Wojtala v Chief Executive, Department of Natural Resources
[1999] QLC 32
•28 April 1999
|
BRISBANE
28 April 1999
Re: Appeals against Annual Valuations
Valuation of Land Act 1944
Shire of Esk.
(AV97-286, V98-14 and AV98-617).
John A Wojtala
v.
Chief Executive, Department of Natural Resources
(Hearing at Toogoolawah)
D E C I S I O N
These are three appeals against valuations made by the Chief Executive under the provisions of the Valuation of Land Act 1944 (“the Act”).
Mr Wojtala is the owner of land described as Lot 308 on Plan CH 31219, Parish of Walloon, County of Churchill, containing an area of 35.21 hectares. As at 1 October 1996, the Chief Executive determined the unimproved value of that land at $78,000.
Mr Wojtala objected against that valuation and, following advice that his objection had been disallowed, he appealed to the Land Court against that decision on his objection advising that his estimate of the unimproved value was $48,500 (AV97-286).
The evidence disclosed that the Chief Executive had valued that land under the provisions of section 17 of the Act as land used for purposes of farming.
Section 17(1) of the Act so far as is relevant for this case, provides that where land is used for purposes of “farming”, then any enhancement in the value of that land for any other purpose must be disregarded. Sub-section (2) of section 17 defines “farming” to mean:“(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.”
As a result of investigations made following the objection by Mr Wojtala, the Chief Executive came to the conclusion that the subject land no longer qualified for the concessional valuation under section 17 of the Act and that the land should therefore be valued at its highest and best use as rural residential land. Accordingly, the Chief Executive issued an interim valuation as at the same date of valuation, 1 October 1996, for $88,000. Mr Wojtala objected to this interim valuation, once again unsuccessfully, and following notice that his decision had been disallowed, he appealed to the Land Court against that valuation, again advising that his estimate of the unimproved value was $48,500 (V98-14).
In due course, the Chief Executive issued a valuation for the next valuation period as at 1 October 1987, again for the amount of $88,000. Once again, Mr Wojtala objected and appealed to the Land Court against that valuation (AV98-617).
The parties agreed that the three appeals should be heard together.
At the hearing of these appeals, Mr Wojtala appeared and gave evidence, while the Chief Executive was represented by Mr J O’Rourke, and valuation evidence on behalf of the Chief Executive was given by Mr EG Ridley, a registered valuer employed by the Department of Natural Resources.
There is general agreement about the physical attributes of the property. It fronts the bitumen sealed Marburg-Fernvale Road. Electricity and telephone are connected and the property has access to the Glamorganvale Rural Water Supply Scheme.
Mr Ridley described the land as being in what is generally known as “the Marburg Forest”, comprising about 17 hectares of brigalow watercourse type country associated with Black Snake Creek, which runs in a northerly direction through the western part of the property, while the balance area he described as easy sloping mixed scrub/forest type country.
In addition to water from the Glamorganvale Scheme, the land is watered by dams. It is zoned “Rural A” under the Shire of Esk Town Planning Scheme and is used for the purpose of breeding and raising horses.
Mr Wojtala’s grounds of appeals related to
· the use of the subject land for purposes of farming;
· the disabilities suffered by the subject land, particularly flooding;
· the relativity of the valuations of the subject land with those of neighbouring lands; and
· the sales used by the respondent as bases for the valuations.
Mr Wojtala explained that he purchased the property in December 1981 for the purpose of farming. It had previously been a dairy farm which had been allowed to run down and that was reflected in the improvements on the land at the time. He said that the house was average for its age, there was one dam on the property which needed desilting, and there was some farming equipment, including a tractor, ploughs, fertilizer spreaders and a plant fertilizer. Although it was purchased with the intention of breeding horses, for some time after the purchase Mr Wojtala used the property to raise pigs.
Since purchasing the property he has made extensive improvements, borrowing $40,000 from the Development Bank in 1986 for property development. He replaced part of the boundary fencing with a barbed wire fence, and all the internal fences with solid tubular steel fencing suitable for the running of horses. He also put three more dams on the property, improved some pastures for general grazing and converted some sheds to stables.
Mr Wojtala explained that his horse breeding enterprise initially started with two mares and gradually increased to 35 mares. In 1986 he purchased an imported thoroughbred stallion which was used for commercial breeding. In addition to breeding from his own mares, the stallion stood at a service fee originally of $1,250 which was later increased to $2,000.
Mr Wojtala gave some details of sales of horses from the enterprise. However, he produced no records of these transactions and no details of the income received and expenditure incurred in connection with the horse breeding enterprise. He said that there had, for short periods, been up to 70 head of horses on the property. However, he gave no details of the cost of feeding the horses.
Mr Wojtala went on to say that as the result of a paddock accident the stallion had to be put down in 1992 or 1993. Since then the enterprise experienced a severe downturn in income. In addition to the prolonged drought, the enterprise suffered financial difficulties because of unexpectedly high bad debts, particularly from clients who would not pay outstanding service fees. He said that in the last seven years the enterprise would have made a profit in only two or three years, perhaps $8,000 to $12,000, but he produced no documentary evidence to support these figures.
Mr Wojtala said that he was on the lookout for another stallion, but he did not want to take just any horse. He was looking for the right stallion. He was confident that in the future the viability of the enterprise would improve.
Mr Wojtala said that the access road could be described as fair. Although it was a sealed road it was constantly under repair.
He explained that the property also suffers from flooding after heavy rain. To reach the homesite, not only does Black Snake Creek have to be negotiated, but also a series of gullies and low-lying land. His access road suffers erosion damage after heavy rain. In addition, when the Shire Council upgraded the road it lifted the level of the road about two feet, which caused water to back up on the low-lying area of the subject land. Even though Mr Wojtala had raised the level of a bridge on his access road, the access was flooded in the floods of 1984 and 1988.
In support of his estimate of unimproved value of $48,500, Mr Wojtala referred to the sale of the property immediately to the east of the subject land. That property sold about two months prior to the date of hearing for $237,000. It has an area of 21.87 hectares and is highly improved with two houses, sheds, inground swimming pool, tennis court, fencing, yards, dams and other improvements. Mr Wojtala analysed that sale by attributing a value to each of the improvements as follows:
“When assessing unimproved value of this property, it has two very livable homes – value $130,000
60 x 40 iron shed $ 20,000
inground swimming pool $ 10,000
full size tennis court with lighting $ 10,000
fencing and yarding dam facilities $ 10,000
contours and other improvements $ 5,000
agents fees approximately $ 7,000
Total value of improvements $192,000 ”Mr Wojtala reasoned that his analysis disclosed an unimproved value of about $45,000, or about $2,060 per hectare, while the Department had valued the property at over $5,100 per hectare.
He said that the property has a northerly aspect and what he described as “a tremendous outlook with absolutely no access problems”. He considered it to be superior to the subject land. He went on to say that the vendors had used the property as a rural retreat, while the purchasers were presently using it for the stabling of horses.
In his oral evidence Mr Wojtala also mentioned the recent sale from Perrett to Peterson of a 23 hectare property for $195,000. That property adjoins Mr Ridley’s Sale No 2. Mr Wojtala said that it had major improvements, including a high-set four bedroom brick home, a shed approximately 80 x 50, plus numerous other sheds, dams, tanks, fencing and other improvements, the total value of which he estimated at about $150,000. He reasoned that would leave $45,000 for the land, which he considered was far superior to his property as it was better located.
Mr Ridley explained that he had originally valued the subject land under the provisions of section 17 of the Act as land used for purposes of farming at $2,215 per hectare, or $78,000. However, when investigating the objection by Mr Wojtala, he had not been provided with evidence which satisfied him that the property qualified for such concessional valuation. Accordingly, he had made an interim valuation of the property on the basis of its highest and best use as a rural residential property at $88,000.
In the subsequent valuation made as at 1 October 1997, he had formed the opinion that the valuation should not be changed and it issued again at $88,000.
Following the issue of the interim valuation, the appellant was advised by the respondent's Ipswich office that the appeal was invalid as it had been superseded by the interim valuation. However, at the hearing Mr O'Rourke advised that the respondent was not pursuing that point and accepted that the appeal was valid.
It is well established that if there is a valid appeal against a valuation, then the appellant has the right to pursue that appeal, notwithstanding that an interim valuation may have issued in substitution of the original valuation. (See Buchanan v. Chief Executive, Department of Natural Resources (AV97-290 and V97-472) Land Court, 31 July 1998, not reported). The original valuation of $78,000 as at 1 October 1996, was made under the provisions of section 17 of the Act, when the respondent thought it was used for purposes of “farming”. An appeal was lodged against that valuation and the appellant is entitled to pursue that appeal.
In support of his valuation of $78,000, Mr Ridley relied upon four sales, one being a resale. Mr Ridley’s Sale No 1 is situated south of the Warrego Highway, near Marburg. It fronts a bitumen road which provides good access, has electricity, telephone and school bus services, but is not connected to a rural water supply scheme. He described the land as easy to moderate slopes, originally timbered with brigalow and softwood scrub.
That property, of 48.3 hectares, with the same zoning as the subject land, sold in November 1995 for $195,000. That sale was analysed to show an unimproved value of $85,994 and the respondent applied an unimproved value of $85,000, or $1,760 per hectare, to that property as at 1 October 1996. Mr Ridley considered it to be inferior to the subject land.
Mr Ridley’s Sale No 2 adjoins Sale No1 to the east, fronting a gravel road. It has electricity and telephone, but does not have water from a rural water supply scheme. Mr Ridley described the land as comprising easy to moderate slopes, originally timbered with brigalow and softwood scrub. That property of 40.47 hectares, zoned “Rural A” sold in June 1995 for $250,000, on interest-free terms, which Mr Ridley calculated to be worth $43,389. That sale was analysed to show an unimproved value of $86,004 and at the revaluation of the Shire, a valuation of $80,000, or $1,977 per hectare, was applied to that property as at 1 October 1996.
As with Sale No 1, Mr Ridley considered it to be inferior to the subject land on a rate per hectare basis.
That property resold (Sale No 3) in May 1997 for $225,000. While that was a lower price than Sale No 2, the previous sale had been on interest-free terms. The resale analysed to show $96,410 and at the next revaluation, as at 1 October 1997, an unimproved value of $85,000 was applied to that property.
Mr Ridley’s Sale No 4 is situated to the south-east of Boonah, fronting a bitumen sealed road which provides good access. Electricity and telephone are connected, but it does not have a reticulated rural water supply scheme. Mr Ridley described that land as comprising moderate to steep slopes where soils are derived from sandstone, originally timbered with brigalow and softwood scrub, with a small area of forest in the south-east corner. The property is watered by a bore and dams and natural water in the gully is salt-affected.
That property, of 133.1 hectares, zoned “Rural A”, sold in May 1996 for $450,000. It analysed to show an unimproved value of $209,890 and as at 1 October 1996, the respondent applied an unimproved value of $185,000, or $1,390 per hectare, to that property.
Mr Wojtala thought that Sale No 2 represented a 10% drop in sale price in less than 12 months. However, he was not aware that Sale No 1 was made on interest-free terms. He rejected Sale No 4 as providing a basis of valuation as he thought it was too remote to be applicable to the subject land.
He preferred to rely on the sale from Perrett to Peterson, adjoining Sale No 2, which he felt would analyse to show an unimproved value of $45,000 and which he considered to be superior to the subject land.
Mr Ridley explained that when he had formed the opinion that the property no longer qualified for a concessional valuation under the provisions of section 17, he was required to value the land on the basis of its highest and best use as a rural residential property. Therefore, he had to look at the subject land from a different viewpoint, as it was his opinion that a prudent purchaser looking for a rural residential property would pay particular attention to attributes such as the best building site and access to that site. The subject land required crossings over Black Snake Creek and some shallow gullies. He claimed that he was well aware of the difficulty, but once the gullies and the creek were crossed, there was a suitable building site with some views on the more elevated eastern part of the property.
As the basis for his valuation as a rural residential property, Mr Ridley relied upon three sales of lightly improved land. His Sale No 1, of 11.42 hectares, zoned “Rural A”, is situated on the gravel surfaced Freeses Road, to the north-west of the subject land. Electricity, telephone and reticulated rural water are available to that land.
That property sold in April 1996, for $90,000. That sale analysed to show an unimproved value of $76,513 and at the revaluation as at 1 October 1996, the respondent applied an unimproved value of $70,000 to that property.
Mr Ridley described the land as comprising moderate to steep scrub slopes. He considered that it had similar situation and services to the subject land, but that its access was inferior. Although he was of the opinion that the building site offered much better views and was easily accessible from Freeses Road, the sale property is much smaller than the subject land and overall he considered it to be inferior.
Mr Ridley’s Sale No 2 fronts the bitumen sealed Haigslea-Malaba Road to the north-east of the subject land. Electricity and telephone services are available. However, the property does not have access to a reticulated water supply scheme.
That property, of 15.4 hectares, zoned “Rural”, sold in July 1996 for $118,000. That sale analysed to show an unimproved value of $100,330 and at the revaluation as at 1 October 1996, the respondent applied an unimproved value of $86,000 to that property.
Mr Ridley described the land as elevated easy to moderate scrub slopes, where soils are of basaltic origin, with an accessible building site. He considered that the sale property had superior situation, class of land and building site to the subject land, however it did not have access to reticulated water. Overall he considered the sale property to be slightly inferior to the subject property because it is smaller.
Mr Ridley’s Sale No 3 is situated some distance from the subject land, south of the Warrego Highway fronting the gravel surfaced Glamorganvale-Wanora Road, which provides fair access. Electricity, telephone and rural water supplies are available.
That property of 18.21 hectares, zoned “Rural A”, sold in November 1996, for $125,000. That sale analysed to show an unimproved value of $114,700 and at the revaluation as at 1 October 1997, the respondent applied an unimproved value of $103,000 to that property.
Mr Ridley described the land as moderate to steeply sloping forest country, with an easily accessible elevated building site. He considered that the sale property was much better situated and had similar services to the subject land, but that it had inferior access. It had a more elevated building site and although it was smaller, overall he considered it to be superior to the subject land, mainly because of its superior location.
Mr Ridley had concluded that there had been no change in the unimproved value of the subject land as a rural residential site between 1 October 1996 and 1 October 1997. He relied on the same three sales to support the 1997 valuation, but included a fourth sale which is situated just north of Marburg on the bitumen sealed Postman’s Track Road, which provides good access. It has electricity, telephone and town water supply services available.
That property, of 13.29 hectares, zoned “Rural A”, sold in July 1997, for $150,000. That sale analysed to show an unimproved value of $108,003 and at the revaluation as at 1 October 1997, the respondent applied an unimproved value of $107,000 to that property.
Mr Ridley described the land as easy sloping scrub-type country, with an easily accessible building site of medium elevation. He considered that the sale property had superior situation, similar services and access to the subject land, but had a more accessible building site. Despite the fact that it is smaller than the subject land, he considered the sale property to be superior.
Mr Ridley was aware of the two sales referred to by Mr Wojtala, but he had not investigated them as they were so recent. They were well after the relevant dates as the valuations under appeal were made as at October 1996 and October 1997. In any case he said that he would not have attempted to analyse those sales because they were so highly improved. He preferred to rely on sales of unimproved or lightly improved land, where the possibility of error in calculating the value of improvements was lessened.
Mr Wojtala attacked the appropriateness of Sale No 1 as a basis for the valuation of farming properties, as it comprised two separately saleable parcels of land, one of 4.47 hectares and the other of 43.827 hectares. He thought that the smaller parcel of land could be sold off at any time as it had good frontage to Ballins Road. However, Mr Ridley did not think that it affected its appropriateness as a basis for farming properties as he did not think that it had the attributes which would be sought after by a potential purchaser of rural residential land. He said that his investigations had revealed that it was purchased for the purpose of running cattle.
Mr Ridley also contended that he had made allowance for the difficulties in accessing the elevated building site on the subject land. He referred to the neighbouring 21 hectare parcel to the east which he claimed had a fairly good elevated homesite with good access, which had an unimproved value of $112,000. He said that if the subject land did not have access difficulties he would have valued it at much the same figure. He also referred to the 29 hectare property to the north owned by Paine, where access to the building site had to negotiate land subject to flooding, but not to the extent of the subject land. He had valued that property at $95,000.
These appeals have arisen as a result of three valuations by the respondent. Prior to the valuation carried out as at 1 October 1996, the subject land had been valued at $48,500 under the provisions of section 17 of the Act, as land used for purposes of “farming”. When Mr Ridley made the valuation as at 1 October 1996, he came to the conclusion that the sales evidence indicated that an increase of some 60% should be made in such valuations. Accordingly, he valued the subject land at $78,000.
As a result of an objection lodged by Mr Wojtala, Mr Ridley formed the opinion that the property no longer qualified for valuation as land used for purposes of “farming”, as he felt that it did not fulfil the requirements of section 17(2)(c), that the enterprise conducted on that land have a significant and substantial commercial purpose or character. Therefore, acting under the provisions of the Act, the respondent issued an interim valuation for $88,000, based on the highest and best use of the land as a rural residential property.
When next valuing the area as at 1 October 1997, Mr Ridley came to the conclusion that there had been no movement in the unimproved value of the subject land as a rural residential property. Accordingly, he again valued the land at $88,000.
The major issues in these cases relate to:· the level of value applied to the subject land as “farming” land; and
· whether the land qualifies for the concessional valuation under section 17; and
· the appropriateness of the sales used as the basis of valuation in each case.
Mr Wojtala attacked the sales used by Mr Ridley in order to arrive at his farming value. Sale No 1 comprised two parcels which could be sold separately and therefore Mr Wojtala thought that the sale was inappropriate as a basis for the valuation of “farming” land. However, no such criticism was levelled at Sales 2 and 3 which showed similar values. In order to check if those sales near Marburg were at prices which were influenced by potential other than for “farming”, Mr Ridley has gone further afield and looked at a “farming” sale in the Boonah area. Mr Wojtala’s only criticism of that procedure was that the sale was too far removed from the subject land.
However, in APM Forests v. The Valuer-General (1975) 2 QLCR 30, the then President of the Land Court, Mr WF Smith, discussed the difficulty of establishing that sales in a closely-settled area were free of any enhancement in value for potential for some purpose other than primary production. He suggested that it may be necessary for a valuer to look further afield than would previously have been regarded as acceptable, for sales in a farming locality. In this case, Mr Ridley investigated sales close to the township of Marburg. He then compared them with a farming sale near Boonah and come to the conclusion that the sales near Marburg were not out of line with the sale at Boonah, making allowance for their situation and proximity to services. I can see nothing inappropriate in that procedure.
Despite attacking Mr Ridley’s basis of valuation, Mr Wojtala has not produced any sales of genuine farming land. He has referred to some sales in the vicinity of his property and of Sale No 2, but he has not investigated sales further afield. Although his attack may cast some doubt on the appropriateness of Sale No 1, it does not appear to me to be out of line with the Sales 2 and 3, and those sales do not appear to be out of line with the Sale No 4.
In the circumstances, I am of the opinion that the appellant has not demonstrated that Mr Ridley’s valuation of $78,000 as land used for purposes of “farming”, is incorrect.
As to whether or not the land qualifies for valuation under section 17 of the Act as land used for purposes of “farming”, the respondent concedes that the land is used for the business or industry of the rearing of livestock, and that the rearing of livestock represents the dominant use of the land, and that the rearing of livestock is engaged in for the purpose of profit on a continuous or repetitive basis. The only issue is whether that business or industry has a significant and substantial commercial purpose or character as required by section 17(2)(c).
That matter has been considered by the Land Appeal Court on a number of occasions. In Chief Executive, Department of Lands v. Whackett (1995) 15 QLCR 311, the case involved valuations of two adjacent parcels of land in the Cedar Creek area near Beenleigh which had areas of 54.8 hectares and 51.03 hectares, which were used together for grazing beef cattle. The Whackett’s land consisted of moderate to steeply sloping forest/scrub country which carried about 70 head of mixed cattle. In the relevant years, approximately 25 head of cattle were sold each year, with an estimated gross return in the order of $5,000 per annum. Most of the income from the sale of cattle was spent on machinery and other expenses connected with the enterprise. In Mr Whackett’s opinion, it would be necessary to run more cattle to make any profit, but 70 head was the maximum carrying capacity. On occasions it had been necessary to buy in feed.
The majority of the Land Appeal Court proposed the following test at page 328:
“It is difficult and unnecessary, to state precise and compendious meaning of the expression ‘significant and substantial commercial purpose’ and ‘significant and substantial commercial character’. Bearing in mind the various connotations of the words ‘significant’ and ‘substantial’ it is perhaps sufficient for present purposes to say that for section 17(1) of the Act to apply to the subject land there must be evidence that:
(a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or
(b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit. ”
At page 330, the majority found that neither the objective character, nor the subjective purpose of the grazing enterprise could be said to be significantly and substantially commercial. However, they expressly stated that they arrived at that conclusion on the evidence in that case and that there was insufficient evidence to find in favour of the landowners, as no trading figures of any kind were presented. It continued at page 330:
“ We emphasise, however, that we arrive at this conclusion on the facts presented in this case. There is insufficient evidence to find in favour of the owners. No books of account or trading figures of any kind were presented. Before us both parties relied on the verbal evidence of Mr Whackett in the Court below that these lands carry 70 head of mixed cattle on a year to year basis, that for the three years to 1992 they sold approximately 25 head of cattle per year and that he estimated their average recent gross return at $5,000 per annum. He also stated that the maximum carrying capacity is 70 head of cattle and it would be necessary to run more cattle to make any profit.
No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming.
We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant or substantial commercial purpose or character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts’ business activities are presented in more detail, the matter could again be considered, with quite different results. ”
The matter was also considered by the Land Appeal Court in the case of CH and MC Peck v. Chief Executive, Department of Natural Resources, 1 August 1997, unreported. In that case the Pecks had a property of just over four hectares upon which they were conducting an intensive orchard comprising macadamia, lychee and other tree types, which they purchased in 1986 and from which they expected to make quite extensive returns. However, despite their best efforts, such returns were not forthcoming and in each of the financial years from 1987 to 1994, the farming operations ran at a loss.
In its reasons for judgment, the Land Appeal Court said at page 7:“ The third condition concerns one purely objective matter, the commercial character of the business or industry. The commercial purpose of the business or industry is a matter which requires consideration of a subjective matter, again the genuineness of the purpose, but the use of the adjectives ‘significant’ and ‘substantial’ to qualify the expression ‘commercial purpose’ in our view calls for consideration of objective criteria when assessing that purpose. The use of both adjectives leads us to the conclusion, but, of the two, ‘significant’ is the more important in leading to that result.
So whereas paragraph (d) makes the genuineness of the purpose alone a condition and so concerns an exclusively subjective matter, paragraph (c) requires assessment of that purpose by reference to objective facts to determine if it can properly be described as significant and substantial. In making such an assessment it is permissible – and necessary in our view in a case like this in which a business has been established for some time – for consideration to be given to the results achieved by the business after a reasonable interval has elapsed following its establishment. Full allowance must, of course, be made for such things as the uncertainties of the weather, the vagaries of markets, and fluctuations in exchange rates. Having given those factors proper weight, one may conclude that an owner, though genuinely pursuing profits, is engaged in such an unpromising enterprise that it could not be said, in accordance with any ordinary or reasonable standard, to have a significant and substantial commercial purpose. Such a conclusion was clearly open in this case, as was a conclusion that the appellants’ business lacked the requisite significant and substantial commercial character. Where a business or industry is in the process of being established objective criteria other than results, such as a credible business plan, will of course be appropriate. ”
In my opinion, these two authorities are relevant in this case. In Whackett’s case, the members of the Court were clearly of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant and substantial commercial purpose or character, but they were not satisfied on the evidence that such was the case. They expressly left open the possibility that if such evidence was forthcoming the appellants may have succeeded.
In this case, there is evidence that the property has run up to 70 head of horses and that good prices have been received from the progeny of the stallion and the mares. There is also evidence that substantial returns from service fees could have been made from the stallion. Some evidence was given of the returns received, and the large proportion of bad debts, but there was no evidence of the costs of running the property.
Peck’s case makes it quite clear that gross returns are not the only thing to be considered. The cost of producing those returns must also be taken into account to determine whether the enterprise has made a profit. In this case, none of those details have been produced. There is the oral evidence from Mr Wojtala that he would have made a profit from the property in only two or three of the last seven years and no profit at all in the last two or three. However, in order to prove that the enterprise is significantly and substantially commercial, details of income and expenditure must be produced. Having regard to the tests propounded by the authorities, on the evidence before me I cannot conclude that the horse-rearing conducted on the subject land has a significant and substantial commercial purpose or character.
Mr Wojtala relied heavily on the fact that he had spent substantial amounts of money providing the infrastructure for his horse rearing enterprise. However, the evidence indicates that the enterprise declined sharply after the loss of the stallion. He is waiting to purchase another stallion, but it must be the “right stallion”. His position was summed up in his own words when he was asked by Mr O’Rourke why he persisted with the enterprise: “Because I have such a financial involvement in it. I have outlaid quite an amount of money on the idea that I would have significant profits at some stage.”
However, it is clear that since the loss of the stallion there has been little or no profit and that position is unlikely to improve until a replacement is purchased. Therefore, Mr Wojtala has not demonstrated to me that the property qualifies for valuation as land used for purposes of “farming” as defined by section 17(2) of the Act.
The other two issues can be dealt with briefly. I am satisfied on the evidence that Mr Ridley was well aware of the disabilities suffered by the subject land, particularly that of access across the creek and gullies to the homesite. The comparison of the values applied to the properties to the north and the east with those applied to the subject land satisfy me that he has made allowance for those disabilities.
I turn now to the appropriateness of the sales which Mr Ridley used to value the subject land as a rural residential property. It is well established that sales of unimproved or lightly improved land provide the best basis of valuation (see Grahn v. The Valuer-General (1992-93) 14 QLCR 327).
Mr Wojtala attempted an analysis of the sale of the highly improved property to the east of the subject land. However, he provided no details of his reasoning in undertaking that analysis and I am not in a position to know how he valued each of the improvements. He did not indicate if he did so by finding the added value of those improvements as required by the Act, or if he has valued the improvements by some other method. For example, I would question his valuing the two houses on the property at $130,000. I would have thought that a hypothetical prudent purchaser of a property of only about 20 hectares would have substantially discounted the added value of the second house. I also have doubts as to how much added value a prudent purchaser would have attributed to the swimming pool and tennis court. Such a purchaser would not have allowed for agents’ fees.
The same comments apply to Mr Wojtala’s analysis of the sale of the property from Perrett to Peterson, in which he attributed the amount of $150,000 to the improvements. I have no means of knowing how he valued each of the improvements on that property, or if he did so on an added value basis. Even if he had adopted the correct approach to the valuation of the improvements on those sales, there is the difficulty of analysing a highly improved sale to unimproved value. The most appropriate method of valuation is to use sales of unimproved or lightly improved land. This is what Mr Ridley has endeavoured to do.
I should add that in his written statements, Mr Wojtala referred to various other matters, some of which were the result of without prejudice discussions. He also appended other material, including a departmental discussion paper. In arriving at my decisions in these matters, I placed no weight on those matters or that material.
While Mr Wojtala has been highly critical of Mr Ridley’s valuations, he has not been able to provide any cogent evidence to demonstrate that those valuations are incorrect. The provisions of section 33 of the Act deem the respondent’s valuation to be correct unless proved otherwise. The Act also places the burden of proof upon the appellant (section 56(3)). In Brisbane City Council v. The Valuer-General (1978) 140 CLR 41, the High Court of Australia considered the statutory presumption of correctness. The High Court held that that presumption can be rebutted if the appellant can prove that the valuing authority acted upon a wrong principle, or made a serious error of fact, or made the valuation by a fundamentally erroneous method.
In these cases, despite Mr Wojtala having vigorously attacked many of Mr Ridley’s assumptions, he has not demonstrated that Mr Ridley has acted upon a wrong principle, made a serious error of fact, or made the valuations by an erroneous method. Therefore, the appeals must fail.
Accordingly, all three appeals are dismissed and the valuations of the Chief Executive are affirmed.
(JJ Trickett)
President of the Land Court
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