Staal v Chief Executive, Department of Natural Resources
[1998] QLC 65
•3 June 1998
|
BRISBANE
3 June 1998
Re: Appeal against Annual Valuation -
Valuation of Land Act 1944 -
Shire of Peak Downs.
(AV96-358).
Allan E Staal and Marjorie M Staal
v.
Chief Executive, Department of Natural Resources
(Hearing at Emerald)
D E C I S I O N
This is an appeal by landowners against the unimproved value of their land made by the Chief Executive, Department of Natural Resources, under the provisions of the Valuation of Land Act 1944.
Mr AE Staal and Mrs MM Staal are the owners of a property in the Capella District known as "Crescendo", being Grazing Homestead Freeholding Lease 12/2300A, described as Lot 1 on Plan TT439, Parish of Capella, containing an area of 7176 hectares. As at 1 January 1996, the respondent Chief Executive determined the unimproved value of that land at $490,000. Following an objection by the owners against that valuation it was reduced to $480,000. The owners then appealed to the Land Court, advising that their estimate of the unimproved value as at the relevant date of valuation was $380,000.
At the hearing of the appeal Mr AE Staal gave evidence on behalf of the appellants. The respondent was represented by Mr J O'Rourke and evidence on the respondent's behalf was given by Mr JS Cowie, a registered valuer employed by the Department of Natural Resources.
Background:
Mr and Mrs Staal purchased "Crescendo" at auction in late 1991, at a time when their home property at Gindie was suffering from severe drought. At the time of sale "Crescendo" had been destocked for the previous two years as part of the Tuberculosis and Brucellosis eradication campaign. It was therefore carrying a good body of grass. Mr Staal explained that because of the drought it was impossible to obtain agistment anywhere in the district and they purchased "Crescendo" to save their breeding herd. The alternative, Mr Staal said, was to sell their breeding stock at giveaway prices.
The drought continued, with the whole of Peak Downs Shire being drought declared in late 1992. By 1995, the area was still in severe drought and although the Staals had succeeded in saving their breeding stock, they did so only by feeding out hundreds of gallons of molasses, plus urea, lick blocks, grain and hay. Due to poor nutrition, in 1995 the calving rate fell from 78% to 62%. These desperate circumstances continued into 1996.
The Valuation Made as at 1 January 1996.
Mr Staal described 1995 as a tough and stressful year, one in which their cattle business showed a considerable loss. He was therefore "angry and indignant" when he discovered that the respondent had increased the unimproved value of "Crescendo" from $375,000 to $490,000 as at 1 January 1996, to take effect from 30 June 1996. Mr Staal was particularly annoyed that there had been no inspection of the property for that valuation. He said that after their purchase of "Crescendo" there had been a very careful and thorough inspection made of the property by Departmental valuers prior to the determination of unimproved value at $375,000. Mr Staal seemed to think that the 1996 valuation was made by computer, with reference to a few sales, some of which were over 100 kms from "Crescendo" and which had little similarity to that property. He said that the new valuation meant an increase of over $1,000 per year in rates to an enterprise which was struggling to survive.
Mr Staal was of the opinion that there had been no increase in the property market between the date of purchase of "Crescendo" and the relevant date of the valuation under challenge. He had been advised in 1995 by two agents, Primac and Maguires, that he should not attempt to resell "Crescendo", as he would be unlikely to get his money back, since there was little interest in properties of that size. However, Mr Staal was of the opinion that there was some interest in and an increase in prices paid for smaller properties which, while not viable in their own right, were purchased by people who had off-farm occupations or alternative income sources. Mr Staal described these smaller, non-viable properties as akin to hobby farms.
During the year 1995-96, cattle prices fell to record low levels, in real terms lower than during the beef recession in 1975, with producers' incomes the lowest in 20 years. Mr Staal contended that there was no way in which land values could have increased by over $100,000, or 30 percent, in a period of total and continuous drought, when cattle prices were so low and with huge increases in running costs.
The Appellants' Opinion of "Crescendo".
Mr Staal said that "Crescendo" is purely a cattle breeding property, with occasional opportunity fattening in appropriate seasons. He described it as a fairly ordinary, rough, inferior block in its natural state, but with great potential for development, which was what the owners had been trying to do. They had improved the property, purchasing a second-hand dozer and spent a lot of money to increase the carrying capacity. They have pulled, racked, burnt and grassed with buffel grass between 10,000 to 12,000 acres, much of it virgin box and inferior country. The country is subject to a lot of regrowth, of which the owners have recently pulled 4,000 acres.
"Crescendo" has more than its share of pests. Mr Staal explained that four large watercourses intersect on "Crescendo", bringing heavy infestations of parthenium, parkinsonia and other noxious weeds. In early 1996, a flash flood deposited silt over a large area which resulted in 4,000 acres being affected by parthenium. Parkinsonia is also carried by the creek system and has become a major problem which is difficult to control.
In addition to natural pests, the property is subject to an "Authority to Prospect", allowing mining companies to search for coal, with hundreds of bore holes being drilled and associated tracks dozed through the property. Neighbouring properties are not so affected, Mr Staal said, with only the property to the south being affected by mining activity to much the same extent.
The Offer of a Further Reduction to the Valuation:
Mr Staal explained that before the matter came on for hearing before the Land Court, another valuer from the Department had inspected the property in late 1997 and conceded that there had been an error in the previous classification of the country. An area previously classified as 350 hectares of open downs country was omitted and the owners were offered a further reduction from $480,000 to $465,000. Mr Staal was of the opinion that this offer was made contingent upon the appellants withdrawing their appeal. This opinion was reinforced by the fact the valuation had remained at $480,000. A draft letter prepared by the Department for Mr Staal's signature, but which he was not prepared to sign, tends to confirm this opinion.
The Case for the Respondent:
Mr Cowie was not the valuer responsible for the 1996 valuation of $490,000, nor the valuer who inspected the property in late 1997, and who made the offer to reduce the valuation to $465,000, provided the owners withdrew their appeal. Neither of those valuers was available to defend the valuation, so Mr Cowie had been instructed to take over its defence. He explained that Departmental records showed that the valuation had been reduced subsequent to the valuer's inspection in 1997. He could not explain why notice of that reduction had not been conveyed to the Staals or the Peak Downs Shire Council.
Mr Cowie had inspected "Crescendo" and a number of properties which had sold between 1993 and July 1996, and which he felt would have been used by the respondent's valuers as the basis for the valuation. He had made a careful comparison between the types of country on the sales and the country on "Crescendo". However, he had not attempted to re-analyse the sales, but had accepted as correct the analyses of other valuers. Therefore, he arrived at his valuation of $465,000 simply by comparing the types of country on the sale properties with those on the subject land.
Mr Cowie's report contains the following description of "Crescendo":
"Topography:The property comprises a broken block with Theresa Creek forming the southern boundary to the property and Capella Creek intersecting the property along its northern boundary and joining Theresa Creek on the property towards the centre of the southern boundary. Retro Creek also intersects the property from the north western boundary and joins Capella Creek near the junction of Theresa Creek. These creeks all have wide flood plains generally timbered with flooded Coolibah. These wide flooded creek flats are all interspersed with low ridges timbered with mainly Brigalow, Blackbutt and False Sandalwood scrub with areas of Box and Silver Leaf Ironbark forest influence.
The north-eastern area of the property comprises a mix of broken forest of Bloodwood, Box, Silver Leaf Ironbark, False Sandalwood and Current Bush with some areas of wattle in the north-eastern corner. Some of the forest country has an influence of Whitewood and Bitterbark along the northern boundary. This area of forest country in the north-eastern part of the property has broken areas of Brigalow, Yellowwood with odd Blackbutt and Belah.
Soils vary considerably from heavy black clay flooded alluvial soils, light loam on the Box - Sandalwood country to harder gravelly soils on the ridges between the flood plains. A hard stony ridge (knoll) is located towards the southern boundary located between two of the flood plains.
200 ha Stock Cultivation (1:4ha)
2050 ha Flooded Coolibah (1:5.5ha)
600 ha of Scrub Grazing (1:5ha)
4326 ha Forest Grazing (1:7.5ha)
Carrying Capacity:1 beast to 6.4ha (1,119 head overall)
Noxious Plants:The property contains infestations of Parthenium, Parkinsonia and Noogoora Burr. Parthenium is well established throughout the district. Parkinsonia and Noogoora Burr are confined more to the flood prone areas.
Use:The property is used for grazing beef cattle, breeding, growing and fattening. "
There was little disagreement between Mr Staal and Mr Cowie. Mr Staal emphasised that the property was predominantly timbered with box and that much of the forest ridge country was gravelly. It is obvious from Mr Cowie's description that he did not disagree.
There was some confusion over whether Mr Cowie's opinion of carrying capacity referred to the country in its natural state or in its improved state. Mr Cowie made it clear that his estimate of carrying capacity was on the basis of the country being fully economically developed. Mr Staal conceded that on that basis the carrying capacity was reasonable. However, he emphasised the enormous cost to achieve that result. He also took issue with the fact that the property had been classified as part fattening, emphasising that it was basically a breeding property with only occasional opportunity fattening.
The Sales:
The sales relied upon by Mr Cowie to support the respondent's valuation comprised two small properties ("The Laura" and "Birtley") and three larger properties ("Carbine Springs", "Sunlight" and "Kareela"). With the exception of the adjoining property "The Laura", I do not propose to discuss these sales in any detail, as Mr Cowie's description of the country and comparisons are set out in his report.
The sale of "The Laura" would seem to be the one to which the respondent's valuer would have had particular regard in arriving at the unimproved value of "Crescendo", as it is situated immediately to the east, comprises generally similar country and sold only just over three months prior to the relevant date. It has an area of 1,777.9 hectares and sold in September 1995, for $400,000. That sale analysed to show an unimproved value of $111,418, or $63 per hectare, and as at the relevant date, 1 January 1996, the respondent applied an unimproved value of $95,000, or $53.50 per hectare.
Mr Cowie described the country on "The Laura" as comprising:
184 ha (10%) Flooded Creek Flats,
259 ha (15%) mixed Brigalow-Sandalwood Scrub,
1,250 ha (70%) fair to inferior forest and
85 ha (5%) Downs Stock Cultivation.
His estimate of carrying capacity was 1 beast to 7.2 hectares, fully economically developed. The property is used for grazing with some stock cultivation. He considered the subject land to be superior to the sale, because while the situation, use and water were similar, "Crescendo" had a greater percentage of better country.
Mr Staal was familiar with "The Laura" as it adjoined "Crescendo", but he admitted that he had not been over the whole of it. He considered it to have a greater percentage of good developable country, a bigger percentage of scrub and identical forest country. He regarded it as breeding country, not fattening country. It was too small to be a commercial operation, as it had a carrying capacity of less than 250 head. As a small property he thought that it was attractive to people with income from other sources, rather than someone seeking a living area. He likened it basically to a hobby farm. To emphasise his point, he said that the vendor had worked for the Council, while the people who purchased the property had off-farm occupations. The general opinion in the district was that the price paid for the property was excessive, but Mr Staal said that it may well have suited purchasers who did not intend to rely on the property for their living.
Mr Staal also felt that the property "Birtley" was in the same category. It had an area of only 1,790 hectares, with a carrying capacity of 1 beast to 10.5 hectares, or about 170 head. That property, situated just north-west of Springsure, sold in April 1995 for $385,000, analysed to show an unimproved value of $88.73 per hectare, and the respondent had applied at the relevant date an unimproved value of $97.80 per hectare.
Mr Staal challenged the respondent's analysis of the "Birtley" sale. He knew that there was a new house on the property, with a replacement value of in excess of $200,000, plus three sheds, four equipped water points, steel yards and fencing. Mr Cowie had not attempted to re-analyse the sale, so he was unable to comment upon the value attributed to the improvements.
Mr Staal went on to say the property is situated in the Springsure Ranges, about 130 kms from "Crescendo", comprises mostly black soil mountain country which is totally different to that on "Crescendo" He also knew that it had been bought as a "hobby farm" and not as a commercial living area.
Consideration and Conclusions:
Mr Staal was of the opinion that there could not possibly have been any increase in values between 1992 and 1996, because of the ongoing drought and poor cattle prices. However, Mr Cowie was of the opinion that the sale prices and analyses of the sales of the five properties that he relied on, plus other sales in the area, indicated that there had been an increase of at least 30% to 40% between 1993 and 1 January 1996. However, there had been no increase in the respondent's unimproved values for the valuation periods as at 1 January 1993, 1 January 1994 and 1 January 1995.
Mr Staal based his opinion largely upon the opinion of the agents that he would be unlikely to get his money back if he attempted to resell "Crescendo" in 1995. Mr Cowie gave evidence that the Departmental files showed that the respondent's valuers had analysed the sale of "Crescendo" to show an unimproved value of $462,000. However, they had considered it to be a high sale, so had abandoned it as a basis of valuation, and had applied an unimproved value of only $375,000 to the property, based on other sales. In other words, they considered Mr and Mrs Staal had paid in excess of the market value for the property, because of the particular circumstances that they were in at the time.
In my view, the evidence is not inconsistent on this point. If indeed the Staals did pay more than market value because of the grass that was on "Crescendo", it was not surprising that the agents had advised Mr Staal some years later that because of the continuing drought and low cattle prices he was unlikely to get his money back. On the other hand, despite the adverse seasons and prices, the sales analysed by the Department, particularly the 1995 sales, seem to indicate that there was continued confidence in the long-term future of the cattle industry and the market may well have increased over that period. Therefore, in the absence of any firm evidence to the contrary, I am not prepared to find that there had been no increase in the unimproved value of "Crescendo" between 1993 and 1996.
However, I feel that the respondent may well have placed undue emphasis upon the sale of the adjoining property, "The Laura". Mr Cowie gave evidence that "Crescendo" is larger than most of the properties in the Emerald-Capella area. There may well be a different market for larger properties than the general run of smaller ones. Mr Cowie was placed in a most difficult position. He was called upon to defend a valuation made and adjusted by other valuers. He did not reanalyse the sales, so could give no evidence of their analyses. He has done the best that he could in the circumstances, comparing the country types of the sale properties with those of the subject land. In this regard his comparisons were without serious challenge. However, he was in no position to comment on what weight the previous valuers had placed on individual sales.
I have come to the conclusion that the respondent may well have placed too much emphasis on the sale of the small adjoining property to value the subject land. While I accept Mr Cowie's opinion that overall the subject land is somewhat superior to the sale property, I am left with the impression that not sufficient regard has been had to the difference in their sizes.
As at the relevant date the respondent applied an unimproved value of $53.50 per hectare to "The Laura", which has an improved carrying capacity of 1 beast to 7.2 hectares. If the subject land had been roughly the same size as "The Laura" then a reasonable comparison could well have resulted in an unimproved value of approximately $65 per hectare for the subject land, the figure which in Mr Cowie's opinion is appropriate.
In my view, this does not take into account sufficiently the differences in their areas. Having regard to the other problems enunciated by Mr Staal, the proportion of flooded country bringing water-borne pests, the mining activity on the subject land and the expenditure necessary to achieve the carrying capacity, I feel that allowances may well have been made in Mr Cowie's reasoning to recognise those disabilities. However, the deciding factor which the evidence clearly identifies is the difference in size between the subject land and the adjoining sale, which does not appear to be allowed for.
Mr O'Rourke, for the respondent, submitted that the appellants have not discharged the onus of proving that the respondent's valuation is incorrect. As indicated above, I agree with that submission except in respect of the allowance that should be made for the difference in size between subject and sale properties.
Having come to that conclusion, without evidence as to just what allowance should be made for the difference in size, on the state of the evidence before me, I can do no more than make some allowance for that difference. Therefore, I propose to reduce the unimproved value as at 1 January 1996, to $450,000. Perhaps on some future occasion the respondent will have sufficient sales evidence to indicate definitively the difference per hectare in the unimproved values of small properties and properties the size of "Crescendo".
It remains for me to deal with one matter about which there may have been some confusion on the part of the appellants. Although "Crescendo" is a Grazing Homestead Freeholding Lease, s.14(1) of the Valuation of Land Act 1944 requires that for the purpose of deciding the unimproved value, the land is taken to be land granted in fee simple.
Order:
The appeal is allowed, the valuation of the respondent is set aside and the unimproved value of the subject land as at 1 January 1996 is determined at Four hundred and fifty thousand dollars ($450,000).
(JJ Trickett)
President of the Land Court
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