Potter v Chief Executive, Department of Lands
[1995] QLC 13
•10 March 1995
|
BRISBANE
10 March 1995
Re: Appeal against Annual Valuation
Valuation of Land Act 1944
Shire of Boonah (AV94-194)
Lenard Thomas James Potter and Jennifer Enid Potter
v.
Chief Executive, Department of Lands
(Hearing at Ipswich)
D E C I S I O N
Mr and Mrs Potter are the owners of land described as Lot 2 on Registered Plan No. 145011, Parish of Coochin, County of Ward, containing an area of 23.61 hectares. As at 30th June, 1993, the respondent determined the unimproved value of this land at $70,000. An objection against this valuation was disallowed and the owners appealed to the Land Court against the respondent's decision on that objection, advising that their estimate of the unimproved value is $28,000.
This land is situated approximately 11 kilometres south of the Town of Boonah on the Bunburra Road, which at that point, is a gravel surfaced road providing fair access. Electricity and telephone services are connected to the property, while a school bus service is available nearby at Mallon Road.
The parties agree that the land is of moderate to steep topography, with the slopes originally timbered with brigalow and softwood scrub. The scrub has been cleared and pastures established, principally Rhodes grass with paspalum on the gully and limited kikuyu patches.
The land is zoned "Rural A" under the Boonah Shire Town Planning Scheme and is used for rural residential purposes and for the running of beef cattle.
The owners' grounds of appeal are:
•the valuation is out of relativity with those of neighbouring properties;
•the valuation does not properly reflect the use of the land. It is not a large homesite with potential for subdivision. It is exclusively used for running beef cattle to make extra income.
The second ground of appeal raises the issue of whether the subject land is entitled to a concessional valuation as land used for the purposes of "farming" under the provisions of section 11(9) and (10) of the Valuation of Land Act 1944. In the 1994 reprinted Act, these provisions appear as section 17.
Section 17(1) of the Valuation of Land Act 1944 states:"In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling-house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, the potential use is lawful when the valuation is made."
In ss.(2) of s.17, farming is defined to mean:
"(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 effect of this legislation is that if land qualifies for valuation as land used for purposes of "farming" as defined, any enhancement in value for any other use must be disregarded.
Evidence for the appellants was given by Mrs Jennifer Potter who explained that she and her husband purchased the property about seven years ago as a place to live and for the purpose of earning extra income to supplement that earned elsewhere. At the time of purchase the property was developed with a brick veneer home, but was somewhat overgrown. The appellants cleared the lantana etc., fenced it, enlarged the dam and added cattle yards.
Mrs Potter went on to explain that the appellants normally ran 20 to 25 head of cattle on the property in average seasons and have run up to 40 head for short periods in good seasons. They usually purchased store cattle, held them for about 12 months and then sold them to the meatworks. However, the seasons had not been good since they purchased the property.Mrs Potter gave details of cattle purchased and sold in the last three years: •As at 30 June 1991 they had 31 steers, having in that year sold eight bullocks for $6,173, and purchased four steers at $1,520.
•As at 30 June 1992 they had 33 cattle, having that year sold six for $3,794 and purchased nine steers for $4,365.
•As at 30 June 1993 they had 20 head, having that year sold 30 steers for $21,623 and purchased 19 steers for $7,145.
•At the date of hearing, they were running about 24 head.
Mrs Potter explained that 1993 was an extraordinary year and that they had sold a larger number than usual. Because of the drought they were unable to finish the cattle for sale the previous year, they had to feed them and keep them longer before selling them.
Expenditure incurred in running the cattle for the same three years amounted to $3,378, $6,763 and $4,587. Averaged over the three years, net profit is less than $1,300 per annum.
Mrs Potter said that in a good year she would expect that the appellants could buy 24 head, fatten them on grass for about 12 months and then sell them. She thought that they would make an average profit of $300 per beast. However, she admitted that they had done this in only one year, 1988-89, when they had bought 30 head for around $400 per head, held them for approximately a year and sold them at a gross profit of about $300 each.
Mr Errol Morris Stenzel, a grazier who owns a nearby property, also gave evidence on behalf of the appellants. Mr Stenzel compared the relativity of the subject valuation with those of three neighbouring properties. On an area basis the valuation of the subject land at $70,000 is $2,964 per hectare. Valuation No. 2582-5, in respect of neighbouring land owned by Coburn and Miller, with an area of 31.7 hectares was, to Mr Stenzel's knowledge, valued at $38,000 or $1,197 per hectare. However, evidence given at this hearing indicates that this valuation was later increased under the provisions of section 13(2) of the Valuation of Land Act to $80,000. Mr Stenzel said that the owners live in a house on that property, but lease the land to people to run approximately 30 head of cattle and four horses. It is similar country to the subject land.
Valuation No. 2582, in respect of neighbouring land owned by Maudsley, is valued at $1,016 per hectare. Mr Stenzel said that the owners live on the property and have a business in town. They use the land for grazing cattle and he thinks that they run it in conjunction with other land.
Valuation No. 2920-1 in respect of a third neighbouring property, with an area of about 150 hectares, owned by Gordon, is valued at $150,000 or $1,027 per hectare. It is used for farming purposes.
Mr Stenzel said that all four properties are of similar type of country and yet the valuation of the subject land is far higher on a per hectare basis than the other three properties. He was unaware that the valuation of the Coburn and Miller property had been increased to $80,000 and valued as a rural residential site.
Mr Stenzel said that the Potters run a small grazing operation on good scrub country developed with pastures. This type of country will finish cattle much better than forest country and in reasonable seasons will run one beast to 2 acres or one beast to 3 acres, without supplementary feeding. He thought that 25 head of cattle was a reasonable carrying capacity and that a profit margin of between $150 and $200 per head could be achieved in most years. However, he agreed that the profit margin depends on the seasons and the price at which cattle could be purchased.
Evidence on behalf of the respondent was given by Mr EG Ridley, registered valuer, employed by the Department of Lands. Mr Ridley considered the land to be reasonably good country, well grassed with Rhodes grass and with a safe carrying capacity of one beast to 1.6 hectares, or 15 head, on a year-in, year-out basis. It had no potential for subdivision, as the minimum subdivisional requirement for "Rural A" zoned land is 40 hectares.
As a basis for the valuation of $70,000 as a rural residential site, Mr Ridley relied upon three sales. Sale No. 1 is situated on the Boonah-Lake Moogerah Road and has an area of 16.05 hectares, zoned "Rural B", and sold in February 1993 for $70,000. This sale was analysed to show an unimproved value of $62,900 and a valuation of $62,000 was applied in the 1993 valuation. This land is approximately 10 kilometres south of Boonah and comprises approximately 8 hectares of wet, blue gum flats and the balance easy scrub/forest. It is watered by a bore which is salty. The sale property has similar situation, services and water to the subject land, but has superior access. It has inferior country and views and is smaller and Mr Ridley considers it inferior overall to the subject land.
Sale No. 2 is situated on Dwyers Ridges Road, approximately 15 kilometres south of Boonah, has an area of 25.84 hectares, is zoned "Rural B" and sold in March 1993 for $90,000. This sale was analysed to show an unimproved value of $75,200 and a valuation of $72,000 was applied in the 1993 valuation. Mr Ridley notes that this land is encumbered by an easement for access purposes through its entire length. It comprises moderate to steep scrub slopes, is watered by dams and the building site has good views to the east. In comparing the sale with the subject property, Mr Ridley said it has similar services and class of country, has inferior water and situation, but superior access and views, and is larger. Overall he considers it superior to the subject property.
Sale No. 3 fronts the Ganthorpe Road, approximately 13 kilometres south of Boonah, has an area of 33.49 hectares, zoned "Rural B", and sold in March 1993 for $100,000. The sale was analysed to show an unimproved value of $87,700 and a valuation of $79,000 was applied in the 1993 valuation. Mr Ridley notes that the property comprises easy to moderate forest slopes, is watered by dams, with the building site affording moderate views to the south. In comparing it with the subject land, he said it has similar situation and access, has inferior class of country, water and views, but superior access and it is larger. Overall he considers it superior to the subject property.
Mr Ridley admits that Sale No. 3 has some potential for subdivision, as the minimum subdivision requirement for "Residential B" zoned land is 16 hectares. However, he considers that this potential is not achievable until well into the future.
Although Mr Ridley was not the valuer responsible for applying the valuation to the subject land, he has inspected it and the sale properties and has satisfied himself that the valuation is correct. He has also inspected the properties adjoining, which were used by the appellants as comparisons.
In respect of the Coburn and Miller property, Mr Ridley said it was previously owned by a Mr Benstead who ran it in conjunction with other land. It was considered by the Department to be used for purposes of "farming", so it was valued under section 17(1) of the Valuation of Land Act. However, when Mr Ridley ascertained that its use by the new owners did not qualify it for valuation under that subsection, he altered the valuation to $80,000 as a rural homesite.
The Maudsley property was also investigated by Mr Ridley. He had no doubt that it qualified for valuation as land used for "farming" under the provisions of section 17(1) of the Valuation of Land Act, because of the scale of activities, as it was used in conjunction with other land. Similarly, the Gordon property, which is much larger, was used in conjunction with other land and was part of an extensive aggregation of grazing and farming land. Mr Ridley had no doubt that it was used for the purposes of "farming" as defined in the Act.
However, Mr Ridley said that in his opinion the subject land was not used for the purpose of "farming". He considered that its dominant use was for rural residential purpose and that grazing was incidental. Except for the extraordinary income of $21,600 in 1993 when, because of the drought, cattle were held over, the income for the other two years was relatively small.
Mr Ridley agreed with Mr Stenzel that a profit margin of between $150 and $200 per beast was more realistic than $300 per beast. He doubted that a net profit of $4,000 per annum could be achieved. In his opinion, the activities on the land did not have a significant or substantial commercial purpose or character. Furthermore, he did not consider that the grazing activities were the dominant use of the land.
Mr Stenzel submitted that while $4,000 per annum may not seem to be a large amount, for people earning a relatively modest income it certainly was a significant and substantial amount.
This aspect of s.17 of the Valuation of Land Act 1944, was recently considered by the Land Appeal Court in Chief Executive, Department of Lands v. Whackett (AV93-163 and AV93-164) judgments delivered 3 March 1995.
Whacketts' case involved the determination of the unimproved value of two adjacent parcels of land, of 54.8 ha and 51.03ha, situated at Cedar Creek about 15 kms south of Beenleigh. Although exclusively used for cattle grazing, the land was of poor quality with a relatively low carrying capacity, carrying only about 70 head of mixed cattle on a year-to-year basis. In the three years 1990-1992, the Whacketts sold approximately 25 head of cattle each year, the varying sales depending on the breeding program and the seasons. The average recent gross return was estimated to be approximately $5,000 per annum, although the income depended on the numbers sold, the state of the market and the seasons.
Although the enterprise was not a hobby or a recreational pursuit, the evidence indicated that the Whacketts would never make a big profit because the area was not big enough. The maximum carrying capacity of the land was about 70 head of cattle and it would be necessary to run more cattle to make any profit. On occasions they had to buy in feed to supplement the grass available. In order to earn a living, Mr Whackett worked a five-day fortnight on the subject land and a nine-day fortnight elsewhere.
At page 10 of its judgment, the majority of the Land Appeal Court in Whacketts' case set out the requirements of section 17 of the Valuation of Land Act 1944:"If land is to be valued under section 17(1) on the basis that the land is 'exclusively used ... for purposes of farming', each of the following questions must be answered in the affirmative:
1. Is the land used for 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? "
The majority of the Land Appeal Court considered each of these questions in some detail and found:
.the land was being used for the business or industry of grazing;
.the land was being used solely for that business or industry; and
.the business of grazing is being engaged in for the purpose of profit (however modest) on a continuous or repetitive basis.
However, as to whether the business or industry had a significant and substantial purpose or character, the majority of the Land Appeal Court, after considering the meaning of each of the words in that phrase, said at p. 15:
"It is difficult, and unnecessary, to state a precise and compendious meaning of the expression 'significant and substantial commercial purpose' and 'significant and substantial commercial character'. Bearing in mind the various connotations of the words 'significant' and 'substantial' it is perhaps sufficient for present purposes to say that for section 17(1) of the Act to apply to the subject land there must be evidence that:
(a)the business or industry is being carried on with a genuine and sizeable intention or desire that there be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or
(b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit. "
The Court found that the Whacketts' land had been used solely for the business or industry of grazing and although the enterprise was not a hobby or recreational pursuit, Mr Whackett had said that it would never make a big profit because the area was not big enough and it would be necessary to run more cattle to make any profit.
In the event the majority of the Land Appeal Court found that neither the objective character nor the subjective purpose of the grazing enterprise carried on by the Whacketts could be said to be significantly and substantially commercial.
After considering the whole of the evidence in the present case, I have come to the conclusion that Mr Ridley is correct. For reasons which are set out in the judgment of the majority in Whacketts' case, I am of the opinion that the grazing enterprise carried out on this land does not have a significant and substantial commercial purpose or character.
While the activities carried out by the appellants on the land provide a very useful adjunct to income which is derived elsewhere, they do not qualify the land for valuation as used for purposes of "farming" as defined in the Act. It must therefore be valued as a large rural residential site and Mr Ridley's sales support the valuation applied by the respondent.
Therefore, the appeal is dismissed and the valuation of the Chief Executive at $70,000 is affirmed.
MEMBER OF THE LAND COURT
0
0
0