Whackett v Chief Executive, Department of Lands

[1994] QLC 21

LAND COURT

BRISBANE

20TH MAY, 1994.

Re:     Appeals against determinations of unimproved value
  Shire of Albert - AV93-163(1) and 164(2)

(1) K.W. Whackett and (2) K.W. and M.R. Whackett
  v.
  Chief Executive, Department of Lands

D E C I S I O N

These two appeals were heard together.  They relate to adjoining parcels of land, one being Lot 2 on RP 47469, containing 54.8 hectares, owned by Mr K.W. Whackett, the other being Lot 2 on RP 144905, containing 51.03 hectares, owned by Mr K.W. and Mrs M.R. Whackett.  The land is located in the parish of Darlington, off Shaw's Pocket Road, Cedar Creek, about 15 kilometres south of Beenleigh.
           As at 31st March, 1992, the Department of Lands valued the subject lands, unimproved, in the amounts of $220,000 and $205,000, respectively.  The separate lots were valued on the basis of their respective potential as zoned. 
           In the Notices of Appeal, the same grounds were stated in each case -

"That the valuation is excessive as due cognizance has not been given to the disabilities of the land, its topography and sales of land in the vicinity to which it could be compared or to the productivity and general usefulness of the subject land".

The appellants' estimates of value were $100,000 in each case.

The appellants' cases were conducted by Mr F.L. Olsen, a retired valuer, who lives in the Shaw's Pocket Road locality. He dealt with the land initially as one parcel, used for the common purpose of cattle grazing. He described the history of the ownership, the 54.8 hectare parcel having been purchased by Mr Whackett in 1969 specifically for grazing use, then the contiguous 51.03 hectare lot having been purchased jointly in 1980, extending that grazing operation. Until some time subsequent to the relevant date, there had been no dwelling on either lot. The appellants live on a property nearby. The aggregation is boundary fenced, divided internally into paddocks and is serviced by a substantial set of yards, sheds and a molasses dump. Mr Olsen described the difficult access to the land and its steep topography, in his opinion 80 per cent of the total area being steep to very steep and the balance being easier slopes. He said the carrying capacity of the total area was about 70 head of mixed cattle. Details were given of Mr Whackett's primary producer recognition through an allotted State Government property number, his sales tax exemption and Taxation Office classification. In Mr Olsen's opinion, there was no doubt that the land should have been valued in terms of (the once existing) section 11(1)(vii) of the Valuation of Land Act 1944, as being exclusively used for the business of primary production. He provided details of five other local properties used, or it seems considered by the Department to be used, for grazing, where the applied valuations ranged from $921 per hectare for an adjoining 116.1 hectares of "rough mountain block fairly comparable to the subject" up to $1,998 per hectare for 61.06 hectares of "much better grazing land" with very much better access. Comparing each of the five examples individually, and after exclusion of "out of line" evidence (which would have influenced a lower value for the subject land) Mr Olsen adopted on a relativity basis an overall value of $1,100 per hectare for the subject land in aggregation. When apportioned on a direct pro-rata basis, this provided individual valuations of $60,360 and $56,240 respectively. Although Mr Olsen went in to some detail about various transactions which had taken place in the locality, none were considered of assistance in establishing a value for primary production use, as he understood was the necessary basis for the subject valuations.
           Mr Whackett gave evidence as to the development of the land, its exclusive use for grazing but its moderate quality and carrying capacity.  He confirmed the cattle numbers as being about 70 mixed head on a year-to-year basis and the varying sales of cattle depending on the breeding programme and the seasons.  He estimated the average recent gross return to have been in the order of $5,000 per annum, although the income depended on the numbers sold, the state of the market and the seasons. 
           Valuation evidence for the Department was given by Mr I.L. Hawley, registered valuer.  He had not been the original valuer, but agreed with the valuations appealed against on the basis of the highest and best use of each lot being as zoned.  A basis for the applied values had been obtained from the sales of sites of 20.01 hectares and 26.5 hectares for analysed values of $77,000 (application $75,000) and $135,000 (application $125,000).  Mr Hawley said that the potential of the subject lots for further subdivision was a matter that he took into consideration.  It seems that the original objections or the appeals against the valuations had not prompted any specific consideration of the question of the "farming" use.  Indeed there was a submission on behalf of the chief executive that the grounds of appeal were not sufficiently wide to cover argument on the basis of the alleged use for the purpose of farming.  The appellants' response was that the grounds of appeal referred directly to productivity and general usefulness of the subject land and that they had never considered the land to be used other than for grazing.  I am not persuaded by the submissions of the chief executive that the grounds of appeal do not allow consideration of the basis of valuation put forward by Mr Olsen.
           Mr Hawley was subjected to intense cross-examination as to the comparability of the sales used and the very limited inspection he had been perceived to have undertaken.  Mr Hawley's inspection of the subject land it appears, relied fairly heavily on the assistance of aerial photography.  Prior to the hearing he had not considered the question of use of the land for "farming" although his reports contained the description of the use of each parcel as being for "grazing beef cattle".  Based on the evidence he had heard in Court Mr Hawley had "difficulty" in accepting that the grazing use represented the "significant and substantial purpose" qualification as required by the legislation in force at the relevant date.  While he had not previously given specific consideration to the correct value of the land had it been found to be exclusively used for purposes of farming, he offered the opinion that a valuation of $2,000 per hectare, might better reflect the value of the individual parcels than the opinion of $1,100 per hectare put forward by Mr Olsen. 
           The question to be decided is whether the subject lands are used for the "purposes of farming".  It is the submission of the chief executive that the use of the subject land does not qualify it for the protection afforded by the legislation as the business of grazing which is conducted does not have "a significant and substantial commercial purpose or character" or alternatively is not "engaged in for the purpose of profit on a continuous or repetitive basis".  This submission was made on the evidence of Mr Whackett who suggested that the grazing income per annum would average in the vicinity of $5,000 per annum and that little real profit was possible because of the size of the herd.  I was referred by the advocate for the chief executive to the decision, handed down on 23rd December, 1993, by my learned colleague, Mr J.J. Trickett, in G.T. and B.G. Taylor v. Chief Executive, Department of Lands and the observations made by him in considering the evolution and intent of the legislation as it applied at the relevant date, under the provisions of ss.(9) and (10) of s.11 of the Valuation of Land Act. I have perused that decision which is a helpful guide to an understanding of the legislative history as it now applies to the terminology "purposes of farming".
           I now make the following observations.  The intent of providing legislation to recognise the potential rating and taxation burden to which owners of property exclusively used for the purposes of a single dwelling-house or the business of primary production, could be exposed, by the enhancing effect of potential use through urban development, is commendable.  However, market value of land with qualifying use is required to be put aside in favour of an artificially lower value related to use lesser than optimum potential.  In particular, the "purpose of the business of primary production" valuation concept, has with the sprawl and extended demand for rural-residential land peripheral to cities and towns, become in many cases so artificial as to defy acceptable valuation support.  The rating  advantages to owners of hectarage land, where the business of primary production is exclusively carried on, can be significant.  Comparable neighbouring lands with qualifying or non-qualifying use may legitimately have significantly different statutory valuations.  It is basic to human nature and proper business practice that owners of rural use orientated land will endeavour to seek the protection of the legislation.  Wide debate and argument as to the proper interpretation of "exclusively used for the purposes of the business of primary production" has resulted in numerous appeals against decisions on objections to such valuations, to the Land Court and against decisions of that Court to the Land Appeal Court.
           Eventually, as referred to by Mr Trickett, the Land Appeal Court in Crawford v. The Valuer-General (1990-91) 13 Q.L.C.R. 138, faced with the question of proper interpretation of "business" as it applied to the then existing legislation, found, inter alia, that "concentration upon the size or significance of the business is prone to lead to error".
No doubt in response to concern that the original intent of the protective legislation had been unduly widened by such interpretation of "business" as it applied to primary production, the legislation was amended, so that at the relevant date in this matter the provisions of ss. (9) and (10) of s.11 were relevant as follows:

"(9)  In making, under this subsection (except subsection (7)), the valuation of the unimproved value of land exclusively used for purposes of a single dwelling-house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made.

(10)In this paragraph -

......

......

`farming' means -

(a)the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or

(b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock;

if the business or industry represents the dominant use of the land, and -

(C)has a significant and substantial commercial purpose or character; and

(D)is engaged in for the purpose of profit on a continuous or repetitive basis."

It seems to me that the findings of the Land Appeal Court in Crawford's case are relevant in the meaning of "farming" where there is reference in paragraphs (a) and (b) to "business".
           The amending legislation does not leave it there.  While a "business" of primary production may be carried out on land, that land qualifies for the protection afforded by the legislation if the business first represents the "dominant" use of the land; then has a "significant and substantial commercial purpose or character"; and finally is engaged in "for the purpose of profit on a continuous or repetitive basis".
           There is no doubt that the intent of the amended legislation is to make more stringent the tests to be employed by those given the task of deciding whether land is exclusively used for "purposes of farming".  The legislation however, provides no panacea in that the decision-making process has been simplified.  Fewer properties will qualify through the "dominance" test alone.  The danger remains that the obvious difficulty in deciding what constitutes "a significant and substantial commercial purpose or character" could result in artificial criteria being adopted, at least in the first decision-making procedure which, fairly or otherwise, becomes the responsibility of the valuer.  The intent of the legislation may be objective, yet the determining criteria remains subjective and no doubt will not lessen the intensity of argument which may be expected as to correct interpretation of the terminology employed.
           The words "significant and substantial" are to be considered in terms of the "commercial purpose or character" of the particular business.  There can be no artificial base, for determining the scale of any particular activity, which will meet the qualification of significance and substantiality.
           It is my opinion that, provided the requirements of paragraph (d) in the meaning of "farming", are met, the level of income generated from the business should not be the only criterion adopted in deciding the question of significance and substantiality.  The income from a business may be sufficient for other considerations to be seen to be unnecessary.  Alternatively, a business would not fail to qualify on the grounds that the income did not provide self-sufficiency to its operator.  It seems to me that the question of dominance of use, where mixed use exists, will need to be decided on district or local community standards.  I see no reason why an understanding of district or local community perceptions could not also be argued as an important guide to deciding the question whether a particular business "has a significant and substantial commercial purpose or character".
           It is suggested that, for example, in a rural-residential community, dominated by residential activities, a grazing operation of the scale of the subject, would be seen within that community as being a real business, one of substance, and not insubstantial when considered in light of the size of the herd, the improvements necessary to its operation and the capital and management skills employed.
           That same operation in another geographic location could well be seen as not even a business, but merely a hobby, but then in such a locality, the legislation might also have little if any significance, as a protective benefit.
           The legislation involves a revenue gathering result, and in those cases where qualification for protection rests with the need for final decision on the interpretation of a scale of activity being "significant and substantial" then, in my opinion, the benefit of doubt should be provided to the owner of the property involved.
           In the particular circumstances of the subject matter, it is considered that:

(1)the business of grazing beef cattle is conducted on the land

(2)the business is the dominant use - being the only use

(3)the business may be regarded as being engaged in for the purpose of profit on a continuous basis.

The remaining test is whether the business has a significant and substantial purpose or character.  It is seen as being of interest that Mr Olsen, who genuinely had no doubt as to the significance and substance of the commercial purpose of Mr Whackett's grazing business, admitted candidly that while he carried 10 head of cattle on his own local property he himself "couldn't dream of asking for primary production status".  This, in my opinion, is a statement which reflects the perception of a local community standard. 
While deciding this matter was not assisted by the lack of documented evidence which might have been presented in relation to the financial trading history of the grazing operation, I have come to the conclusion that the lands subject of the valuations appealed against, are exclusively used for purposes of farming and qualify for the protection provided under s.11(9) of the Act as at the relevant date.
           As to the question of value for the purposes of farming, I am persuaded that the more reliable evidence has come from the considerations of Mr Olsen on a strict relativity basis.  This results in valuations less than those estimated by the appellants, but supported by the advice sought by them and the evidence then provided to the Court. 
           The appeals are allowed, the valuations of the chief executive set aside and the unimproved values determined in the rounded amounts as follows:
           AV93-163 - Sixty Thousand Dollars ($60,000)
           AV93-164 - Fifty Six Thousand Dollars ($56,000).

R E WENCK
  MEMBER OF THE LAND COURT