Sedgwick v Department of Natural Resources and Water
[2008] QLC 66
•3 April 2008
LAND COURT OF QUEENSLAND
CITATION: Sedgwick v Department of Natural Resources and Water [2008] QLC 0066 PARTIES: Edwin J Sedgwick and Judith MC Sedgwick
(appellants)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NO: RV2006/0604 DIVISION: Land Court of Queensland – General Division PROCEEDING: An appeal against a rental valuation. DELIVERED ON: 3 April 2008 DELIVERED AT: Brisbane HEARD AT: Longreach MEMBER: Mr JJ Trickett, President ORDER: The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of “Avondale” as at 1 October 2005 is determined at Three Hundred and Seventy-seven Thousand Dollars ($377,000). CATCHWORDS: Unimproved value – grazing property in Longreach Shire – admissibility of expert evidence – weight to be attached to expert evidence – direct comparison with analyses of improved sales – whether sales at market value – relativity with values applied to sales – carrying capacity – Valuation of Land Act 1944 APPEARANCES: Mr P Whip, Valuer, for the appellants.
Mr W Isdale, Executive Legal Consultant, Crown Law, for the respondent.
This is an appeal by landowners in the Shire of Longreach against the unimproved value applied to their land by the Chief Executive, Department of Natural Resources and Water (the Department) under the provisions of the Valuation of Land Act 1944 (the Act).
Background
Mr and Mrs Sedgwick (the appellants) are the owners of a grazing property known as "Avondale", containing an area of 9,418.452 ha. As at 1 October 2005, the Department applied an unimproved value of $510,000, to that property under the provisions of the Act. Mr and Mrs Sedgwick appealed to the Land Court against that valuation, the notice of appeal being lodged by their agent, Mr Peter Whip, who is also a registered valuer. The owners' estimate of the unimproved value of the land is stated to be $205,000.[1]
[1] Exhibit 1.
The grounds of appeal contend that the unimproved value is excessive because:
· the carrying capacity assessed by the Department is far too high and fails to take into account the impact of gidyea thickening and encroachment;
· the valuation is out of relativity with the valuations of surrounding blocks;
· the sales used by the Department to value the property have not been analysed in the proper manner;
· insufficient allowance has been made for differences in carrying capacity between this property and the sale properties;
· insufficient allowance has been made for the disabilities associated with animal pests from an adjoining property;
· the current market is largely driven by purchasers of properties for use for cattle, but the subject property has a poorer market perception because it has a serious pimelea problem, which affects cattle to a greater extent than sheep;
· the potential increase in carrying capacity due to gidyea clearing has been significantly overestimated as the cleared areas have not grassed up and the majority of pulling has been done to address gidyea thickening and encroachment.
This case was heard separately from the case of "Ban Ban"[2] where the appellants were also represented by Mr Whip, who also gave evidence as their valuer. However, the parties agreed that any relevant evidence in either of these cases be evidence in the other. Because of the general interrelationship of the appeals against the Department's valuations in the central west, the parties also agreed that any relevant evidence in the cases which I heard at Blackall, Longreach and Winton, should also be treated as evidence in these two cases.
[2] Pratt v Department of Natural Resources and Water [2008] QLC 0063.
The Admissibility and Weight of Mr Whip's Evidence
In the "Ban Ban" case, I dealt with the submission by Mr Isdale, counsel for the Department, that Mr Whip had a conflict of interest in his roles as agent, advocate and expert witness in these cases. After considering Mr Isdale's objection to the admission of Mr Whip's evidence as an expert valuer, I held that even though Mr Whip's evidence was tainted it should be admitted, but any argumentative or adversarial statements were excluded from consideration. Furthermore, where there was a conflict between Mr Whip's evidence and that of the Department's valuer, no weight would be attributed to Mr Whip's evidence unless it was corroborated from another source, or unless the Department's valuer was demonstrably wrong. I propose to adopt the same approach to Mr Whip's evidence in this case.
The Subject Land
"Avondale" consists of Lot 5 on Crown Plan M 22813 and Lot 4 on Crown Plan VG 30, held as Grazing Homestead Perpetual Lease 29/11269, containing an area of 9,418.452 ha. It is part of an aggregation of properties owned by Mr and Mrs Sedgwick, known collectively as "Spoilbank", used for grazing sheep.
According to Mr PD Schefe, the registered valuer who gave evidence on behalf of the Department, "Avondale" is situated about 98 km west of Longreach, with access by about 8 km of bitumen road, with the balance being formed earth and gravel roads. However, according to Mr Whip, "Avondale" is situated approximately 120 km west of Longreach. Electricity and telephone services are not connected to the property but are available in the locality and could be connected at a cost.
Mr Schefe described the property as consisting of:
Approximately 4,432.452 ha (47%) of open to lightly shaded Mitchell grass downs, on brown/red brown soil, shaded with scattered gidyea and whitewood;
Approximately 3,222 ha (35%) of developed gidyea scrub on red brown to brown soil, about 915 ha of which are more gidyea downs than gidyea scrub, with only a light coverage of buffle grass, the majority of grass cover being herbage;
Approximately 1,384 ha (14%) of thick gidyea scrub with heavy seedling regrowth;
Approximately 312 ha (3%) of hard gidyea ridge;
Approximately 68 ha (1%) of unavailable toprock.
Mr Schefe assessed the carrying capacity of “Avondale” at 1 dry sheep equivalent to 2 ha, a total of 4,709 sheep. His assessment of unimproved value was $54/ha.
Mr Schefe had made an allowance of 5% because "Avondale" has a problem with dingoes and dogs from the adjoining large cattle property, "Vergemont".[3]
[3] Exhibit 36.
Mr Whip described the country quite differently:
Approximately 4,050 ha (43%) of thick, stunted, gidyea scrub, generally stony throughout, with no significant areas of open country and very little grass. Approximately 2,481 ha of this country has been cleared either through pulling or thinning;
Approximately 3,950 ha (42%) of broken boree and gidyea with encroaching and thickening gidyea growth throughout, with thick patches of stunted gidyea. This country varies from a light stony Mitchell grass (very susceptible to pimelea infestation) to patches of very thick gidyea scrub. Approximately 760 ha of this country has been cleared by pulling;
Approximately 288 ha (3%) of stony brown soil, Mitchell grass downs type country, moderately shaded with gidyea and whitewood, stony and ridgy throughout, lightly grassed with Mitchell and Flinders grass with herbage in season. Very susceptible to pimelea infestation;
Approximately 1,036 ha (11%) of brown soil Mitchell grass downs type country, nicely to moderately shaded, timbered with whitewood, gidyea, boree, and vinetree, normally well grassed with Mitchell and Flinders grass, with herbage in season;
Approximately 94 ha (1%) of rough hills and associated scalded run-off areas, very poor country, which has been fenced out by the owners.
Mr Whip assessed the carrying capacity at 1 sheep to 2.45 ha at best, "given ongoing treatment of pulled areas and encroaching gidyea".[4] His assessment of unimproved value was $22/ha.
[4] Exhibit 30.
It is evident that their appreciation of the property was quite different. A Court-ordered joint report prepared by the two valuers prior to the hearing, identified a number of issues. While they both agreed there is some good open downs country capable of carrying 1 sheep to 1.6 ha (1 sheep to 4 acres), they disagreed as to the area of such country. Mr Schefe contends there are 4,432 ha, while Mr Whip identified only 1,036 ha.
Part of what Mr Schefe described as good open downs is what Mr Whip described as mixed country, ranging from stony lightly grassed downs type country to broken boree and gidyea, with encroaching and thickening gidyea. According to Mr Whip, all the stony downs type country was very susceptible to pimelea infestation.
Mr Whip's assessment of the country was largely supported by Mr Pratt, the joint owner of "Ban Ban", and by Mrs J Sedgwick, one of the appellants. Mr Pratt is also the owner of the nearby property "Belfield", which he described as similar to "Avondale". In Mr Pratt's opinion, much of what Mr Schefe described as "open to lightly shaded Mitchell grass downs" is open stony gidyea country, quick responding, but lighter carrying than the black soil downs because water does not penetrate that soil type.[5]
[5] Transcript 32.
That assessment was supported by the evidence of Mrs Sedgwick that much of the area that Mr Schefe has called open brown soil downs is really very light carrying stony country, quick to respond, but which deteriorates much more quickly than the good downs country, such as "Ban Ban" and "Corona".[6]
[6] Transcript 338-339.
In my view, there was sufficient evidence from these two experienced landowners to support Mr Whip's classification of that country rather than Mr Schefe's. The photographs in the exhibits confirm that the area is not Mitchell grass downs of the quality of that on "Ban Ban".
While there was little difference between them in the area which had been pulled (Mr Whip 3,241 ha, Mr Schefe 3,222 ha), they disagreed as to the effect of that development on the carrying capacity of the property.
Mrs Sedgwick gave evidence that the owners pulled some gidyea in 1979 and in 1989 repulled that area in addition to a larger area. That was all repulled and seeded in 2004 at a cost of $110,000. Seeding was only partially successful, with "only a show of buffle" on the softer creek and gully areas.[7] Pulling resulted in an increased carrying capacity for a few years before gidyea regrowth gradually reduced it to virtually nil. Mrs Sedgwick said if finances permitted, they would repull the area every eight to ten years.
[7] Transcript 333.
Mr Whip thought the benefit was marginal. He contended that although there was an increase of productivity following the pulling, the regrowth of the gidyea eroded the benefits so that within eight to ten years the carrying capacity had returned to that of its virgin state and further pulling was necessary. He questioned the economics of the cost of that continual expenditure over the short term gain in carrying capacity.
On the other hand, Mr Schefe was of the opinion that pulling the gidyea would increase the carrying capacity to 1 sheep to 2.2 ha and that the control of the gidyea regrowth to maintain that carrying capacity was a management issue. He had no doubt about the economic benefits of pulling the country.
Those different assessments of the quality of the country on "Avondale", resulted in their differing carrying capacities. Mr Whip assessed the carrying capacity at a maximum of 1 sheep to 2.45 ha following pulling, reverting to 1 sheep to 3.27 ha over 10 years. Mr Schefe had a more optimistic view of the carrying capacity at 1 sheep to 2 ha, or 4,709 sheep.
Mrs Sedgwick's evidence was to the effect that she thought there was benefit in pulling the scrub, but it is stunted gidyea, with a different soil type to the Blackall gidyea. The increase in carrying capacity was temporary and costly repulling was necessary. She conceded that "Avondale" would have run up to 4,700 sheep at times, but that could not be maintained. She thought the long term average carrying capacity would be more like 3,000 sheep.
On the evidence in this case I propose to adopt a carrying capacity of 1 sheep to 2.5 ha, which can be maintained only by costly periodic pulling of the gidyea country.
While Mr Whip and Mr Schefe agreed that the property suffered from some disabilities, there was no agreement as to their severity. Mr Whip contended that much of "Avondale" suffered from thick infestation of pimelea, which affected its ability to run cattle. However, Mr Schefe was of the opinion that pimelea is a seasonally occurring plant and made no allowance for its impact.
Both valuers agreed that the property suffered from being adjacent to the large, rough property, "Vergemont", and that some buffer allowance should be made because of the impact of dingoes and dogs. However, it was Mr Whip's opinion that the impact was greater than had been allowed by Mr Schefe.
The Assessment of Unimproved Value
In the "Ban Ban" decision I discussed the relevant legislation and legal principles. It is unnecessary to repeat that discussion. It is sufficient for the purposes of this case to say that the Act requires the Department to assess the unimproved market value of each parcel of land at the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are well informed of the advantages and disadvantages of the property. It is well established that the unimproved value of land is ascertained by comparison with sales of comparable lands, which have been analysed to ascertain what part of the purchase price of the sale property relates to improvements and what part is attributable to the land itself.
That was the process adopted by the Department in valuing "Avondale" as at 1 October 2005. In defending his applied unimproved value of $54/ha, Mr Schefe relied upon three sales, "Ban Ban", "Corona" and "Cotswold Hills". However, in his oral evidence, Mr Schefe explained that the sale of "Cotswold Hills" had been inspected and analysed by another valuer. In the circumstances, I had no regard to that sale.
Mr Whip adopted the same approach. He also relied on the sale of "Ban Ban", but also the sales of "Glenroy" and "Weeumbah".
The Market at the Relevant Date
The Longreach area had traditionally been a wool-growing and sheep-breeding area. All the sale properties had been developed with sheep infrastructure. However, there is evidence in this and other cases throughout the central west, that the market at the date of valuation was dominated by the demand for properties to run cattle. Any purchaser seeking land to run sheep would have to compete with potential cattle purchasers. In those circumstances, the Department’s valuers concluded that the highest and best use for lands throughout the central west was for cattle grazing.
"Ban Ban" was purchased to run both sheep and cattle. Evidence was given in that case of the purchasers' intention to maintain and utilise the sheep infrastructure on that property. However, the vendors had run only cattle and had little interest in the sheep improvements which had deteriorated.
"Corona" was purchased for the purpose of running cattle by an adjoining owner. It is also a predominantly downs property and there was no argument that it is well suited to the running of cattle. "Glenroy" has a mixture of country, with only a small proportion of downs country. It was purchased for the purposes of running sheep. "Weeumbah" also has a mixture of country. It was sold under somewhat unusual circumstances, but the evidence is that the purchasers intend to run both sheep and cattle.
It is clear from the evidence that the dominant market at the time was for cattle. That had a significant impact on the approach adopted by the Department's valuers when assessing the added value of the sheep improvements on the sale properties. That was discussed in detail in the "Ban Ban" case and other cases and need not be repeated here.
The Highest and Best Use of "Avondale"
The appellants contend that "Avondale" is not suitable for the running of cattle. Mrs Sedgwick, explained how pimelea had spread over most of the property and the effect which it had on cattle. Although pimelea affects sheep to some extent, it affects the lungs of cattle resulting in severe losses. Mrs Sedgwick was of the opinion that "Avondale" would be of no interest to a cattle producer.
Mr Whip's evidence was to the same effect as that of Mrs Sedgwick. He was of the opinion that the highest and best use of "Avondale" was for wool-growing.
On the other hand, Mr Schefe contended that pimelea is a seasonally occurring plant which waxed and waned with the seasons. However, he quite fairly conceded that he had little experience with pimelea, most of his information had come from discussions with others and what information could be obtained from the Department of Primary Industries.
In the circumstances, I accept the evidence of Mrs Sedgwick and find that the highest and best use of "Avondale" is for sheep-grazing rather than cattle-grazing. However, there was no evidence of directly comparable sales. Therefore, in determining the unimproved value of "Avondale", it will be necessary to have regard to the sales relied upon by the valuers, making what allowances seem to be appropriate.
The Sales Evidence
The sale of "Ban Ban" was the primary basis for both valuers. Their respective analyses of the sale and the adjustments which I considered necessary are dealt with in detail in the "Ban Ban" case.
"Ban Ban" of 14,263.83 ha, sold in October 2005 and was analysed by Mr Schefe to show an unimproved value of $106.46/ha (second analysis). He applied $98/ha at the date of valuation. On the other hand, Mr Whip analysed the same sale to show an unimproved value of $82.03/ha. After making what adjustments I considered necessary on the evidence, I determined the unimproved value of "Ban Ban" as at 1 October 2005 at $89/ha.
Both valuers agreed that "Ban Ban" is considerably superior to "Avondale". It has a far greater proportion of black/brown soil Mitchell grass country. However, there was no agreement as to the extent of its superiority. Mr Schefe was of the view that 47% of "Avondale" was at least equal quality to the downs on "Ban Ban". However, Mr Whip contended only 11% was good Mitchell grass downs country, while the remaining downs type country was much lighter carrying country than the black/brown soil Mitchell grass downs country.
Mrs Sedgwick's evidence, supported by photographs, was to the effect that the vast majority of the more open country of "Avondale", is much lighter country than that of "Ban Ban". Mrs Sedgwick explained that she knew both properties very well, having been the joint owner of "Avondale" since 1979, while her family had owned "Ban Ban" in the past. She was therefore, in my view, in an ideal position to compare the two properties. Basically Mrs Sedgwick's evidence supported that of Mr Whip.
There was general agreement between Mr Whip and Mr Schefe that approximately 83% of "Ban Ban" is open brown soil Mitchell grass downs, while the balance comprises boree woodland with gidyea encroaching, with an area of creek channels and an area of thick stunted gidyea scrub. They agreed that the carrying capacity is 1 sheep to 1.7 ha. Both regarded "Ban Ban" as considerably superior to the subject land in quality of land, locality and access.
In addition to "Ban Ban", Mr Whip relied upon "Glenroy", with an area of 13,404 ha, which sold in July 2005 for $590,000, which Mr Whip analysed to show $15.37/ha. His estimate of carrying capacity was 1 sheep to 4.2 ha.
"Glenroy" is inferior to "Avondale", comprising 50% thick stunted stony gidyea scrub, with very little grass. The balance of the property ranges from river channels and flood plain, broken gidyea and boree with gidyea encroachment and 13% hard stony hills and toprock. Only a small area (Mr Whip estimated 3%) comprises lighter Mitchell grass downs. It is situated just outside Stonehenge, 138 km from Longreach by bitumen road.
Mr Schefe placed no reliance on the sale of "Glenroy". In his opinion , it was a forced sale below market value. However, he had also analysed that sale to show only $6.35/ha. It is situated in the Barcoo Shire. The Departmental valuer responsible for the valuation of that Shire, applied an unimproved value of $24.62/ha, clearly abandoning the sale.
The circumstances of Mr Schefe's analysis of the sale are discussed in the "Ban Ban" case. It is sufficient to say that I found Mr Schefe's analysis to be unreliable. I do not accept that the sale of "Glenroy" should be rejected as being below market value.
In addition, Mr Whip also relied to some extent on the sale of "Weeumbah". However, that was a sale in April 2004 and there were particular circumstances relating to that transaction, as discussed in the "Ban Ban" case, which led me to conclude that the sale of "Weeumbah" was not of any assistance.
In addition to the sale of "Ban Ban", Mr Schefe relied on upon the sale of the 25,064 ha property "Corona", situated 109 km west of Longreach. "Corona" sold in May 2004 and was analysed by Mr Schefe to show an unimproved value of $128.12/ha. However, at the date of valuation, he applied only $91.76/ha to that property. Despite the early date of the sale, Mr Schefe thought that the sale of "Corona" was at market value. He explained that he had applied much less than the analysed unimproved value in order to maintain relativity with sales further to the east in Ilfracombe and Aramac Shires.
Mr Whip rejected the sale of "Corona" because, he contended, it was purchased by an adjoining owner who needed somewhere to put breeders in a hurry and had paid too much. In my view, by not applying his analysed unimproved value, Mr Schefe effectively conceded that "Corona" was a high sale. In any case, it is the sale of a much larger property, with much superior country and carrying capacity, nearly 18 months prior to the valuation date.
Conclusion
The sales evidence in this case is far from satisfactory. There are no sales which are directly comparable with the subject land. The only common sale is "Ban Ban", which both valuers used as the primary basis of valuation, and for which I have determined an unimproved value of $89/ha for a carrying capacity of 1 sheep to 1.7 ha.
However, "Ban Ban" is substantially superior to "Avondale". It is better situated, has better access and vastly superior country. It has an unimproved sheep area value of $151.30.
The only other sale of any possible assistance is the sale of "Glenroy" which Mr Schefe rejected but which Mr Whip analysed to $15.37/ha. At a carrying capacity of 1 sheep to 4.2 ha, that analysis shows an unimproved sheep area value of $64.55.
However, the Department considered the sale to be at below market value and applied $24.62/ha at the date of valuation. According to his analysis of the sale, Mr Schefe had assessed a carrying capacity of 1 sheep to 3.5 ha for "Glenroy". That would amount to an unimproved sheep area value of $86.17.
Mr Schefe's applied value to the sale of "Corona" is $91.76/ha. With an assessed carrying capacity of 1 sheep to 1.67 ha, the resulting sheep area value is $153.24. Assuming that is correct, together with the sheep area value of "Ban Ban" at $151.30, it would seem that if "Avondale" was all good black soil downs country, it would have a sheep area value of around $150.
However, it is vastly inferior to those downs properties and, because of its pimelea infestation, it is unsuitable for cattle. It also abuts the dingo infested property "Vergemont", which prevents the running of ewes. Furthermore, its carrying capacity of 1 sheep to 2.5 ha can only be maintained by pulling the gidyea country every ten years or so, at considerable expense. Indeed, there is on-going debate about the economics of pulling the stunted gidyea in this area. It does not seem to be the general practice. The only other property mentioned by Mr Schefe as achieving some benefit was "Mt Ryde", but Mrs Sedgwick said it had a greater area of softer gully country.[8]
[8] Transcript 345.
In my view, on the evidence, the Department has over-assessed the capabilities of "Avondale". The pimelea infestation renders the property unsuitable for the running of cattle. In a market dominated by purchasers of cattle country, that must have an impact on the price that a hypothetical prudent purchaser would pay for "Avondale".
In addition, on the evidence I find that Mr Schefe made an over optimistic assessment of the potential of the thick stunted gidyea country on "Avondale". He regarded the gidyea regrowth and the need to re-pull the country periodically as a management problem. However, I accept the evidence that the pulling of this type of gidyea country provides only a temporary benefit which then deteriorates over the years until it is lost. Further expensive clearing is required to again temporarily restore the carrying capacity.
Although there are no sales which are of direct assistance, I have come to the conclusion that taking all those aspects into account, a prudent purchaser would pay significantly less per sheep area value for "Avondale" than for the Mitchell grass downs country. A sheep area value of the order of $100 would not seem inappropriate. At a carrying capacity of 1 sheep to 2.5 ha, that is an unimproved value of $40/ha, which I propose to adopt. That amounts to an unimproved value when rounded of $377,000.
Order
The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of “Avondale” as at 1 October 2005 is determined at Three Hundred and Seventy-seven Thousand Dollars ($377,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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