite said that Sale 1, Maranie, which analysed to $116.83 had been applied at $115.50 which was approximately 98.8% of the analysed value. Sale 2, Stamford Downs, analysed to $116.46. The applied value was $115.74 which is 99% of the analysed value.
While it is standard practice, for valuations under the Act, to compare the issued value of the subject land with the applied value of the sales, it appears that in this case the issued values for Sales 1 and 2 are so close to the applied values that there is no significant difference between the two.
Because the appellants considered that the respondent’s sales evidence was unsatisfactory, they sought to rely on the two Land Court determinations referred to above in support of their valuation.
The appellants’ reliance on the Land Court’s determinations amounts to a submission that the unimproved value of the subject should be determined in relativity with those determinations. A Land Court determination of the unimproved value of land under the Act takes effect as the issued valuation for the particular property in question. The determination is made on the basis of the evidence produced to the Court and as a result of the Court’s reasoning and conclusions in relation to the appeal in question. It is accepted that the Land Court determinations in question have established the values of the relevant properties as at the date of valuation. However, the determinations do not apply automatically to other properties in the district although it is accepted that it is desirable that valuations of comparable lands should bear proper relativity to one another.[5] It is also well established that the best basis for assessment of the unimproved value of land is the use of sales of vacant or lightly improved parcels of land.[6] I have already decided that the respondent’s reliance on Sales 1 and 2 is justified in the circumstances of this case. That being so, the evidence of those sales is to be preferred to the relativity argument relied on by the appellants.
[5] Grahn v Valuer-General (1992) 14 QLCR 327 at 328.
[6] Barnwell v Valuer-General (1989) 13 QLCR 13 at 17.
Prickly Acacia Infestation
The only remaining matter to be determined is whether the respondent has made a sufficient allowance for the prickly acacia infestation on the subject property.
Mr Ogg submitted that an allowance of 12½% should be made for the adverse effects of the extensive prickly acacia infestation on the subject land. His evidence was that the infestation was heaviest around the gullies and near waters and lightens up on the downs. He tendered a sketch map showing the heavy infestation in green and the more scattered areas in yellow. It appears that the 12½% allowance was calculated in accordance with a table set out in his written statement. The table was said to be a departmental schedule showing the allowances given for prickly acacia in the Muttaburra/Aramac areas. It shows that for 30-35% infestation, 12.5% is allowed.
The valuation report prepared by Mr Quaite does not on its face show the extent of any allowance for prickly acacia. Mr Quaite said that he had inspected the property twice, in 2002 and 2006 and his evidence was that he had made an allowance of 6% in the 2001 valuation. He agreed that the heaviest infestations were around the water facilities. On the yellow areas on the map, he said, the acacia was definitely not as thick as around the water facilities. In 2006, the areas marked scattered had increased in density in a minor way but not such as to warrant any change to Mr Quaite’s opinion of the overall carrying capacity and utilisation of the subject. He considered there would be a 5% heavy infestation over the whole property and 95% would be open to lightly shaded.
Mr Quaite did not comment on the accuracy of the table in Mr Ogg’s statement, but observed that in accordance with the table the 6% reduction he (Mr Quaite) had made allowed for something like 20% to 22½% prickly acacia, which he considered excessive for the subject. He had allowed 6% for the density of the infestation.
There is a significant difference between Mr Quaite’s and Mr Ogg’s evidence as to the extent of prickly acacia infestation on the subject land. Some of the difference is caused, I consider, by their using different descriptors as to the degree of infestation. In any event, I am not able to identify any reasons which would lead to conclude that either should be preferred. However, there was further relevant evidence from Mr Quaite that both Sales 1 and 2 are infested with prickly acacia. Mr Quaite’s opinion was that the infestation on Eldorado was marginally worse than on Sale 2, Stamford Downs, and that all up, there would be a couple of percentage points difference between the three properties in terms of the degree of infestation.
There was no evidence challenging or contradicting Mr Quaite’s estimate of the prickly infestation on Sales 1 and 2. I have therefore accepted that evidence and have concluded that the analysed values revealed by those sales reflect the price the market place was prepared to pay for a property with a degree of prickly acacia infestation similar to that on the subject. In those circumstances I do not consider that any further allowance should be made for the infestation on the subject property.
Conclusion
My overall conclusion is that there has been no error demonstrated in the subject valuation. That valuation therefore has the benefit of the presumption in s.33 of the Act that it should be deemed to be correct until proved otherwise. In the circumstances the appeals must be dismissed.
ORDERS
1.The appeals are dismissed.
2.In Appeal VLA135-06 and Appeal VLA136-06, the unimproved value of “Eldorado”, being Grazing Homestead Perpetual Lease No. 23/16268 in the County of Douglas, Parishes of Stamfordham and Harriet, is affirmed at One Million, Eight Hundred Thousand Dollars ($1,800,000) as at 1 October 2005.
CAC MacDONALD
PRESIDENT OF THE LAND COURT
0
2
0