Thompson v Chief Executive, Department of Natural Resources
[2001] QLC 17
•30 March 2001
|
BRISBANE
30 MARCH 2001
Re: Appeals against Unimproved Valuations -
Shire of Paroo -
Valuation of Land Act 1944
AV99-1413 (Appendix A) - AJ & FM Thompson - "Weona"
AV00-627 (Appendix B) - IR Messenger & MM McGuire - "Robina Downs"
AV99-1267 (Appendix C) - RF & SR English - "Willacora"/"Coona"
AV99-1331 (Appendix D) - RM & AE Bredhauer - "Claverton"
v.
Chief Executive, Department of Natural Resources
(Hearings at Brisbane)
D E C I S I O N
Summary:
| Ref | Appellants | Property | Appendix | Page Ref | Valuation | Decision |
| AV99-1413 | AJ & FH Thompson | "Weona" | A | 12 | $41,500 | $37,000 |
| AV00-627 | IR Messenger & MM McGuire | "Robina Downs" | B | 14 | $140,000 | $128,000 |
| AV99-1267 | RE & SR English | "Willacora"/"Coona | C | 17 | $210,000 | $200,000 |
| AV99-1331 | RM & AD Bredhauer | "Claverton" | D | 19 | $340,000 | $323,000 |
Background:
The chief executive made an unimproved "annual valuation" of all lands in the Shire of Paroo as at 1 October, 1998 (the date of valuation). The previous valuation of these lands had been made as at 1 January, 1996.
Prior to the date relevant to this matter, the Department's valuation strategy had been to "divide" various districts into "Sub Market Areas" (SMA's) which were intended to identify areas within which specific market value trends might be identified. The establishment of SMA's was expected to assist the Department's task of conducting mass valuation appraisals through application of identified trends within those areas, on a factorised calculation, using the existing valuations as a base.
The Court was advised that within the Shire of Paroo six SMA's were identified and after investigation of the sales evidence by departmental officers unimproved values had been considered to have remained static since the previous date of valuation in one SMA while varying increases above the previous valuation were interpreted to have occurred in the remaining five. Valuations were made and issued accordingly followed by the statutory objection process. The overall application of factorised alterations relative to the previous valuations of lands within the SMA's were after final review, as follows:
SMA Increase
Eastern Mulga 20%
Western Mulga 0%
Nebine Mulga 25%
Warrego Flood Plain 30%Eastern Merge 30% - flood plain component
20% - mulga component
Western Merge 30% - flood plain component
0% - mulga component
The Warrego Flood Plain SMA extends from north of Wyandra, parallel to the Warrego River southerly to the New South Wales border. It is described by the Department as "typified by open black soil Mitchell grass plains broken by coolibah watercourses, gidyea clumps and sandhills and sand ridges. Traditionally this area is tightly held and is well regarded as sheep-breeding and wool-growing country. Limited first cross lamb production also occurs."
The valuations as originally issued for lands in the Warrego Flood Plain SMA had represented a 40% increase but after the objection process, the level of increase was reviewed and reduced to 30%. The majority of objectors to the 1 October 1998 Shire of Paroo valuations had come from this SMA. The reductions on objection had generally failed to satisfy the objectors and about 90 appeals from the decisions of the chief executive were filed in the Land Court.
Most of the appellants are represented by the valuation firm, Taylor Byrne, and the parties agreed that "representative cases" be heard and determined by the Land Court. In the end result, four representative cases were heard each of those appeal properties having been the subject of sales which, together with two other sales, represented the basic sales evidence upon which the Department had relied. The other properties subject of the sales were "Huntley"/"Glen Oxford" and "Northam"/"Airlie".
Valuation Evidence:
Evidence for the appellants was led through Mr RG Brown an experienced rural valuer representing Taylor Byrne.
Mr M McManus, employed by the chief executive as senior valuer at Charleville took responsibility for the valuations appealed against and gave evidence accordingly.
The Appellants' Case:
It is the submission of the appellants that not all of the sales upon which the Department relied as basic evidence of value should in fact be regarded as providing reliable evidence of market value. They say that Mr McManus fell into error in the final analyses of sales through failing to properly identify the added value of various improvements.
The appellants, through Mr Brown, drew attention to the discrepancies between original and reviewed analyses of each sale.
There was no complaint from the appellants that reviews of analyses were necessary when the respondent recognised the veracity of some arguments relative to the added value of, for example, artesian bores and, in some cases, timber treatment. It is submitted, however, that the final analyses as presented to the Court involved revision of original assessments of the added value of other improvements which action was seen to be an endeavour by Mr McManus to obtain a resultant unimproved value supportive of the original interpretation of trend.
Mr Brown was of the opinion that when the Department disclosed its basis for arguing valuation trends either in the pre-valuation public consultation or post-valuation objection conference procedures, the original departmental analyses should be given "statutory" equivalent weight, to be reviewed only in a transparent way based on identification and admission of error.
The Respondent's Case:
The respondent unsuccessfully objected to the admission of copies of the earlier summarised sales analyses, claiming that the documents had been provided to the appellants or their representatives on a without prejudice basis.
The respondent did not dispute that the relevant original sales analyses had been reviewed on one occasion generally with out reinspection of the property and on a second occasion after inspection or reinspection by Mr McManus.
Mr McManus relied upon his final sales analyses. He said that the final review had been intended specifically to embrace all aspects of the earlier analyses. In his opinion each sale offered support, to varying degree, to the trend in the market as finally interpreted. It was his evidence that the original inspecting officer had recommended an increase as high as 60% in the Warrego Flood Plain SMA based on his interpretation of that sales evidence. However, after that officer had resigned, prior to the valuations being made, Mr McManus assumed responsibility and decided on the factorised increase of 40% above the pre-existing valuation. Subsequently, he and other departmental valuers had given consideration to the question of the methodology which should be adopted in assessment of the added value of artesian bores in light of the Government funding which had become available through the Great Artesian Basin Rehabilitation Project (GABRP) for rehabilitation or replacement of bores in the Basin.
This valuation review resulted in acceptance that the project funding available to pre-1954 bores and the greater life expectancy of post-1954 bores due to improved construction techniques, significantly increased the added value of bores, in comparison with valuation methodology previously adopted by the Department.
After the question of the added value of old timber treatment had been raised by Mr Brown, as it related to some of the sale properties, during the objection and negotiation process, Mr McManus had paid specific attention to that aspect of the appellants' complaint on reinspection. Where he accepted that review of any component of the earlier analyses was warranted, he acted accordingly.
Overview of Issues:
The principal issue in these appeals and indeed in the appeals relevant to valuations within the Warrego Flood Plain SMA is the relevance of the sales evidence adopted by the chief executive as a basis for the valuations and then the correct analyses of those sales.
If the chief executive chooses to engage in public or any other consultation prior to the making of a valuation of a local government area and no doubt, most landowners would see that as a positive policy, it should be seen that any opinions expressed by departmental valuers as to market trends would be supported by professional analysis of the sales evidence on which the opinions were formulated.
Once a valuation is made by the chief executive pursuant to the Valuation of Land Act1944 (the Act) it "shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered" (s.33). Furthermore the burden of proving the grounds of an appeal against a valuation is upon the owner (s.45(4)).
Clearly the funding of a professional challenge to a statutory valuation of all or part of a local government area becomes a significant economic consideration for dissatisfied landowners. In these matters the decision was taken to fund a professional challenge. That resulted in an admission from the Department that review was warranted of certain aspects of the analyses upon which market trends had been initially identified. It is understandable that the landowners then expected a full flow-on effect from a review of the relevant analyses.
If that was not the case and the further decision was taken to challenge on appeal to the Land Court the decisions of the chief executive relative to objections to the valuations, then, regardless of the discrepancies in the various departmental analyses, the challenge facing the appellants was to show the Court that Mr Brown's analyses should be preferred to those final analyses presented to the Court by Mr McManus.
Overview of Valuation Evidence - Sales Analyses:
Mr Brown took a generally broad approach to the description of improvements. His inspection style is probably in keeping with that of a potential purchaser. Floor areas of buildings were estimated by pacing and, for example, he relied on his experience in estimating the volumetric capacities of improvements such as rainwater and earth tanks. Field inspections were assisted by the interpretation of aerial photography with desk calculations of areas of classes of country and/or timber treatment using a planimeter. Lengths of fencing and the like were scaled from relevant mapping. Mr Brown relied on verbal information as to the details of some items including construction details of artesian bores.
A relatively minor point which requires mention is the allowance of $1,640 for "telephone" made by Mr Brown under the "sundries" heading when a sale property was serviced by a Telstra connection including a radio tower. There is a Telstra charge of a connection fee of $190 and a "once off extension fee" of $1,450 when a radio tower is involved. Evidence was tendered through Mr McManus to the effect that a "Telstra Radio Tower and equipment" remains the property of Telstra. If the availability of such a connection adds value, then that added value attaches to the unimproved value as the tower is clearly not an "improvement" as defined (s.6(1) of the Act), or equipment acquired by the purchasers.
Mr McManus on the other hand reported in detail. Floor plans of buildings were provided with dimensions tape measured. Volumetric capacity of rainwater tanks and earth tanks, again for example, were calculated from measurements taken. Construction details of artesian bores were obtained from relevant departmental records, tendered where dispute arose. Comprehensive construction details of all infrastructure were provided. Inspections were generally conducted with the assistance of others. Advanced technology is now utilised by the Department for the assistance of field inspections. For example, the inspecting officer carries with him a laptop computer with technical software providing layered reference mapping, survey and property plans and satellite imagery. Global positioning instrumentation augments the computer software allowing relatively precise location of the point of inspection, property infrastructure and country features. Calculations of the lengths of fencing and the like are now computer assisted. Aerial photography and departmental file information is carried on the field inspections.
Clearly the resources of time and equipment available to Mr McManus were superior to those available to Mr Brown.
There was some criticism of Mr Brown's approach to detail and some significant errors were revealed during his oral examinations. Otherwise it needs to be said that valuation is intended to interpret the relevant market which is established by vendors and purchasers. When it comes to large rural properties purchasers tend to rely on general observations and, if the property meets heir general requirements, their primary consideration is the price then able to be negotiated.
Nevertheless, the matters before the Court involve, as far as is possible, valuation precision in the piecemeal assessment of the component parts of a sale transaction, as the bottom line figure is the analysis of the somewhat artificial unimproved land value as shown by the sale.
It the chief executive's analysis of unimproved value was to be proved wrong then the appellants' task was to show that Mr McManus' sales analyses as provided to the Court were defective. Not unnaturally the appellants placed considerable weight on the fact that earlier departmental analyses, some with input from Mr McManus himself, had been altered. However, the Court cannot place weight on departmental material no longer relied upon by the respondent. If the appellants were of the belief that elements of earlier sales analyses were correct but then altered, then they were obliged to rely on the professional evidence of Mr Brown, to show that Mr McManus' final analyses were defective.
Where dispute arose as to any aspect related to either valuers' inspection, I feel confident in accepting Mr McManus' report, in preference to Mr Brown's. I place more reliance on the evidence of Mr McManus as far as it is relevant, to matters such as replacement cost of improvements.
It is the question of the "added value" of various improvements which has proved the most difficult to resolve. The respondent submitted that where such difficulty does exist, the expert opinion which is formulated on a fundamentally sound basis should prevail. However, regardless of the extent of detail and precision in reporting the facts, the foundation on which the question of added value is based is not necessarily that detail but instead the application of cogent reasoning in arriving at the expert opinion.
The question of the added value of improvements arose, to varying degree, with regard to each sale analysis, where over-capitalisation or economic obsolescence was evident. The most consistent dispute related to the added value of the older style fencing although there was general agreement that district average standard new fencing was now of steel peg suspension type construction.
Overall, Mr McManus' methodology in the valuation of fences was prima facie more transparent than that of Mr Brown. For every section of fence Mr McManus provided construction details and his estimate of replacement cost based on precise local costings. He then depreciated the replacement cost to allow for both physical and economic obsolescence. There was, however, no evidence either written or oral, from Mr McManus as to the specific physical condition of any fence or the apportionment, in the single depreciation rate adopted, between the physical condition and the obsolescence factor. It was Mr McManus' evidence that the extent of the depreciation allowance which he made could be accepted as a reference to actual physical condition. He said it had never been his practice to take notes of physical condition of fences. Instead it had always been his practice to apply a depreciation allowance which he considered relevant to physical condition, on inspection. His present practice is to enter that reference directly into the computerised record. When the extent of detail which goes into his replacement cost estimations is considered, it is difficult to understand the mental process which would allow him to confidently assess both physical and economic depreciation in a single figure applied in the field.
The potentially arbitrary nature of his depreciation allowance is evident in one example. The sale properties "Claverton" and "Northam"/"Airlie" adjoin. Approximately the same gross value was placed on one section of the common boundary fence in both sales analyses. There was some variation in the length of that fence as measured (fence B4 "Claverton" - fence G "Northam"/"Airlie"). The same replacement cost was adopted, but the depreciation allowance I think purely in this case for physical depreciation, was 20% for the later sale and 30% for the earlier sale. In fairness to Mr McManus there was only one other common fence observed in the sales analyses. That was a boundary fence between "Huntley"/"Glen Oxford" and "Robina Downs". There were some differences in the detail of construction of that fence but the depreciation rates showed reasonable consistency.
While the money involved in the fencing disputes is not generally large, the overall evidence has led me to the conclusion that Mr McManus has been too harsh in many examples in his approach to the valuation of the older style fencing. An example is again taken from "Northam"/"Airlie". The purchaser on interview had been concerned about work being needed on the "Clovelly" boundary, while other fences had been considered by him to be "generally sound". Mr McManus assessed the added full share value of the "Clovelly" boundary fence as being $748/km in part, and $523/km for the balance. However on another boundary fence which the owner clearly thought was not worthy of specific mention, Mr McManus valued 20.4 km as having full share value of only $357/km.
Mr Brown generally has valued the older style fencing at significantly higher levels than Mr McManus but I am unable to accept his broad descriptions and assessments, when I have Mr McManus' detailed evidence before me.
There are a number of examples, apart from fencing, in the sales analyses where dispute has arisen as to the added value of improvements. While reference to Mr McManus' assessments is not intended to single out his evidence for criticism, that inference results when I generally adopt his descriptive evidence of improvements as the accurate base for added value considerations. I have given reasons in the individual analyses, when I have seen the need to depart from Mr McManus' added value assessments.
It should be mentioned here that the parties accepted the principle enunciated by the Land Appeal Court in O'Brien Nominee Pty Ltd v. The Valuer-General (1979) 6 QLCR 280 at 287, that, in assessment of the value of a particular improvement, the relevant section of the Valuation of Land Act (now s.5) "requires the actual improvement on the land in question to be considered and not some hypothetical standard of improvement".
However there seems to have developed an interpretation of that principle which suggests that it is wrong to consider the cost of a hypothetical standard of improvement in the reasoning relative to valuation of the actual improvement. That interpretation is, in my opinion wrong. In these matters, Mr McManus carried out calculations to depreciate, as an example, the replacement cost of 100% effective timber treatment (ringbarking) by 75% to in fact equate an alternative means of tree destruction (pulling). It seems to me to be quite appropriate to consider the relevant date cost of an alternative practical improvement in the process of finding the added value of the actual improvement.
I find support for that opinion expressed by the Land Appeal Court in Knuth & Ors (1983) 9 QLCR 142 at 146 when, after referring to the O'Brien Nominee judgment, the Court said:"The 'relevant date' cost of a fence of the type envisaged by Mr Hamilton may be a factor a prudent purchaser would consider in relation to assessing 'the added value' of the fencing in question."
It seems to me that taking fencing as an example, the test in assessing added value could be explained as follows: a property has a new gidyea post, 3.5 m panel, 5 plain wires, hinged joint and rabbit netted fence which cost $7,150/km to construct as well as a new suspension fence of steel peg construction, 10 m panels, 4 plain and 2 barbed wires, 2 wire droppers, that fence having cost $2,150/km. What would a prudent purchaser pay for the first fence, when the second fence is now accepted as meeting district average standard? I think it is unrealistic to suggest that the prudent purchaser would not be prepared to pay more than $2,150/km for the first fence of superior construction, regardless of it constituting overcapitalisation by district average standard. The answer to the question may not be simple but it seems reasonable to expect that the cost of the cheaper alternative would weigh more heavily in the mental process of the purchaser's reasoning than the cost to replace the superior fence. It would be expected to also weigh heavily in the reasoning of a valuer and is a question which, no doubt, would be asked of those in the industry in this case of sheep breeding and woolgrowing. If the "added value" of the actual new fence is established by cogent reasoning, including the consideration of the cost of the alternative improvement, it should be that "added value" (in new condition) which would be the basis for assessment of the added value of older fences of comparable construction in less than new physical condition.
Regarding timber treatment, it seems to me that it is the destruction of original timber cover which constitutes the improvement, not the method by which destruction was achieved. I see no practical purpose served by attempting to assess the added value of, for example, ringbarking, when such treatment is no longer cost effective, by attempting to depreciate the notional cost of such treatment back to a level of value equivalent to current treatment practice such as pulling. Again, in my opinion, a prudent purchaser would have regard to the most cost effective method in deciding the added value of the actual treatment. Mr McManus appeared in his reasoning, to relate added value of ringbarking directly to pulling and I accept that as part of a cogent reasoning process, without need for the convoluted depreciated ringbarking replacement cost calculations. The one area where I found concern with the direct application of pulling cost as representing added value was where old ringbarking had resulted in the treatment being 100% effective. Mr McManus was fairly adamant in his opinion that in the class of country where ringbarking had resulted in full effectiveness, pulling would not have generated a regrowth problem requiring further treatment to achieve full effectiveness. Mr Brown did not appear to share that view. Where regrowth was present after previous treatment, ringbarking or otherwise, he assessed the residual value by considering the cost of "re-pulling". As I understood his approach he assessed a higher added value for 100% effective ringbarking than the cost of a single pulling operation, then depreciated that value where regrowth required further treatment.
It seems to me that a prudent purchaser would see 100% effective timber treatment as more valuable than the degree of effectiveness which might be achieved by a single pulling operation. I have been influenced to a degree, by Mr Brown's evidence in that regard.
Summary of Sales Analyses and General Conclusions:
Appended to this decision are the reasons which have led to the following analyses being adopted:
| Appendix | Property | Date of Sale | Carrying Capacity | Appellants' Analysis/ha | Chief Executive's Analysis/ha | Court Analysis/ha | Valuation Applied/ha |
| 1 | "Weona" | 30.12.96 | 1:2.74 | $2.93 | $6.66 | $5.67 | $6.14 |
| 2 | "Robina Downs" | 10.10.97 | 1:3.07 | $8.67 | $11.77 | $11.21 | $10.16 |
| 3 | "Willacora"/"Coona" | 15.03.96 | 1:2.63 | $10.88 | $13.35 | $12.24 | $11.29 |
| 4 | "Claverton" | 27.04.99 | 1:2.16 | $11.49 | $17.02 | $15.02 | $16.19 |
| 5 | "Huntley"/"Glen Oxford" | 20.05.96 | 1:2.82 | $8.69 | $12.15 | $11.14 | $10.74 |
| 6. | "Northam"/"Airlie" | 17.02.98 | 1:3.15 | $6.60 | $7.96* | $7.29 | $7.56 |
* Mr McManus' analysis has been reduced from $8.30 for correction of an apparent error as identified in the individual analysis.
It can be seen that of these sale properties those subject of the representative appeals are "Weona", "Robina Downs", "Willacora"/"Coona" and "Claverton" .
Mr McManus relied on each sale as a basis for the individual valuations appealed against. His schedule of supplementary sales which he regarded as "supporting evidence" included six sales, three within the period leading up to the date of valuation, two in July 1999 and one in June 2000. The latter sale had not been analysed. Although the other "supporting" sales had been analysed, Mr McManus was unable to produce details of those analyses for examination. The supporting sales were said to indicate levels of unimproved value significantly in excess of the values applied to those sale properties as at the relevant date. Clearly the supporting sales had not been adopted by the Department as providing basic evidence of value and as a consequence are of no assistance in these matters.
Mr Brown had included in his report, detailed analyses of two of Mr McManus' "supporting" sales being of the properties "Plainview" and "Werrina", but Mr Brown had found them both to show too high a level of value to provide reliable evidence of value. He said that the sale of the "Plainview" property in 1997 had been at only a marginally higher price (ex stock) than a previous sale in 1992. The relatively small "Werrina" property had been carrying an excellent body of grass and was sold to an adjoining owner as an "expansion area" and Mr Brown believed that those factors had inflated the sale price.
Mr Brown was selective in the use of the overall evidence when valuing the individual appeal properties.
It can be seen that there are quite significant differences in the valuers' individual sales analyses. Mr Brown's analyses of unimproved value provide results ranging from 44% to 83% below those of Mr McManus.
After consideration of the evidence the analyses which I have decided to adopt provide results ranging from 85% to 95% below those of Mr McManus.
Mr McManus' applications of value are in the range of 85% to 95% of his sales analyses.
The analyses which I adopt indicate levels of value, as compared to valuations applied, as follows:"Weona" - 7.6% below
"Robina Downs"` - 10.3% above
"Willacora"/"Coona" - 8.4% above
"Claverton" - 7.2% below
"Huntley"/"Glen Oxford" - 3.7% above
"Northam"/"Airlie" - 3.6% below
The sales where overcapitalisation is an issue are first "Claverton" then to a lesser degree "Weona" and "Robina Downs". The evidentiary weight which can be placed on these sales is affected to some degree by the "added value" argument.
"Claverton" is a Stud Holding and Mr Brown saw the lease conditions as being restrictive. Mr McManus disagreed, offering the opinion that, in practice, the lease conditions of a Stud Holding are not restrictive to highest and best use, but in any event are capable of being relaxed. If it was accepted that the lease conditions did affect market value as compared to freehold or unrestricted grazing leases, then the analysed value would be expected to reflect that restriction and further weaken the weight which would be placed on this sale for valuations pursuant to the Act when such restrictions or limitations are to be disregarded.
There is no dispute that the purchasers of "Robina Downs" were not experienced graziers and one of the attractions of the property to them was the above average quality of the homestead and its ancillary improvements. There was some evidence that the male vendor may not have met the "willing" vendor criterion as it relates to market value, indicated, it was suggested, by the firmness with which the asking price was maintained. With this property there is the question of the risk attaching to assessment of the added value of the palm plantation. This sale is not considered by itself to offer a sound evidentiary basis and does appear to reflect a relatively higher level of value than the bulk of the primary sales.
Although there was some question as to the true value of the stock included in the "Huntley"/"Glen Oxford" sale (and that property comprises a significantly larger area than the other sale properties), the level of value indicated seems consistent with the sale of "Willacora"/"Coona" at about the same time and within reasonable relativity with the sale of the inferior "Northam"/"Airlie" property which took place closer to the date of valuation. I am satisfied that the adopted analyses of the sales of "Huntley"/"Glen Oxford", "Willacora"/"Coona" and "Northam"/"Airlie" reflect a fair interpretation of the unimproved market value of those particular properties.
On my interpretation of the basic sales evidence, the sale of "Willacora"/"Coona" is the one apparently reliable sale which comfortably supports the valuation appealed against. It is observed that that valuation represented only 85% of Mr McManus' analysis of the sale. When the location of "Willacora"/"Coona" is considered, the possibility could exist that its valuation was previously, and consequently remains low in relativity with other valuations in the SMA. However, there is no evidence on which that assumption can be made and Mr McManus was confident that correct relativity existed.
When it is considered that the unimproved value component in each of the sales represents a relatively small part of the sale price, I have come to the conclusion that if the best evidence of unimproved value for the Warrego Flood Plain SMA is restricted to the six sales as discussed, the analyses of which have been tested with some degree of particularity, then the overall valuations as applied by the chief executive are not sufficiently supported for all doubts to be resolved in favour of the landowners.
As it was the decision of the parties to have the Court determine representative cases, it seems apparent that a reduction of 5% in the general level of value applied by the chief executive within this SMA would be sufficient to resolve the doubts referred to above. The chief executive used the previous valuation as a base when applying a factorised increase. It is appreciated that a 5% reduction in the level of value appealed against, reduces, in mathematical terms the factorised increase from 30% to about 23.5%. The Court is, of course, concerned not with the previous level of value but the valuations appealed against.
I have further concern that the property "Weona" is not a fair representative case for these appeals. It appears that "Weona" may be more representative of one of the properties which could be regarded as merging out of the particular SMA influence. It will be seen that I have decided to reduce that valuation to $5.50/ha which reflects a reduction of about 10% below the valuation appealed against. It is a matter for the parties to decide how that decision may influence their future considerations.
There is then a further complication with the decision I have made relative to "Robina Downs". That decision, in actual percentage reduction terms, should not be regarded as representative of my findings generally relative to the SMA.
I now proceed to the individual decisions in the following appendices.
Individual Appeal Appendix A
Reference AV99-1413
Property "Weona" (Sales Analysis - Appendix 1)
Appellants: AJ & FM Thompson
Real Property Description: Lot 33 on NB13 GHPL 15/1406, Parish of Talawanta.
Area: 6,756.23 ha
Situation and Access: Approximately 180 km south-east of Cunnamulla via 35 km of bitumen sealed Mitchell Highway, 67 km of bitumen sealed Noorama Road then 78 km of formed earth and gravel road from the Noorama Junction.
Description of Country 5,607 ha brigalow/gidyea mixed country with some flood out areas
Mr Brown:1,149 ha harder mulga with turkey bush and hop bush
Description of Country 730 ha (11%) of Widgee Creek channels seasonally flooded coolibah
Mr McManus: 4,706 ha (70%) brown to red soil gidyea and brigalow
330 ha (5%) sandy to sandhills with ironwood
990 ha (14 %) red mulga country with small areas of spinifex and turkey bush
There is little difference between the valuers and I adopt Mr McManus' detailed classification which is observed to be a little more conservative in finding slightly more inferior country.
Water:Artificial: 1 capped artesian bore supplying five troughs, five unequipped earth tanks fed from Widgee Creek. Natural: waterholes in Widgee Creek which are not considered permanent.
Use:Sheep breeding, woolgrowing, limited cattle breeding.
Carrying Capacity: The departmental estimate of carrying capacity is 1DSE:2.74 ha - (2,466 sheep)
No estimate by Mr Brown.
Valuation Appealed $41,500 ($6.14/ha)
Against:
Appellants' Estimate $32,000
of Value:
Bases of Valuation:
There seems no dispute that this property comprises "somewhat different" country to most of that within the Warrego Flood Plain SMA, is located in the extreme south-eastern corner of the SMA and has "fair to poor" access, difficult after rain.
Mr Brown was of the opinion that the best evidence of value was the sale of "Weona" itself which he analysed to show a rounded $3/ha (amended during the hearing from $4.50/ha). The remaining sales are of land which he said was not directly comparable. His valuation is $20,000 based on the sale.
Mr McManus had analysed the sale of this property to show an unimproved value of $45,008 or $6.66/ha. His applied valuation which in effect was based on a 30% increase over the previous valuation equated $6.14/ha. His valuation was said to represent correct relativity with each of the six basic sales.
I agree with Mr Brown in that it is difficult to compare "Weona" with the other sale properties and that, all things considered, the best evidence of value might have been expected to have come from the sale of the property itself. However, the difficulty is that the question of the added value of the improvements has caused significant differences between the valuers and I have attempted to resolve those differences with the reasoning given in the Court analysis.
Mr McManus provided the opinion that his valuation maintains correct relativity with other valuations in the immediate locality but that opinion seems to rest with his acceptance that the previous valuations were correct. As I understood the position he has not inspected other than the sale properties.
In the circumstances, while no particular comfort is taken in applying near directly the Court's adopted analysis of the sale of the subject property, I am loath to further disturb the previously existing relativity of valuations.
I determine the unimproved value of "Weona" at $5.50/ha rounded to $37,000.
Decision
The appeal is allowed, the chief executive's valuation set aside and the unimproved value determined in the amount of Thirty-seven Thousand Dollars ($37,000).
RE WENCK
MEMBER OF THE LAND COURT
Individual Appeal Appendix B
Reference AV00-627
Property "Robina Downs"
Appellants: IR Messenger and NM McGuire
Real Property Description: Lot 3 on NO41 GHFL 15/1677, Parish of Holkham.
Area:13,785.211 ha
Situation and Access: Approximately 152 km south-east of Cunnamulla via about 35 km bitumen Mitchell Highway, 68 km bitumen Noorama Road, the balance being formed earth.
Description of Country 6,892.5 ha flooded coolibah and Mitchell grass plain with gidyea
Mr Brown:clumps
6,892.5 ha sandy red ridges, mulga and box with better gidyea fringes
Description of Country 1,490 ha (11%) open and broken chocolate grey and red soil plains
Mr McManus: 5,460 ha (40%) light to moderate grey and ashy soil coolibah, lignum country subject to local and watershed flooding
2,480 ha (18%) red and brown soil thick gidyea, sandalwood and brigalow
4,355 ha (31%) of sandhills with cypress pine, ironwood, box, wilga
After consideration, the classifications are reasonably similar, with Mr McManus' more particularised.
Water:Artificial: 3 bores, 2 bore drains (from adjoining properties - no agreements exist) and 300 ml licence (attached to one of the bores) Natural: none of any consequence.
Use:Sheep breeding and woolgrowing with potential for limited cattle breeding.
Carrying Capacity: The departmental estimate of carrying capacity is 1DSE:3.07 ha - 4,490 sheep.
No estimate by Mr Brown.
Valuation Appealed Against: $140,000 ($10.16/ha) - Date of Effect: 23 August 2000.
Appellants' Estimate of $100,000
Value:
Bases of Valuation:
Mr Brown had analysed the sale to show a rounded $8.70/ha overall. It was his opinion that the analysis indicated "slightly high figures" for the quality of the land and its poor access. He considered the high price was a reflection of the inexperience of the purchasers. In his opinion "Robina Downs" was inferior to "Huntley"/"Glen Oxford" the sale of which he had analysed to show an unimproved value also of a rounded $8.70/ha which he had applied directly to that superior property. Mr Brown valued the subject land at $7.25/ha in comparison or about 16.7% less on an overall rate/ha.
Mr McManus in valuing "Robina Downs" at the equivalent of $10.16/ha relied on the sale of the subject property, which he had analysed to show $11.77/ha, as well as the remaining five basic sales and the schedule of supporting sales. In comparison the sale of the adjoining "Huntley"/"Glen Oxford" had on his analysis, shown $12.15/ha with an application of $10.74/ha for a significantly larger area but with in his opinion, superior country and access. The valuation applied to "Robina Downs" was about 5.6% less than that applied to "Huntley"/"Glen Oxford" on an overall rate/ha.
When a comparison was made of "Willacora"/"Coona" with an applied value of $11.29 (excluding a Permit to Occupy) and the subject "Robina Downs" Mr McManus accepted that "Willacora's" area was comparable; situation and access were superior (and obviously clearly significantly so); the country was "slightly" superior (carrying capacity 1DSE:2.63 ha - compared to 3.07 ha); while natural water and rainfall were similar.
I have formed the opinion that the sales of "Huntley"/"Glen Oxford" and "Willacora"/"Coona" both southerly of Cunnamulla, provide the best evidence of value for the valuation of the subject property, then to a lesser degree the sale of "Northam"/"Airlie", which has inferior country (carrying capacity 1DSE:3.15 ha) but which, in Mr McManus' opinion has comparable area; superior situation, access and rainfall; then similar natural water.
The valuation of "Robina Downs" which is now appealed against resulted from a "manual adjustment" which had been considered necessary by Mr McManus to attain uniformity in values between the valuation and subsisting valuations of other comparable parcels of land (see s.28(1)(g) of the Act). The valuation after the initial objection had been in the amount of $114,000 effective from 30 June 1999. That represented the uniform 30% increase above the earlier valuation. However, when Mr McManus reviewed the sale analysis he came to the conclusion that the valuation of $114,000 was significantly too low in comparison with the valuations applied to the other lands in the area. He duly increased the valuation to $140,000 the valuation to become effective from 23 August 2000. It is that valuation which is now subject of appeal, the date of valuation remaining as 1 October 1998.
Clearly Mr McManus has given specific consideration to the question of relativity. In his opinion the problem had occurred at some time earlier when the valuation of "Robina Downs" had been split from a much larger aggregation and the overall rate for that aggregation had been incorrectly applied directly to "Robina Downs".
Regardless of the fact that Mr McManus has given specific attention to relativity, I have not been convinced by his oral evidence that his valuation is now not too high. The only cogent comparable evidence before the Court is the comparisons drawn between the sale properties as made by both valuers. There were maps tendered showing the actual relativities existing between various properties but that information is worthless in the absence of evidence as to the actual comparison of country involved. As I understood Mr McManus' evidence, he had not personally inspected other than the sale properties. That is not a criticism of Mr McManus, the bulk valuation system does not allow departmental valuers to personally inspect each property to be valued.
On the evidence which is available to the Court, ie the valuations applied to the sale properties and particularly "Huntley"/"Glen Oxford", "Willacora"/"Coona" and "Northam"/"Airlie" I would reduce the valuation of "Robina Downs" to $135,000 purely on the basis of the relativity with existing valuations. It is then from that base which I will allow a further reduction of 5% rounded to $128,000 ($9.28/ha).
Decision:
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value of the land determined in the amount of One Hundred and Twenty-eight Thousand Dollars ($128,000) effective from 23 August 2000.
RE WENCK
MEMBER OF THE LAND COURT
Individual Appeal Appendix C
Reference AV99-1267
Property "Willacora"/"Coona"
Appellants: RF & SR English
Real Property Description: Lot 1 on WN 105 GHFL 15/1442; Lot 2 on WN26 GHFL 15/1690; Lot 3 on WN26 GHFL 15/1673; Lot 1 on Plan AP2532 PO209397, Parish of Eunama.
Area:18,307.681 ha
Situation and Access: About 35 km south, south-east of Cunnamulla, via the bitumen sealed Mitchell Highway.
Description of Country 5,492.3 ha open black soil Mitchell grass plain
Mr Brown:2,851 ha flooded watercourse country of gidyea and coolibah
9,153.84 ha sandy pine, box and mulga country
(excludes the Permit to Occupy)
Description of Country 6,850 ha (37%) open and broken red/brown soil plains with scalded
Mr McManus and claypan areas and some watercourses timbered with coolibah and yapunyah
4,577 ha (25%) mixed red and brown soil gidyea, coolibah and sandalwood
1,760 ha (10%) grey and brown soil coolibah open to thickly timbered
5,121 ha (28%) heavy sandhills and sand ridges timbered with cypress pine, box with pockets of mulga
The area of the pine, box and mulga country was a matter of dispute between the valuers. Mr McManus' classification is said to have been supported by interpretation of satellite imagery. Although the land classification plan included with Mr McManus' report provided a colour-coded index to 10 separate land classifications there was no accompanying description of the nature of country as represented by the indexed colours. While no doubt the satellite imagery is of assistance to those trained in its interpretation, the classification mapping as provided to the Court is meaningless in the absence of a descriptive index. However, by cross-reference to the tendered aerial photography then the satellite imagery classification I am unable to accept Mr Brown's contention that about 50% of the property comprises the sandy country as described.
Use:Sheep breeding and woolgrowing with potential for limited cattle breeding in conjunction.
Carrying Capacity: The departmental estimate of carrying capacity is 1DSE:2.63 ha - 6,960 sheep.
Mr Brown provided no opinion as to carrying capacity.
Valuation Appealed Against: $210,000 (including permit to occupy) - $11.47/ha.
Appellants' Estimate of $162,500
Value:
Bases of Valuation:
Mr Brown valued the 17,498 ha (excluding the permit to occupy with an area of 810 ha) at $10.80/ha which equated his analysis of the sale.
Mr McManus' valuation of the area of 17,497.68 ha was stated to have been $197,500 or $11.29/ha, while inclusive of the Permit to Occupy the total area of 18,307.681 ha was valued at $210,000 or $11.47/ha. Exclusive of the permit to occupy the applied valuation would equate about 85% of his analysis of the sale of the subject property.
Again Mr McManus is of the opinion that the overall sales evidence supported his valuation.
I have adopted an unimproved analysis of $12.13/ha for the subject property which analysis would in the absence of the other sales evidence, reasonably support the valuation appealed against. The relevant other sales evidence is considered to be, in particular, the sale of "Huntley"/"Glen Oxford" and to a lesser degree "Northam"/"Airlie" and those sales do not, in my opinion, provide sufficient benefit of doubt in favour of the appellants to support the full extent of the trend of increase as was identified by the Department.
I have indicated in the body of the reasons for these decisions that I have interpreted the overall evidence as supporting a reduction of 5% in the level of value applied in the Warrego Flood Plain SMA as at the relevant date. This assumes that correct relativity of valuations has been previously established and now maintained. Although I see the possibility that the chief executive's valuation of the subject property, purely on a relativity basis could be marginally low, in comparison particularly to "Huntley"/"Glen Oxford", there is no direct valuation evidence to support such possibility.
Consequently the application of a 5% reduction to the valuation of this property would result in a rounded valuation of $200,000, and maintain the existing relativity.
Decision
The appeal is allowed. The valuation of the chief executive is set aside and the unimproved value determined in the amount of Two Hundred Thousand Dollars ($200,000).
RE WENCK
MEMBER OF THE LAND COURT
Individual Appeal Appendix D
Reference AV99-1331
Property "Claverton"
Appellants: RM & AE Bredhauer
Real Property Description: Lot 4 on Plan BAN100 Stud Holding 15/3764 , Lot 1/ PER6639: PO/15/6639, Parish of Whitney.
Area:20,907 ha
Situation and Access: Approximately 77 km north of Cunnamulla and 12 km south of the township of Wyandra via the bitumen Mitchell Highway.
Description of Country: 8,790 ha open black Mitchell grass plain
Mr Brown 7,757 ha flooded coolibah, box and harder red country
3,530 ha western mulga open
(excludes Permit to Occupy)
Description of Country: 15,322 ha (73%) Mitchell grass plain, broken plain including
Mr McManus some Warrego River Coolibah channels
3,613 ha (18%) light mulga and box
1,972 ha (9%) cypress pine sandhills with areas of levees and channels, wilga, ironwood and box.
It can be seen that there is some general agreement as to the overall nature of the country, Mr McManus' description said to accord with the colour indexed "land systems" type which indicates 11 undescribed types as interpreted from satellite imagery.
Water:Artificial: 1 artesian bore uncapped and free flowing feeding approximately 75 km of bore drains.
Natural:permanent natural waterholes in the Warrego River.
Use:Sheep breeding and woolgrowing with limited cattle breeding.
Carrying Capacity: The departmental estimate of carrying capacity is 1DSE:2.16 ha (9,679 sheep)
Mr Brown provided in his oral evidence an estimate of 1 sheep to 2.5 ha.
Valuation Appealed Against: $340,000 ($16.26/ha).
Appellants' Estimate of Value: $286,196.
Bases of Valuation:
Mr Brown analysed the sale of "Claverton" to show $11.50/ha overall, commenting that the "sale indicates UCV for pastoral holding tenure. Large block but good country. After date sale highly improved (overcapitalised)." It was Mr Brown's opinion that the particular leasehold tenure of the land (in fact it is a Stud Holding) has conditions relating to minimum stud stock numbers which "shall" be maintained on and sold from the holding and the use of the holding shall be "primarily for stud purposes", which are restrictive and limiting in comparison with freehold tenure. However as he accepted that pursuant to s.14 of the Act, for the purpose of deciding the unimproved value, the land is to be taken to be granted in fee simple without regard to the restriction or limitation, Mr Brown ignored his sale analysis and applied $14/ha to the land (excluding the Permit to Occupy). His valuation on that basis was rounded to $280,000.
Mr McManus stated the opinion in his report that as the highest and best use of the holding was considered to be "sheep breeding and woolgrowing with limited cattle breeding" the internal title search indicated to him that "there are no restrictions pertaining to the property within these terms" and the "conditions of the lease/leases of the property do not restrict the land being utilised for its highest and best use". However, in his oral evidence is found the following passage at p.223 of the transcript:Question: "… you said that you could apply to vary the conditions, that an application was possible to vary them?"
Answer: "To lift the actual restrictive conditions as in regard to the actual holding being required to be utilised as a Stud Holding. This has happened on one other occasion within the Charleville district to my understanding."
It may be that in practice, the conditions of the holding are not strictly enforced, but the conditions are clearly restrictive in comparison with land granted in fee simple.
If these restrictions had an effect on market value and there is no cogent evidence one way or the other to support either valuer's opinion, then they are to be disregarded, which both valuers have done in their assessment of unimproved value. The evidence provided by the sale is another matter. However Mr McManus' approach in adopting the sale as basic evidence of value provides any benefit of doubt to the appellants' case.
Once again Mr McManus adopted the whole of the evidence being the sale of the subject holding, the other five basic sales and his supplementary sales as evidence supporting his valuation of $340,000 including the permit to occupy. His valuation results from the factorising of an increase of 30% into the previous valuation of $260,000.
It is my opinion that for reasons discussed in its separate analysis and in the body of the main decision that the sale of this subject property does not, by itself, provide reliable basic evidence of value.
However, in an overview of the total evidence provided by the six primary sales analyses I have decided that the level of value as found by the chief executive in the relevant SMA should generally be reduced by 5%. This would reduce the overall valuation of "Claverton" including the permit to occupy, after rounding, to $15.38/ha, slightly in excess of the overall rate in the adopted analysis. This result is considered realistic in the circumstances.
Decision:
The appeal is allowed. The valuation of the chief executive is set aside and the unimproved value determined in the amount of Three Hundred and Twenty-three Thousand Dollars ($323,000).
RE WENCK
MEMBER OF THE LAND COURT
APPENDIX 1
Analysis of Sale - "Weona"
Date of Sale: 30 December 1996
Sale Price: $250,410
Vendors: JT and PD Mannix
Purchasers: AJ and FM Thompson
Summary of Analyses: Appellants Chief Executive Court
(Brown) (McManus) (See Reasons)
Sale Price $250,400 $250,410 $250,410
Deduct:
Plant and Machinery $2,000 - -
Sundries $750 $2,750 $500 $500 $500 $500
Sale Price Improved $247,650 $249,910 $249,910
Deduct Structures $70,156 $48,644 $52,750
Treated, fenced and watered $177,494 $201,266 $197,160
Yards $20,101 $16,864 $16,864
Fencing $47,452 $43,709 $45,000
Water Facilities $42,818 $42,733 $42,733
Timber Treatment $45,737 $49,410 $52,033
Total Value of Improvements $226,264 $201,360 $209,380
Gross Unimproved Value $21,386 $48,550 $40,530
Deduct Interest 7.87% one year $1,560 $3,542 $2,957
Net Unimproved Value $19,826 $45,008 $37,573
Per ha $2.93 $6.66 $5.56
Court Analysis - Reasons
Plant and Machinery
Mr Brown's assessment of $2,000 related to two generators.
Mr McManus had included lighting plant under "Structures" in the amount of $2,500 and the shearing plant and machinery with the shearing shed.
Apart from interest calculations nothing of significance turns on the heading under which these items should be included. For consistency I will follow Mr McManus' approach and make no allowance under this heading.
Sundries
Mr Brown allowed $750 for internal roads for which Mr McManus made a total allowance of $1,397 under "Timber Treatment".
Mr McManus valued beds, refrigerators and a table in the shearers' quarters in the sum of $500.
Again for consistency, I will adopt Mr McManus' approach and allow $500 under this heading.
Structures
Shearing Shed
Mr Brown assessed the replacement cost of the shed complete as being $108,000 which he depreciated by 50% to $54,000 for its age. The shed was in excess of requirements for a property of the size and carrying capacity of "Weona" and he then applied an added value concept to reduce the depreciated replacement cost to $30,000.
Mr McManus, using a standard $340 per m² as the replacement cost of shearing shed structures, excluding plant and machinery, found a replacement cost new of $69,700 (205 m²), or about $78,500 complete with plant and machinery. In his opinion, its value as equipped, depreciated for age alone was $32,967. However, by district average standards the shed was well in excess of requirements, two out of the six stands being sufficient. He found an added value of $17,002, increasing the physical depreciation allowance of mainly 60% to 80% of the replacement cost, to include economic obsolescence.
Mr Brown's replacement cost was assessed on the basis of $18,000 per stand, equivalent to some costings analysed on a per stand basis. Mr McManus did not accept that a broad per stand basis of valuation was of assistance other than as a check against his primary approach of assessment based on the actual floor area of individual sheds together with the necessary plant and equipment.
While I accept the replacement cost valuation methodology adopted by Mr McManus I think the overall evidence would indicate that the size of the shed, although providing six stands, was relatively small and this tended to distort the result of a "per stand check". It seems to me that it has also distorted Mr McManus' added value approach. His evidence was that, to cater for the flock capable of being carried on the property, a portable two-stand shearing plant would have served the needs of this property. That may be so but when considering the utility value of a shearing shed, there are matters other than the excess number of stands worthy of consideration. The evidence leads me to conclude that Mr McManus' assessment both in terms of physical depreciation and utility added value, provides too low a result.
Conversely Mr Brown's replacement cost assessment has not, in my opinion, had sufficient regard to the actual floor area of the shed and this may have distorted his added value considerations.
I will adopt a rounded $20,000 as the added value of the shed with its associated equipment.
Quarters
Mr Brown valued the quarters as having added value of $15,750 based on a replacement cost of $45,000 and the older quarters structure at $8,000 based on a replacement cost of $40,000.
Mr McManus valued the quarters as having replacement cost of $70,380 which he depreciated by 40% for physical condition but then to 80% due to both physical and economic obsolescence, with resultant added value of $14,076. He valued the older quarters as having storage value only, at $4,298.
It is observed that Mr McManus' estimate of replacement cost of the quarters which he described as "relocatable home/quarters" was based on the full floor area (including screened veranda/breezeway) at $600/m² overall which seems somewhat excessive in comparison with other residential structures he has valued on other properties. Mr Brown's replacement cost estimate seems to be one of his "spot values".
I have difficulty on the evidence, in accepting the degree of "economic obsolescence" which the valuers have placed on this structure when, in the absence of a main residence and when the only other residential structure (the older quarters) are accepted as having very limited use potential. In the circumstances it would have been expected that the use potential of the quarters would have been greater than the occasional needs of shearers.
I have decided to adopt an overall value of $18,500 for both structures, which equates Mr McManus' assessment. However the added value of the older quarters is seen to be minimal, on a storage value basis.
Quarters' Amenities
Mr Brown found added value of $3,000 in the various amenities while Mr McManus found a total $4,428, including $2,310 for water facilities.
I will adopt Mr McManus' assessment of the added value of the amenities including water facilities, rounded to $4,500.
Workshop
Mr Brown valued this structure as having a replacement cost of $17,500 and an added value of $7,000. Mr McManus estimated the replacement cost as being $15,520 which he depreciated to $3,880 for its physical condition then to $1,552 due to economic obsolescence. There was some dispute as to whether electricity was connected to this shed, Mr McManus being adamant that it was not. His attention to detail generally leads me to accept his description. Once again however he appears to me to have taken a harsh stance as to the utility value of this shed, regardless of the fact that it has a full concrete floor and the property is not regarded as comprising a living area.
I have decided to adopt an added value of $2,500 bringing it closer to Mr McManus' physically depreciated assessment. Mr Brown's valuation both in terms of replacement cost and added value is considered significantly excessive.
Sundry Sheds
Mr Brown has found added value of $3,750 for three "sundry sheds" which in probability comprise a lighting shed (Mr McManus $2,936 including lighting plant of $2,500); an old fuel shed (Mr McManus $200); and an open shed which Mr McManus found to have no value.
I will adopt Mr McManus' assessment for these structures including plant but rounded down to $3,000.
Electricity Reticulation
Mr McManus has allowed $2,310 under this heading, while Mr Brown has not separately included the item.
I will adopt a rounded figure of $2,250.
Summary of StructuresShearing Shed $20,000
Quarters and Amenities $23,000
Workshop $2,500
Sundry Sheds and Plant $3,000
Electricity Reticulation $2,250
$50,750
Interest for six months Say $2,000
Total $52,750
Yards
The three main sets of yards were the shed yards (Brown $12,840 - McManus $7,691); the bottom yards (Brown $4,000 - McManus $2,194); cattle yards (Brown $2,500 - McManus $6,342).
Mr McManus' detailed description and valuation of the component parts of these improvements is preferred and is, as a consequence, adopted in the total amount of $16,864 including interest.
Fencing
Mr Brown valued 23 km of boundary fencing as having depreciated value of $1,260/km then the balance of the boundary fencing being older style but of more expensive replacement cost, at $1,500/km. Mr McManus valued 28 km of boundary fencing at $1,260/km then a balance 5.7 km of the older style which he valued at $295/km.
Mr Brown valued 20 km of internal fencing at a depreciated value of $1,100/km, while Mr McManus valued 17.8 km at $900/km then the balance 13.8 km of older style construction in five different sections, averaging $434/km.
I accept the length of fencing measured by Mr McManus and his detailed construction descriptions together with his valuation of the more modern fencing. However, as with other sale properties, I am not convinced that his added value approach to the older fencing is realistic in the absence of the assistance of a description as to the physical condition of those fences.
I will adopt an added value of a rounded $45,000 for all fencing, including interest.
Water Facilities
Mr Brown had been given incorrect details regarding the depth and condition of the bore and amended his assessment of that item during the course of the hearing. In the end result there was little difference between the assessments of Mr Brown and Mr McManus.
I accept Mr McManus' detailed descriptions and valuation of the component parts and his total valuation of $42,733 including interest.
Timber Treatment
Mr Brown estimated that 4,200 ha of the property had been previously ringbarked or pulled but only 2,120 ha retained some effectiveness. He apportioned that area as comprising 1,520 ha "semi-timbered rung out" at $40/ha, 50% effective overall ($30,400) and 600 ha which required repulling of regrowth, as having an added value of $12,000. Effectively he allowed an added value of $20/ha over the area of 2,120 ha.
Mr McManus measured a total area of 3,107 ha which had been rung. He apportioned the areas as comprising:Area A:2,191 ha selectively rung gidyea and brigalow country with light to moderate density and some heavy patches of regrowth. He valued this timber treatment as having added value of $11/ha or $24,101.
Area B:222 ha selectively rung gidyea and brigalow country with moderate to thick density regrowth. This timber treatment was assessed as having added value of $5.50/ha or $1,221.
Area C:694 ha rung coolibah, gidyea and brigalow, originally lightly timbered, no regrowth. He valued this area of timber treatment at $30/ha or $20,820.
His total added valuation of the timber treatment was, before interest (which he allowed for six months or half of one year) $46,142.
I accept Mr McManus' estimation of the areas of timber treatment.
For reasons discussed in the main body of these decisions, I am unable to adopt Mr McManus' methodology in finding the added value of old timber treatment. As in other analyses, for reasons associated with maintenance of initial alternative treatment, I will adopt an added value of $35/ha for the fully effective treatment as described in Area C.
I have decided to adopt slightly lower added values of $10/ha for Area A and $5/ha for Area B, than Mr McManus' $11/ha and $5.50/ha due to regrowth considerations.
I will follow Mr Brown's methodology in allowing a development period of two years and development interest over half that period.
The following calculation results:
Area A: 2,191 ha @ $10/ha $21,910
Area B: 222 ha @ $5/ha $1,110
Area C: 694 ha @ $35/ha $24,290
$47,310
Interest 7.87% for 1 year $3,723
$51,033
In addition under this heading Mr McManus allowed $1,397 for farm tracks, including $389 for 16.2 km in "mostly very poor condition".
I will adopt an amount of $1,000 including interest for the tracks, the total allowing under the "timber Treatment" heading being $52,033.
Summary of Analysis
For the reasons given, I adopt an analysis of unimproved value equivalent to $5.56/ha.
APPENDIX 2
Analysis of Sale - "Robina Downs"
Date of Sale: 10 October 1997
Sale Price: $670,000
Vendors: NJ and AM Murray
Purchasers: IR Messenger and NM McGuire
Summary of Analyses: Appellants Chief Executive Court
(Brown) (McManus) (See Reasons)
Sale Price $670,000 $670,000 $670,000
Deduct:
Crop $30,000 $20,000 $20,000
Plant and Machinery $15,000 $14,600 $14,600
Sundries $9,890 $54,890 - $34,600 - $34,600
Sale Price Improved $615,110 $635,400 $635,400
Deduct Structures $249,502 $213,054 $221,150
Treated, fenced and watered $365,608 $422,346 $414,250
Yards $20,543 $21,066 $21,066
Fencing $54,406 $54,502 $54,502
Water $154,107 $172,337 $172,337
Timber Treatment $9,558 $2,189 $2,189
Total Value of Improvements $488,116 $463,147 $471,244
Gross Unimproved Value $126,994 $172,253 $164,156
Deduct Interest 6.2% for one year $7,414 $10,056 $9,583
Net Unimproved Value $119,580 $162,197 $154,573
Per ha $8.67 $11.77 $11.21
Court Analysis - Reasons
Crop
The "crop" comprised plantations of about 300 date palms half of which were mature (about 11 years old), the other half about seven years old. The trees were established in two locations with, according to Mr Brown, about 30 ha cleared, but I think more realistically on Mr McManus' evidence, about 7 ha, fenced and "extensively irrigated" from a bore with a 300 ml licence.
Previous owners had harvested and sold dates. Mr McManus said that the palms "had not been pruned or kept" and "were not a major consideration for the purchaser, however the potential for income diversification existed in the mind of the purchaser". The purchaser had informed Mr McManus, as I understood the comment in the "Rural Inspection Interview/Report" that a crop had been harvested and sold since the purchase. No details were available to either Mr McManus or Mr Brown as to the extent of crop harvested and sold.
There is no evidence as to the market value of a date palm plantation either in its own right or as part of an income diversification scheme in conjunction with a sheep grazing property. Mr Brown valued the palms as established with irrigation infrastructure at $100 each excluding clearing which he assessed separately under "Timber Treatment". His basis of valuation he said had been gained from his experience in valuation of other types of orchards.
Mr McManus had endeavoured to obtain information relative to establishment of commercial date palm plantations but in the end result he could do little more than to form a professional opinion of value based on his assessment of establishment costs and the risks involved in the plantation having commercial potential. His inquiries had revealed that previous owners had been advised that the irrigation water had a high sodium absorption ratio and residual alkalinity with potential adverse effects on the soil but there was no evidence given as to the water quality requirements of date palms. He interpreted the comments of the purchasers to suggest that they had not placed any particular focus on the worth of the date palms at the time of their purchase.
In the absence of production and income records or any income forecast capable of analysis, there would need to be a demonstrably significant discounting process for risk, if direct comparison was to be made with market values for other types of orchards with commercial recognition. Mr Brown's assessment did not appear to sufficiently recognise the obvious risks involved.
In the circumstances I am persuaded that Mr McManus' somewhat arbitrary assessment methodology under all headings including clearing, fencing and irrigation, is more likely the manner in which the subject plantations would be viewed in the marketplace as associated with a predominantly sheep-grazing operation.
I will adopt Mr McManus' assessment in the amount of $20,000 as the added value of the palm plantation.
Plant and Machinery
Mr Brown's valuation (amended to $15,000) under this heading included "generator, motor and spares", "irrigation equipment" and "sundry plant".
Mr McManus' detailed schedule and itemised valuation totalled $14,600, excluding the generator and irrigation equipment which items were valued as ancillary to other improvements.
I adopt Mr McManus' assessment in the amount of $14,600.
Sundries
Mr Brown's assessment under this heading was $9,890 comprising power connection ($3,000), telephone ($1,500) and external access road ($5,390).
Mr McManus included an amount of $5,440 for electricity reticulation under "Structures", nothing for the telephone connection as is discussed elsewhere or for the external road which he had been able to establish was maintained by the Council.
I will follow Mr McManus' approach and make no allowance under this heading.
Structures
The various structures were valued by the respective valuers as follows:
Brown McManusHomestead and ancillary improvements $163,000 $127,164
Cottage $2,000 $3,429
Garage/workshop $8,000 $4,039
Shearing shed $38,000 $36,818
Shearers' quarters $18,000 $17,371
Stables/tack room $3,500 $1,980
Pump shed $3,500 $4,156
Other sheds $6,000 $6,251
Electricity reticulation (Sundries) $5,440
Homestead
Mr Brown measured the building by pacing to find 338 m² under the roof, including the veranda. He estimated the replacement cost of the structure to be $800/m² overall or $270,400. In his opinion, whilst the structure was functional, it was above district average standard and in his opinion its added value was less than its physical depreciated replacement cost. He adopted its value as being $150,000 which in mathematical terms, can be seen to be about 55% of his estimated replacement cost. He suggested that the ground improvements had a replacement cost of a broad-brush $20,000 (to include a modern synthetic grass tennis court) and depreciated those improvements by 35% to arrive at an added value of $13,000.
Mr McManus relied on taped measurements to find an enclosed floor area of 297.96 m² and an open veranda under the main roof of a further 45.58 m². He estimated the replacement cost of the building to be $245,272 (including septic tank) and its added value as being $98,409 based on 40% of the replacement cost of the main structure. The homestead ancillary improvements including domestic water were itemised to have a replacement cost of about $45,000 of which the tennis court accounted for $20,000. He found added value of $28,775 in these ancillary improvements, the tennis court accounting for $16,000 of that amount.
The evidence is that one of the attractions of this property to the purchasers was the size and quality of the homestead and its ancillary improvements. The main structure, said to be about 35-40 years' old, was in good structural condition and well maintained. The question of the added value of a homestead of this quality to a grazing property capable of carrying about 4,500 sheep is one of professional opinion. The purchasers were said not to be experienced graziers and in their purchase of the property had sought a lifestyle change. It is logical that, to them, the residential amenity provided by the homestead was a consideration unrelated to the economic viability of the grazing operation. The purpose of the analysis of the sale is however to endeavour to establish the unimproved value of land with highest and best use for sheep breeding and woolgrowing. On a larger property, this homestead may well have added full value in terms of its age and physical condition but both valuers agreed that economic obsolescence is an additional factor to be considered.
By his assessment Mr Brown suggested that the property could economically support a homestead and ancillary improvements worth $163,000 while Mr McManus suggested $127,164.
I prefer Mr McManus' replacement cost valuation methodology which seems to be supported by district residential building costs obtained from his cost book.
While it is the added value of the existing homestead which has to be assessed and not some alternative replacement, there would unlikely be argument to suggest that if a new family home of smaller dimensions with good quality fittings and fixtures had existed, that such building would not have added full value as related to construction cost. It seems to me then that it is a valid exercise to consider, in the added value considerations, that which might represent full functional added value and then to consider the relative worth of the existing improvement in comparison.
I think Mr Brown has been too optimistic in his overall result while Mr McManus' total result is closer to probability. Nevertheless he seems to have taken a harsher approach to the main structure than was warranted for a necessary improvement, then a somewhat curious added value approach to a lifestyle improvement such as the tennis court, regardless of its near new condition and replacement cost.
I have decided to adopt an added value of $135,000 for the homestead and ancillary improvements, and if it was useful to do so, I would apportion that amount as being $120,000 for the main structure and $15,000 for the ancillary improvements.
Cottage
On a practical added value approach, I prefer Mr Brown's assessment under this heading and adopt the nominal amount of $2,000.
Garage/Workshop
Mr McManus' description of this structure, at least in terms of construction and replacement cost detail, is of assistance. However, in the absence of acceptable reasoning as to physical condition and/or economic obsolescence, his depreciation rate of 75% seems excessive for a functional structure, albeit one of older style.
Mr Brown's broad-brush approach is seen to provide an excessive result when compared to a probable replacement cost.
I will adopt a rounded valuation of $5,500.
Shearing Shed
I prefer Mr McManus' detailed assessment to Mr Brown's broad-brush approach and will adopt a rounded valuation of $37,000.
Shearers' Quarters
There is little between the valuers in the end result. Mr McManus' detailed assessment is adopted rounded to $17,500.
Stables/Tack Room
Again, Mr McManus' exposed assessment is preferred and I adopt a nominal rounded valuation of $2,000.
Pump Shed
It is assumed that Mr Brown's replacement cost estimate of $5,000 was intended to include the two pump units which were fully described by Mr McManus, whose total replacement cost assessment was $7,632 with depreciated value assessed as $4,156. I adopt a rounded assessment of $4,000.
Other Sheds
As I interpret the additional items as detailed by Mr McManus, there is little difference between him and Mr Brown, but I will adopt Mr Brown's rounded figure of $6,000.
Electricity Reticulation
Mr Brown had allowed $3,000 for this item under "Sundries". I will adopt Mr McManus' detailed assessment rounded to $5,500.
Summary of Adopted Values for StructuresHomestead and ancillary improvements $135,000
Cottage $2,000
Garage/Workshop $5,500
Shearing Shed $37000
Shearers' Quarters $17,500
Stable/Tack Room $2,000
Pump shed and equipment $4,000
Other Sheds $6,000
Electricity reticulation $5,500
$214,500
Interest 6.2% for six months $6,650
Total $221,150
Yards
There is little difference between the valuers in the total assessments under this heading. I will adopt Mr McManus' detailed assessment including interest in the amount of $21,066.
Fencing
Again the total valuations are near identical although from slightly different component parts. I will adopt Mr McManus' detailed assessment including interest in the amount of $54,502.
Water
Mr McManus provided a detailed assessment of the various water facilities, the end result being a significantly higher valuation than that of Mr Brown. I will adopt Mr McManus' assessment, including interest, in the amount of $172,337.
Timber Treatment
Mr Brown assessed 30 ha as being "cleared irrigation land" at $300/ha. This was said to be related mainly to the palm plantations which, on Mr McManus' measurements, comprised a much smaller area. Mr McManus' assessment of the added value of the plantations included the associated timber treatment and I have followed his approach in that regard.
Under this heading Mr McManus allowed the earthworks involved in forming an airstrip and grading property tracks in the total amount of $2,189 including interest which amount I adopt.
Summary of Analysis
For the reasons given the sale is accepted as showing an unimproved value of $11.21/ha. However the overall evidence leads me to conclude that this sale provides unreliable evidence of market value for its highest and best use for sheep breeding and woolgrowing. The above average quality of the dwelling and ancillary improvements was a particular attraction to the purchasers. They possessed no previous sheep grazing experience. The oral evidence suggests that the male vendor did not fit the criterion of a willing vendor and the asking price had been for all intents and purposes non-negotiable.
There is the distinct possibility that the sale price may have been further inflated by the questionable added value of the palm plantations.
The analysed unimproved value appears to be out of line with the level of value reflected by the balance of the analysed evidence.
APPENDIX 3
Analysis of Sale - "Willacora"/"Coona"
Date of Sale: 15 March 1996
Sale Price: $843,100
Vendors: EVT Webster, DVJ Webster, RL Webster
Purchasers: RS & SR English
Summary of Analyses: Appellants Chief Executive Court
(Brown) (McManus) (See Reasons)
Sale Price $843,100 $843,100 $843,100
Deduct:
Sundries $19,540 - -
Sale Price Improved $823,560 $843,100 $843,100
Deduct Structures $187,600 $202,418 $202,418
Treated, fenced and watered $635,960 $640,682 $640,682
Yards $35,581 $15,587 $21,913
Fencing $126,581 $120,200 $120,200
Water Facilities $181,816 $198,816 $198,816
Timber Treatment $85,008 $52,066 $66,944
Total Value of Improvements $616,586 $589,088 $610,291
Gross Unimproved Value $206,974 $254,012 $232,809
Deduct Interest (8.7% 1 year) $16,566 $20,330 $18,633
Net Unimproved Value $190,408 $233,682 $214,176
Per ha $10.88 $13.35 $12.24
Court Analysis - Reasons
Sundries
Mr Brown allowed $19,540 under this heading comprising -
Power connection $3,750
Telephone connection $1,640
Permit to occupy 810 ha $12,150
Access road $2,000
Mr McManus allowed an amount of $10,046 for electricity reticulation under the "Structures" heading and $100 for the access road under "Timber Treatment". He allowed nothing for the telephone connection for reasons discussed elsewhere. He also allowed nothing for the existence of the permit to occupy because such permits are not transferable and the issue of a fresh permit is at the discretion of the Department of Natural Resources and not guaranteed.
Total $44,375
Timber Treatment
Mr Brown made no allowances under this heading. Mr McManus had allowed the added value for the establishment of some patchy buffel pastures over an area of 1,671 ha in the sum of $6,475. Under this heading he also allowed an amount of $967 for formation of internal roads, tracks and the airstrip.
I adopt Mr McManus' assessment rounded to $7,650 including interest.
Conclusions and Summary of Analysis
For the reasons given I adopt an unimproved analysis of $15.02/ha for this Stud Holding.
It is valid for the appellants to argue, as they have, that the conditions of the lease are restrictive, even if some departmental relaxation is provided in practice or if those conditions are capable of variation. The appellants' argument does not assist their case however, when it comes to the application of the unimproved value under the provisions of the Act.
There are circumstances surrounding this sale, other than the lease conditions, which in my opinion tend to reduce its weight as basic evidence of value. There is some dispute as to the value of the plant and machinery and stock included in the sale, but a significant issue relates to the added value of some improvements through over-capitalisation or economic obsolescence.
APPENDIX 5
Analysis of Sale - "Huntley"/"Glen Oxford"
Date of Sale: 20 May 1996
Sale Price: $1,370,000
Vendors: GA Deane and DA Deane
Purchasers: RG, ID and GH Heckendorf
Description of Country: 9,000 ha sandy pine/mulga country
Mr Brown:9,000 ha open plain with scattered coolibah and gidyea clumps
12,030 ha thick gidyea and floodout country.
Mr McManus: 9,000 ha (30%) open Mitchell grass plains and alluvial plains, channelled
open coolibah on grey and brown clays.
4,500 ha (15%) flat red/ brown gidyea plains.
6,910 ha (23%) moderate to thick red soil gidyea with sandalwood understorey.
9,620 ha (32%) undulating sandhills timbered with cypress pine, ironwood, sandalwood and woody weeds.
Departmental Estimate of 1 DSE:2.82 ha - (10,649 sheep)
Carrying Capacity:
Summary of Analyses: Appellants Chief Executive Court
(Brown) (McManus) (See Reasons)
Sale Price $1,370,000 $1,370,000 $1,370,000
Deduct:
Plant and Machinery $40,000 $35,109 $35,109
Stock $245,000 $212,500 $222,500
Sundries $14,000 $299,000 $13,500 $261,109 $13,500 $271,109
Sale Price Improved $1,071,000 $1,108,891 $1,098,891
Deduct Structures $274,962 $250,858 $260,875
Treated, fenced and watered $796,038 $858,033 $838,016
Yards $36,293 $30,163 $30,163
Fencing $181,964 $140,821 $153,897
Water Facilities $294,197 $288,276 $288,276
Timber Treatment - $2,158 $2,158
Total Value of Improvements $787,416 $712,275 $735,369
Gross Unimproved Value $283,584 $396,616 $363,522
Deduct Interest $22,697 $31,744 $29,095
Net Unimproved Value $260,887 $364,872 $334,427
Per ha $8.69 $12.15 $11.14
Court Analysis - Reasons
Plant and Machinery
Mr Brown did not inspect the property until four years subsequent to the sale. His evidence was that he had relied on information and opinions of value provided to him by one of the purchasers. An inventory included with his report was generally similar to that contained in the contract of sale. However an end loader (apparently of significant value) had not eventually been included in the sale.
Mr McManus' schedule was consistent with the contract, except that some plant had been valued with structures (shearing sheds). In fact he found significantly more value in the plant and machinery than the figure adopted by Mr Brown. Furthermore Mr Brown's inventory included furniture and stores consistent with the contract but which items Mr McManus included under the heading of "Sundries".
I adopt Mr McManus' assessment.
Stock
There was general agreement that while the contract included all sheep on the property, the purchasers had estimated that 8,500 ewes and 100 rams were grazing on the land at the date of inspection. In fact, subsequent to the purchase additional sheep were mustered - Mr Brown having been informed that about 9,500 sheep were mustered while Mr McManus' inquiries of the owners suggested that 8,900 ewes plus the 100 rams were counted at muster.
According to both valuers the original estimate comprised:
(a)2,000 Haddon Rig blood 3 and 4-year-old ewes with 4 - 5 months wool, joined to lamb April/May.
(b)2,500 Lemongrove blood 5-year-old ewes, 10 months wool, joined to lamb April/May.
(c)4,000 Lemongrove blood 6-year-old ewes, unjoined, 10 months wool.
(d)100 Lemongrove bred rams, mixed ages.
Mr Brown valued the (a) and (c) class ewes at $25/head and the (b) class ewes at $30/head and the rams at $200/head. Again he had been guided by opinions said to have been expressed by the purchasers as well as by one of Mr Brown's clients who had inspected the property and the stock prior to the sale. His estimate of value was influenced by the near immediate cash flow available to the purchasers from the wool clip.
Mr McManus said that one of the purchasers informed him that the ewes had been estimated by them to have had value of $25/head overall. He valued classes (a) and (b) at $25/head each, but class (c) at $20/head and the rams at $100/head. He said he had taken into consideration the wool clip potential of the Lemongrove ewes but had considered them to have been of inferior genetic quality to the Haddon Rig ewes. He had discussed his assessment with local stock agents who thought, if anything, his values may have been a little high. That advice also seemed consistent with a paddock sale of sheep on a contract basis, in association with the sale property "Willacora". Mr McManus had taken the decision however to include the additional 400 head of ewes counted at the muster.
I accept that Mr McManus has been conscientious in his inquiries and has not purposely taken a conservative approach. There would be some logic in Mr Brown's approach had his base stock unit value, ex wool, been capable of confirmation. That did not seem to be the case. Nevertheless it seems to me that the value placed on the sheep by the purchasers had been based on $25/ewe average overall and that they were confident that the stock numbers estimate would prove conservative, as happened. In the circumstances the $25/head average overall does not seem unreasonable.
I will adopt that level of value for the numbers estimated at the time of sale, together with Mr McManus' valuation of the rams, giving a total figure of $222,500.
Sundries
As was his consistent practice, Mr Brown included electrical connections, telephone installations, roads and an airstrip under the "Sundries" heading, totalling in this case $14,000,
Mr McManus included electrical installations under "Structures" and the roads and airstrip under "Timber Treatment" He excluded the telephone installation for reasons discussed elsewhere. I accept his methodology and will discuss individual items later.
Mr McManus then valued the furniture and stores (as contained in the contract schedule) under the "Sundries" category, which I also accept as reasonable. It can be seen that when added to his assessment of plant and machinery, even excluding the shearing shed plant, Mr McManus' assessment exceeds that of Mr Brown.
I adopt Mr McManus' detailed assessment of furniture and stores in the amount of $13,500.
Structures"Huntley Downs"
Mr Brown valued the structures in the amount of $188,500 before interest and Mr McManus $171,467 before interest, but inclusive of electricity installations ($4,140) and the shearing shed's plant and machinery ($6,450). Of the major items the more significant valuation differences were - homestead (Brown $75,000 - McManus $64,543); shearers' quarters and ancillary buildings (Brown $32,750 - McManus $21,233); cottage/jackeroos' quarters (Brown $5,000 - McManus $1,000); machinery shed (Brown $7,500 - McManus $4,874).
After consideration of both the written and oral evidence and the individual values ascribed to the various structures, I generally prefer Mr McManus' detailed and exposed assessments. The reservation I have is that where there is dispute as to depreciation rates adopted for functional buildings (excluding the cottage) Mr McManus is seen to have been, in most cases, a little conservative in his assessment of added value.
After considering the various items I have decided to adopt a rounded valuation of $180,000 as the added value of the "Huntley Downs" structures with the inclusions adopted by Mr McManus (electrical installations etc).
"Glen Oxford"
Mr Brown valued the structures on this property in the amount of $75,000, before interest, and Mr McManus $68,933, before interest, but including electricity installations ($8,175) and the shearing shed's, plant and machinery ($5,800). Mr McManus found more added value in his assessment of the homestead than did Mr Brown, found a similar added value in the shearing shed, but significantly less in the shearers' quarters, vehicle and machinery sheds.
Again the overall evidence influences me to generally prefer Mr McManus' exposed detailed assessments of individual items. However, the added value he placed on the shearers' quarters is considered overly conservative, if the shearing shed is regarded as a functional improvement.
I will adopt a rounded $70,000 as the added value of the "Glen Oxford" structures, with the inclusions adopted by Mr McManus.
The total value of the structures on "Huntley Downs"/"Glen Oxford" then becomes:
"Huntley Downs" $180,000
"Glen Oxford" $70,000 $250,000
Interest - 6 months @ 8.7% $10,875
Total $260,875
Yards
Mr Brown's assessment of the added value of yards, before interest, totalled $34,780 all located on "Huntley Downs". Mr McManus found added value of $20,882, the most significant difference being the Burrell Paddock (bottom yards) (Brown $10,830 - McManus $3,657). Mr Brown found an added value of $1,500 for a tack shed and horse yards. Mr McManus listed the tack shed under "Structures" as having no added value. Mr Brown found added value of $3,000 for "two smaller sets of holding yards" which were not otherwise identified. While Mr McManus' detailed description of yards did not separately identify these yards, he did find $8,025 as the added value of various older yards on "Glen Oxford".
I adopt Mr McManus' detailed assessment of yards in the amount of $30,163 including interest.
Fencing
Mr Brown's initial assessment of the length of fencing and its added value on these properties was inaccurate and required review during the hearing. He valued shared boundary fencing at an overall average of $1,200/km added value (on a full-share basis). Mr McManus valued 12.1 km of near new sections of suspension-type boundary fences at an average of $1,429/km and the balance 108.6 km of older style timber post 3.5 m to 4 m panels, mixed wires with sections of netting, at an average $565/km added value (on a full-share basis).
Mr Brown valued the internal fencing at an overall average of $1,000/km added value while Mr McManus valued 26.8 km of suspension type fences at an average of $1,285/km and the balance 74.5 km of older style mainly timber post fences at an average of $597/km.
I accept Mr McManus' estimates of lengths of fencing, his construction details and the values applied to the newer fencing. However, in the absence of description as to the physical condition of all but one fence ("K") I have formed the opinion that he has been too conservative in his assessment of the added value of the older style fences.
I will adopt the added value of $3,080 which Mr McManus found for five grids as opposed to Mr Brown's assessment of $4,200 (for four grids).
The following values are adopted:Boundary Fencing $54,000
Internal Fencing $84,500
Grids $3,080 $141,580
Interest 8.7% for one year $12,317
Total $153,897
Water Facilities
The difference between the valuers in terms of the total valuation is not significant. However I will adopt the detailed exposed added values applied to the various water improvements by Mr McManus, in the total amount of $288,276 including interest.
Timber Treatment
The valuers agree that no timber has been treated on these properties. Mr McManus chose to include the earthworks involved in constructing tracks ($1,268) and the airstrip ($800) under this heading in the total amount of $2,158 including interest. Mr Brown included a total amount of $6,000 under the "Sundries" heading for roads ($4,000) and airstrip ($2,000).
There was no evidence which would persuade me to depart from Mr McManus' assessment.
Summary of analysis
Although large in area, being the amalgamation of two original individual properties, this sale is considered to offer basic evidence of value in the period leading up to the valuation and not inconsistent with that shown for the smaller but better located "Willacora"/"Coona" of generally comparable country at a similar date of sale, then the smaller better located "Northam"/"Airlie", of overall inferior country type, sold closer to the actual date of valuation.
The analysed unimproved value of $11.14/ha is adopted.
APPENDIX 6
Analysis of Sale - "Northam"/"Airlie"
Date of Sale: 17 February 1998
Sale Price: $770,000
Vendors: AS and JE Kidman
Purchasers: CS and JR Baker
Situation and Access: 7 km south of Wyandra, 91 km north of Cunnamulla via the bitumen Mitchell Highway.
Description of Country: 2,530 ha open Mitchell plain with coolibah watercourses
Mr Brown:750 ha river frontage broken flooded box and coolibah
14,516 ha mixed mulga, red country
Mr McManus: 3,824 ha (21%) open Mitchell grass plain
825 ha (4%) box watercourse
840 ha (4%) levees with channels, minor cypress pine, wilga, ironwood, beefwood with sandy grey and brown clays
85 ha (1%) claypans and depressions
320 ha (2%) gidyea clumps with sandalwood
155 ha (1%) soft red mulga/box
9,000 ha (49%) sandy red mulga/box
3,325 ha (18%) hard stony mulga.
Water:Artificial: 2 capped artesian bores (one-half share) and 1 flowing artesian bore. Natural: none of any consequence.
Departmental Estimate of 1 DSE:3.15 ha - (5,833 sheep)
Carrying Capacity:
Summary of Analyses: Appellants Chief Executive Court
(Brown) (McManus) (See Reasons)
Sale Price $770,000 $770,000 $770,000
Deduct:
Stock $130,000 $130,540 $130,000
Sundries $15,575 $145,575 - $130,540 - $130,000
Sale Price Improved $624,425 $639,460 $640,000
Deduct Structures $193,961 $173,525 $181,405
Treated, fenced and watered $430,464 $465,935 $458,595
Yards $36,243 $35,699 $35,699
Fencing $109,398 $106,162(sic) $112,677 $112,677
Water $112,497 $135,972 $135,972
Timber Treatment $48,116 $26,740 $32,521
Total Value of Improvements $500,215 $478,099 (sic) $484,613 $498,724
Gross Unimproved Value $124,210 $161,361 (sic) $154,847 $141,726
Deduct Interest $6,754 $8,774 (sic) $8,420 $7,706
Net Unimproved Value $117,456 $152,587 (sic) $146,427 $134,020
Per ha (1) $6.60 (2) $8.30 (sic) $7.96 (2) $7.29
(1) (17,796 ha ex Special Lease) (2) (18,375 ha including Special Lease)
Court Analysis - Reasons
Stock
Mr Brown's assessment was based on 6,500 head of mixed-class sheep out of an approximate total of 6,750 head. Mr McManus' assessment was based on 6,527 sheep as counted on muster. The contract (Clause 23.8) provided for the sale price to be increased or decreased at $20 per head for any excess or deficiency above or below 6,500 sheep.
I adopt Mr Brown's interpretation of the contract and a stock valuation of $130,000.
Sundries
Mr Brown included under this heading electricity reticulation ($5,000), telephone ($1,640), airstrip ($1,000) and his assessment of the value of the Special Lease included in the contract of sale ($7,935).
Mr McManus made no allowance under the "Sundries" heading. He included electricity reticulation ($5,835) under "Structures" then nothing for the telephone connection or the airstrip (which he said was not in use).
It was Mr McManus' opinion that as the Special Lease formed part of the contract, the unimproved value should be analysed to include that leasehold land.
I adopt Mr McManus' methodology and make no allowance under the "Sundries" heading.
Structures
Mr Brown's valuation of the structures totals $188,540 before interest, while Mr McManus' valuation before interest is $168,676.
The following comparisons are made:
Brown McManusHomestead including ancillary improvements $78,640 $62,882
Machinery shed/workshop $24,000 $34,442
Cottage $13,500 $10,743
Outbuildings $5,400 $3,319
Shearing shed $36,000 $31,813
Shearers' quarters $30,000 $19,542
"Airlie" buildings $1,000 $100
Electricity reticulation (Sundries) $5,835
Mr McManus' detailed analysis and estimated replacement costs of the various items has been of assistance. However, on the overall valuation evidence I am concerned that, where older functional buildings are involved, his adopted depreciation rates may have been too harsh. Conversely, the machinery shed/workshop, whilst in good condition, was apparently constructed with partial grain storage intent and with its full concrete floor and external apron was considered by Mr Brown to represent a degree of overcapitalisation which did not appear to be adequately reflected in Mr McManus' valuation.
After consideration of the evidence I have decided to adopt the following assessments:Homestead and ancillary improvements $69,000
Machinery shed/workshop $25,000
Cottage $11,500
Outbuildings $3,500
Shearing shed $36,000
Shearers' quarters $25,000
"Airlie" building $500
Electricity reticulation $5,835
$176,335
Add interest 5.75% for six months $5,070
Total $181,405
Yards
I will adopt Mr McManus' fully detailed description and valuation of the yards in the amount of $35,699, marginally less than Mr Brown's assessment.
Fencing
Mr Brown valued boundary fencing as having full-share equivalent value of $880/km, 54 km apportioned as being half share and 28 km full share. He valued 70 km of internal fencing at an average $700/km.
Mr McManus valued the boundary fencing as having added value of $838/km average. The older-style fences were valued in the range from $357/km (24.7 km) through to $1,104/km (12.8 km) averaging $645/km (56.4 km). The balance more modern fencing was valued in the range from $1,064/km (4.9 km) through to $1,512/12 (6.9 km) averaging $1,250/km (26.3 km). His valuation of the internal fencing averaged $727/km overall valued in the range from $223/km (2 km) through to $1,312/km (3.2 km).
Again Mr McManus' detailed fencing schedule and lengths of various construction types was of assistance although there was no evidence as to the physical condition which allowed consideration of the veracity of his depreciation allowance for "physical and economic obsolescence".
I have indicated my doubts as to the reasonableness of the added values placed by Mr McManus on older fences in most of the sales analyses relevant to the valuations under appeal. It is noted here that the purchasers, on interview, offered the opinion that fences were generally sound but work was needed on the "Clovelly" boundary. That particular half-share fencing, as I interpreted Mr McManus' fence schedule, was valued at $748/km (16.3 km) and one section at $524/km (2.6 km). Other older-style boundary fences of more expensive replacement cost but of undescribed physical condition, were valued at $357/km although apparently considered by the purchaser to be in generally sound condition. Although doubts remain, it is noted that Mr McManus' overall valuation (when a mathematical calculation is corrected) is slightly higher (including grids), than Mr Brown's total assessment.
In the circumstances I will adopt Mr McManus' assessment, as corrected, in the amount of $112,677.
Water
Mr McManus specifically reviewed departmental assessments of the water improvements. This resulted in a significantly more detailed and higher valuation than provided by Mr Brown.
I adopt Mr McManus' assessment totalling $135,972 including interest.
Timber Treatment
Mr Brown from his inspection and interpretation of aerial photography assessed the added value of ringbarking as follows:875 ha rung out ranging from scattered coolibah to thick gidyea
at $40/ha - 80% effective$28,000
1,000 ha red mulga and mixed timber country rung out but
substantially regrown at $40/ha - 30% effective $12,000He identified 550 ha of buffel pasture development on the river frontage country which he valued at $10/ha. To his assessment of timber treatment in the amount of $45,500 he added development interest over half of a two-year period.
The evidence was that earlier analyses of this sale by departmental officers had found at first no added value, and then nominal added value, for past timber treatment. Mr McManus set about reviewing the position after the objection process when he became aware of Mr Brown's opinion as to the extent and value of timber treatment. It appears that Mr McManus took considerable care in inspecting areas which Mr Brown interpreted as having been subject of past treatment. After going to the trouble of conducting plot tree counts of green and dead timber, Mr McManus estimated that there was a total area of 725 ha of rung or selectively cut and rung country, with treatment 100% effective. He assessed the added value of the original manual treatment as equivalent to the modern practice of machinery pulling at a cost of $25/ha based on his estimate of the type of timber cover originally treated. He accepted that regrowth could be a problem with pulling treatment of some country/vegetation types, but not in the open type country originally manually treated on this property.
He then found an area of "patchy buffel grass" improvement of 754 ha which he valued at $7.75/ha, based on aerial seeding costs which he had obtained.
There was considerable examination of both valuers as to their interpretation of the extent of past timber treatment. It seems to me that there is a probability that Mr Brown has taken a broad-brush approach and identified general areas where some past treatment occurred or where it now appears likely to have occurred. Mr McManus in setting out to establish the facts as far as was possible in these types of matters, came to the conclusion that within the areas identified by Mr Brown were original sections of rung country but interspersed within naturally open country or naturally lightly timbered country where existing dead timber showed no signs of any manual treatment and in his opinion more likely resulted from fire.
The timber treatment question is a good example of the difficulties associated with identifying unimproved value when past improvements have tended to merge with natural attributes of land.
Mr McManus clearly set about the task of identifying past timber treatment with diligence. His ground inspection and area calculations were assisted by aerial photography, satellite imagery and global positioning instrumentation. When he found a greater area than that calculated by Mr Brown (ie buffel pasture) he adopted the greater area.
I will adopt Mr McManus' calculation of an area of 725 ha of fully effective timber treatment.
For reasons discussed in the main body of these decisions, I am unable to adopt his methodology in finding the added value of old timber treatment. Regardless of Mr McManus' opinion regarding the potential for regrowth after the alternative pulling treatment, I am not convinced that the added value of fully effective treatment does not exceed an initial pulling cost. I will allow $35/ha for this fully effective treatment.
It is observed that where buffel establishment was described as "patchy" on other sale properties, Mr McManus had allowed 50% of the cost of aerial seeding. I will adopt that approach here.
I will follow Mr Brown's methodology in allowing a development period of two years for timber treatment, with development interest over half that period.
The calculation under this heading is:
725 ha fully effective timber treatment @ $35/ha $25,375
754 ha patchy buffel grass @ $50% $7.75/ha $2,922
$28,297
Interest 5.75% for 1 year $1,627
$29,924
Mr McManus also allowed for property tracks in the amount of $2,024. Although the condition of the airstrip is unclear as at the date of sale I will allow a further $500 for that facility the total calculation being as follows:
Property tracks $2,024
Airstrip $500
$2,524
Interest 5.75% for six months $73
Total $2,597
Total for timber treatment, tracks and airstrip including interest $32,521
Summary of Analysis
For the purpose of this exercise the classification of country as provided by Mr McManus is accepted.
For the reasons given I adopt an unimproved value analysis of $7.29/ha.
There is a difference of valuation opinion as to the manner in which the Special Lease should be treated in the analysis. I have accepted Mr McManus' methodology because, if the Special Lease tenure is relatively less valuable than the other lease tenures, the adoption of the sale as basic evidence of value would resolve doubt in favour of the appellants' case. This results from the apparent acceptance that sales of leasehold property provide basic evidence for valuations made pursuant to s.14 of the Act - ie on the basis that the land is taken to be granted in fee simple.
This sale is accepted then as providing reliable evidence of unimproved value.
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