Webb v Minister for Natural Resources and Water
[2007] QLC 122
•5 December 2007
LAND COURT OF QUEENSLAND
CITATION:Webb v Minister for Natural Resources and Water [2007] QLC 0122
PARTIES:Rhett Lewis Webb and Susan Jane Webb
(appellants)
v
Minister for Natural Resources and Water
(respondent)
FILE NO:LA2006/0785
DIVISION:Land Court of Queensland – general division
PROCEEDING: An appeal against a review decision by the Minister regarding the purchase price for conversion of tenure under the Land Act 1994
DELIVERED ON: 5 December 2007
DELIVERED AT: Brisbane
HEARD AT:Blackall
MEMBER:Mr JJ Trickett, President
ORDERS: 1. The appeal is allowed.
2. The Minister’s review decision is set aside.
3. The purchase price for the purposes of conversion of tenure of Lot 3 on Plan TB74:GHPL0/218821, Parish of Gillespie, is determined at Four Hundred and Sixty Thousand Dollars ($460,000).
CATCHWORDS: Valuation – unimproved value for conversion of tenure – purchase price of grazing land – method of valuation – principles to be applied – analysis of improved sale – apportionment of analysed value – description of country – relativity with purchase price of other land – allowance for unmade access – Land Act 1994, ss170 and 434
APPEARANCES: Mr RL Webb, for the appellants
Mr W Isdale of Counsel, Crown Law, for the respondent
This an appeal by landowners in the Blackall district against an internal review decision upholding the decision of the Minister for Natural Resources and Water (the Minister) as to the purchase price of land for conversion of tenure purposes.
Background
Mr and Mrs Webb (the Webbs) are the owners of Grazing Homestead Perpetual Lease 218821, being Lot 3 on Plan TB 74, Parish of Gillespie, with an area of 3,253.7737ha, situated south of Blackall, known as “New Farm”. They also own other grazing properties in the area, including a freehold property known as “Pentwyn”, which is one property removed from “New Farm”, but not adjoining.
The Webbs acquired “New Farm” in somewhat unusual circumstances. On 16 July 2002, together with EC and RM Scholes (the Scholes), the Webbs purchased a 10,376.86ha leasehold property known as “Acacia Downs”, for $3,205,328. “Acacia Downs” comprised four separate parcels, two GHPLs separated by a property known as “Lighthouse” owned by the Scholes, the GHPL known as “New Farm”, situated some distance to the south near “Pentwyn”, owned by the Webbs. There were also two smaller parcels situated on the outskirts of Blackall.
It was common ground that the Scholes and the Webbs purchased “Acacia Downs” in conjunction, with the understanding that “New Farm” would be transferred to the Webbs, while the Scholes would retain the balance of “Acacia Downs”. It seems that the apportionment of the transfer was at the rate per hectare paid for the whole property ($308.89/ha), rather than on the basis of the quality of the country or the improvements thereon. Most of the structural improvements were on the parcels that passed to the Scholes. There is evidence that the only structural improvements on “New Farm” were a cottage in poor condition, an old shearing shed and a set of cattle yards.
In agreeing to the transfers and subdivision of “Acacia Downs”, the Department of Natural Resources and Water required the Webbs to enter into a covenant tying the new lease over “New Farm” and Freehold Lot 6 of “Pentwyn”, in terms of s.373A(3)(b) of the Land Act 1994 and s.97A(3) of the Land Title Act 1994. Those provisions ensure that non-freehold land is transferred to the same person as the freehold land that is subject of the covenant.
In this case there is no dispute that this covenant acts as an “area tie”, endorsed on both titles so that neither parcel can be sold independently of the other, except to a local landowner for “farm build-up” purposes.
On 3 March 2004, the Webbs made application to the Minister for conversion of the lease of “New Farm” to freehold (Exhibit 6). They were dissatisfied with the Minister’s decision as to the purchase price and sought an internal review of that decision under s.424 of the Land Act. On 10 October 2006, the Webbs were advised that an internal review had been completed and the Minister’s original decision had been confirmed. It is from that review decision that the Webbs have appealed to this Court.
The relevant legislation
The Webbs applied to convert their perpetual lease to freehold land under s.166(1) of the Land Act. Under s.170 of that Act, the Minister decides the purchase price for the conversion of a lease to a deed of grant. The purchase price is to be the unimproved value of the land being offered as if it were in fee simple. The unimproved value of the land is calculated at the day the Minister receives the conversion application.
The meaning of “unimproved value” is contained in s.434:
“(1) In this Act, the unimproved value of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion.
(2) …
(3) To remove any doubt, it is declared that the Valuation of Land Act 1944 does not apply to the meaning of unimproved value in this section.
(4) In this section –
paid to the State does not include rent paid to the State.
unimproved state includes, if the value of improvements and development work to the land performed by the State had not been paid to the State, the improvements and development work finished before the lease started or the deed of grant was issued.”
There is a right to appeal against the Minister’s decision as to the purchase price: s.170(2). Every appeal against a decision must be, in the first instance, by way of an application for internal review: s.422. After reviewing the original decision, the Minister must make a further decision (the review decision) to either confirm the original decision, amend the original decision, or substitute a new decision: s.426(1). A person who is dissatisfied with the review decision may appeal to the Land Court against the decision: s.427.
Under s.429, the Court has the same powers as the decision maker (s.429(1)), the appeal is by way of rehearing (s.429(2)) and the Court may confirm the review decision, or set aside the review decision and substitute another decision, or set aside the review decision and return the issue to the Minister with directions that the Court considers appropriate (s.429(3)).
The effect of s.429 is that the appeal is dealt with by way of rehearing in the strict sense, with the Court hearing evidence and not being confined to the evidence considered by the original decision maker.
The Minister’s decision as to purchase price
In this case, evidence for the respondent was given by registered valuer, Mr PJ Haydon, who assessed the unimproved value of the land in accordance with the requirements of the Land Act as at 3 March 2004, at $480,000, or $147.50/ha. In arriving at that figure, Mr Haydon analysed the sale of “Acacia Downs” to the Scholes and Webbs, reasoning that although the sale occurred on the 16 July 2002 at a purchase price of $309/ha, which he considered to be “top value”, that level of value being supported by other sales in the area at the relevant date of conversion. It was his opinion that the sale of “Acacia Downs” was the best guide to value at the relevant time.
As I understand Mr Haydon’s evidence, because the sale was to “two sets of adjoining owners”, the rising market between the date of sale and the date of the conversion application made it unnecessary for him to make an allowance for any increment in value because of the adjacency factor. Mr Haydon analysed the sale to show $1,590,617, or $153.29/ha. He then had regard to the differences in quality of the country, carrying capacity and situation of “New Farm”, compared with the attributes of those parts of “Acacia Downs” retained by the Scholes family. He concluded that the value of $137.50/ha was the appropriate unimproved value to apply to “New Farm” at the relevant date.
The case for the appellants
The Webbs did not challenge the use of the “Acacia Downs” sale as a basis for comparison, nor did they challenge Mr Haydon’s analysis of that sale. However, they challenged his apportionment of the sale between “New Farm” and the remainder of “Acacia Downs”. Their relevant grounds of appeal read as follows:
“3. The Department has failed to correctly relate the subject lands in comparison with the sale of ‘Acacia Downs’ used in the conversion process to support the unimproved value of the subject lands.
2. The carrying capacity placed on the subject lands is incorrect and out of line with the estimates of other senior valuers of the Department. Documentary proof is available.
3. As a consequence of 4. above, the sheep area value or the beast area value placed on the subject lands is completely out of line and excessive.
4. The issue of size has not been correctly taken into account.
5. The issue of land access has not been addressed where a previous allowance was made by the Department.
6. All facts have not been taken into account in arriving at the unimproved value.”
Neither of the Webbs gave evidence. Evidence on their behalf was given their agent, Mr A Boyd, who also submitted a written statement. Mr Boyd, who is not a valuer, was permitted to give limited opinion evidence as an expert witness, because of his knowledge of the Blackall area and the values that had been applied by the Department to various properties over a period of some 40 years. However, Mr Boyd could not be categorised as an independent expert witness, because of his agency and the fact that his report is clearly argumentative and selective in favour of his clients. I have kept that in mind in dealing with Mr Boyd’s evidence.
Mr Boyd did not challenge Mr Haydon’s analysis of the “Acacia Downs” sale. Indeed, as he is not a valuer, it would have been inappropriate for him to do so as it is beyond his expertise. Instead, based on his knowledge of the land classifications, carrying capacities and various other attributes of the apportioned areas, Mr Boyd was of the opinion that Mr Haydon had erred.
The basis for that opinion was largely because at or about the same time that the Webbs had applied to freehold “New Farm”, the Scholes had also applied to freehold the balance of “Acacia Downs”. It is common ground that the Minister’s decision of the purchase price offered to the Scholes was $130/ha. However, Mr Haydon gave evidence that the area which was freeholded by the Scholes was not simply the remaining areas of the “Acacia Downs” sale, but included the southern part of their property known as “Lighthouse”. That complicated the comparisons between the two areas, as it was not simply the apportionment of the sale of “Acacia Downs”.
The principal issue between the parties was in the apportionment of the various types of country of the area freeholded by the Scholes and those of “New Farm”. In Mr Boyd’s written statement, his classifications were based largely on previous negotiations with departmental valuers relating to valuations under the Valuation of Land Act. However, the Webbs had measured the various land categories shown on the Department’s Regional Ecosystem mapping by means of a computer system called “Farmkeeper”. Those classifications were adopted by Mr Boyd:
607.5ha predominantly boree downs, with some gidyea and brigalow;
1460.25ha non-remnant pulled scrub, part of which is heavily suckered;
1186ha remnant scrub, which cannot be developed.
They calculated the area of remnant scrub by measuring two Regional Ecosystems. A summary A summary of those calculations appears in Exhibit 5:
4.9.11 Remnant of concern dominant vegetation = 668.04 hectares
4.9.7/4.9.11 Remnant of concern sub-dominant vegetation =518.12 hectares
Our estimate of 1,186 hectares of remnant scrub which cannot be cleared on “New Farm”.
On the other hand, Mr Haydon gave evidence that he measured the types of country from various sources, including the Regional Ecosystem mapping, and satellite imagery. Mr Haydon’s classification of “New Farm” is as follows:
“1,253.774 hectares (39%) shaded downs with boree and gidyea, having a mixture of Mitchell and buffel grasses.
1,500 hectares (46%) gidyea scrub. Well established to buffel grass. Non-remnant and timber treatment able to be maintained.
500 hectares (15%) remanent gidyea scrub. Not able to be developed. About 165 hectares of this classification is thick gidyea of limited grazing value. Fair buffel established under tree canopy in respect to balance area.”
Mr Haydon’s assessment of carrying capacity is 1 beast to 9ha, or 361 head, on a mixed herd basis.
Mr Boyd’s assessment of carrying capacity was also based on his historical records, for sheep rather than for cattle. From those records, Mr Boyd concluded that the carrying capacity of “New Farm” was 1 sheep to 1.4ha. That was in contrast with his assessment of the carrying capacity of the balance of “Acacia Downs” at 1 sheep to 1.43ha. Mr Boyd concluded from those figures, and by comparison with the Minister’s offer of $130/ha for the “Acacia Downs” freeholding, that the unimproved value of “New Farm” should be determined at $133/ha.
The access argument
In his written report (Exhibit 7), Mr Haydon contends that “New Farm” is situated about 59km south east of Blackall, with about 35km of bitumen sealed road and 14km of formed earth road, but the last 10km of dedicated road is not made. He explains that the current access is through adjoining land with the agreement of the owner.
In his written statement (Exhibit 2), Mr Boyd contends that the property is situated 65km from Blackall, including 22km of heavy black soil road, with three crossings of Macfarlane Creek and one crossing of Duck Creek. He contends that in wet weather access is impossible.
However, they are talking about different means of access. It seems that the present access to “New Farm” is via the bitumen sealed Landsborough Highway and then by black soil roads, the last part of which is a private road through the adjoining property “Effra” by an arrangement with the owners of that property. Mr Boyd was referring to that access, while Mr Haydon was referring to access via the bitumen sealed Ravensbourne Road, then a formed gravel road to the south-east corner of “Effra”. The remaining 6.5km along the southern boundary of “Effra” is the gazetted road to “New Farm”, but is unmade. Under cross-examination by Mr Webb, Mr Haydon conceded that there was somewhat less than 35km of bitumen sealed carriageway on the Ravensbourne Road.
The Webbs contend that an allowance should be made in the valuation of “New Farm” for the access difficulties. On their behalf, Mr Boyd contends that in keeping with the Department’s practice in assessing unimproved values under the Valuation of Land Act, an allowance for access should be made. By comparison with the Webbs’ other property “Williwin”, Mr Boyd seems to be contending for a 5% allowance for access, together with a further 5% allowance for location.
Mr Haydon explained that he had made an allowance of $8,000 for the construction of a graded track along the gazetted road. He reasoned that because of the s.737A covenant, “New Farm” would always be an additional area to another property and would not require the construction of anything more than an access track for stock management purposes. However, Mr Webb put it to him that there was a bore drain as well as a creek to be negotiated. Mr Haydon could not deny that a bore drain crossing would be necessary, but he did not think that the creek presented much difficulty. Mr Webb submitted that Mr Haydon’s allowance of $8,000 was totally inadequate, because even for management purposes, the access road would have to be sufficient to transport stock in and out of the property.
The issues
Mr Boyd contends there are five issues in this case. The first issue relates to the differences in the areas of the country types as measured by Mr Haydon and the Webbs. Mr Boyd originally relied on the various classifications of country by other valuers of the Department. However, there was no evidence of how those classifications were arrived at and where they depart from the classifications assessed by Mr Haydon, they are irrelevant.
According to Mr Boyd, the areas relied on by the Webbs were measured from the Regional Ecosystem maps and the various regional ecosystem polygons marked on those maps. I do not doubt the accuracy of the Webbs’ measurements, but I am concerned that the numbers indicating the various regional ecosystems do no more than show a particular country type. They do not indicate the density of the vegetation and in some instances represent two types of regional ecosystems, with the proportions shown thereunder. For example, the polygon partly on “New Farm” designated 4.9.7/4.9.11 with 90/10 below it, indicates what he calls 90% shaded downs and 10% gidyea, but with no indication of the density of the vegetation.
Therefore, for the purposes of this case, I prefer the classifications made by Mr Haydon derived from his inspection and satellite imagery. His measurements of the various areas are quite transparent.
The second issue raised by Mr Boyd relates to the difference between the classification by Mr Haydon as “downs” and what Mr Boyd calls “boree downs with gidyea/brigalow”. Mr Boyd produced a number of photographs that were taken by Mr Webb in his presence and which he explained identified the types of country. He contends that the boree type downs grows little or no Mitchell grass and could not be compared with the heavy black soil Mitchell grass downs country common in the Blackall district. On the other hand, Mr Haydon classified those areas as “downs”, because the clumps of boree were patchy and there was Mitchell grass throughout. He explained that in the gidyea Regional Ecosystem 4.7.11, there are Mitchell grass patches. It is not all thick scrub. Mr Haydon has inspected many properties in the Blackall district and, although I acknowledge Mr Boyd’s familiarity with the area generally, I do not think that he has the detailed knowledge of Mr Haydon.
The third issue raised by Mr Boyd relates to the differences in carrying capacity of “New Farm” and “Acacia Downs”. Once again, Mr Boyd’s estimate of carrying capacities was based on his historical record of the opinions of other departmental valuers. Those valuers were not called to give evidence and where there is disagreement, I prefer the carrying capacities assessed by Mr Haydon. A difficulty arose in that Mr Boyd assessed the carrying capacities on a sheep basis, while Mr Haydon assessed his carrying capacities on a cattle basis. However, they both seem to agree that the conversion rate is 1 beast to 7 sheep.
The fourth issue raised by Mr Boyd relates to the lack of access to “New Farm” and what he sees as the inadequate allowance made when compared with “Acacia Downs”, which is on a bitumen road. His sixth issue relates to the lack of access to, and the severance of “New Farm” from, its covenant-tied Lot 6 of “Pentwyn”. However, the severance issue, although raised in the Mr Boyd’s statement in relation to size, was not pursued during the hearing. I will return to the issue of lack of access.
Conclusion
It is common ground that for the purposes of conversion of tenure, the value of “New Farm” should be based on the sale of “Acacia Downs”. Indeed, Mr Boyd accepts Mr Haydon’s analysis of the sale. It is the apportionment which he challenges. However, he produced no cogent evidence to demonstrate that Mr Haydon’s apportionment is incorrect.
The only issue upon which the Webbs have succeeded is in relation to the concessions made by Mr Haydon concerning the access. Mr Haydon concedes that there was less bitumen on the Ravensbourne Road than he originally thought. However, in my view, that makes no difference to the final assessment.
The other concession by Mr Haydon is in relation to the unmade gazetted road. Mr Haydon allowed $8,000 for the cost of a grading a track which, he thought, would provide access for the purposes of management and maintenance of what he regarded as an additional area to “Pentwyn”. Under cross-examination he conceded that more than a single grader blade across the track would be needed. Furthermore, there is evidence of a creek to be negotiated and a bore drain crossing would be required. It seems to me that Mr Haydon’s allowance of $8,000 is insufficient in those circumstances.
However, I was not provided with evidence as to the cost of dozing a road, bore drain crossing or creek crossing to provide sufficient access to allow stock to be moved to and from “New Farm”. Mr Haydon was of the opinion that a prudent purchaser would make some allowance in the purchase price for the possibility of having to provide access to “New Farm” if the arrangement with the neighbour was terminated in the future.
However, in my view a prudent purchaser would realise that such access arrangements are transitory and can be terminated at the whim of the adjoining owner. Therefore, it would be prudent for such a purchaser to assume that access via the gazetted road could be required sooner rather than later. In my view, a hypothetical prudent purchaser would adjust the purchase price by more than $8,000 for that probability. However, I have no evidence of the cost of providing such access, so any allowance I make must be arbitrary. After considering the matter, I have come to the conclusion that an additional allowance of $20,000 in these circumstances would not be unreasonable. This would bring the purchase price to $460,000.
Order
1.The appeal is allowed.
2.The Minister’s review decision is set aside.
3.The purchase price for the purposes of conversion of tenure of Lot 3 on Plan TB74:GHPL0/218821, Parish of Gillespie, is determined at Four Hundred and Sixty Thousand Dollars ($460,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
0
0
0