Woods v Department of Natural Resources and Mines
[2004] QLC 5
•19 February 2004
LAND COURT OF QUEENSLAND
CITATION: Woods v Department of Natural Resources and Mines [2004] QLC 0005 PARTIES: Francis James Woods
(applicant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2001/0468
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under Valuation of Land Act 1944 DELIVERED ON: 19 February 2004 DELIVERED AT: Brisbane HEARD AT: Caboolture MEMBER Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value as determined by the Chief Executive in the sum of Three Hundred and Seventy-Five Thousand Dollars ($375,000) is affirmed.
CATCHWORDS: Statutory valuation – Valuation of Land Act 1944 – Section 17 farming – Category of farming – Highest and best use for farming APPEARANCES: Mr F Woods for the appellant
Mr G Smith for the respondent
Background:
This matter relates to land at Maleny-Stanley River Road, Kilcoy, and described as SGP 95/92, Part of Lot 572 on FTY 1521, Lot 138 on C 31916, and Lot 2 on Plan SP 118010, Parish of Durundur; and Lot 255 on SP 118010 and Lot 116 on MCH 1225, Parish of Canondale. The subject land has an area of 165.9476 hectares, being 157.6476 of freehold land and 8.3 hectares of Stock Grazing Permit. The land is located about 25 kilometres north of Woodford. Access is via the bitumen sealed Maleny-Stanley River Road, and Kilcoy-Beerwah Road and D’Aguilar Highway. There is also steeper bitumen access via the Gap and Bellthorpe Roads. The subject land is known as “Fort Lodge and Alan View”, and has good access for large cattle transports.
The subject land is zoned as Rural under the Caboolture Shire Planning Scheme of 12 March 1988, and is also designated as Rural, except for a small area of State Forest in the south-east corner, under the Strategic Plan of 17 December 1993. That zoning was effective at the date of valuation of 1 October 2000. The key issues are the highest and best use of the land, comparison of sales, the nature of the land and the method of valuation.
On 26 February 2001 the Chief Executive issued a valuation of the subject land at $445,000. Following an objection, and a further inspection of the subject land, the Chief Executive amended that figure to $430,000 on 1 July 2001. Following a decision of this Court in respect of comparable increases in valuations in the Kilcoy Shire in Wild & Ors v Chief Executive, Department of Natural Resources and Mines (AV2001/0605 and Ors), 27 August 2002, unreported, the Chief Executive revised the unimproved values of all lands in that area. On 15 January 2003 under s.68 of the Act the unimproved value of the subject land was reduced from $430,000 to $375,000, which is the value now appealed against. The appellant argues for an unimproved value of $298,000, which reflects the same level as the previous valuation at 1 October 1996.
Francis James Woods represented himself, also calling evidence from his son Francis James Woods junior. Mr G Smith, Senior Legal Officer appeared for the respondent, calling evidence from Damien Peter Jones, the departmental registered valuer responsible for determining the valuation.
The Nature of the Land –
There is general agreement about the nature of the subject land which is agreed to be one of the best properties in the district. Mr Woods does not disagree with Mr Jones’ assessment of the land classifications, and it is noted that the land lies in a good rainfall belt (about 100 inches or 2.5 metres annually). The land is generally on top of a plateau, and comprises 110 hectares (66%) of fertile red clay loam soils and vine scrub, with mostly easy to moderate slopes; 24.5 hectares (15%) of moderate to steeper red clay loam soils and vine scrub; 4.35 hectares (3%) of steeper very rocky shallow red clay loam soil; 2.8 hectares (2%) of steep generally brown clay loams; 16 hectares (9%) of rocky rainforest escarpment; and 8.3% (5%) of stock grazing permit area.
The carrying capacity varies from one beast per 0.8 hectares, down to 1 to 3 beasts per hectare on the steeper lands. The 16 hectares of escarpment is seen to have no carrying capacity. Mr Jones also makes allowances for surface rock exposure areas near the homestead. Mr Woods advises that subsequent to the date of valuation there had been major drought conditions on the land, whereas the subject land had been formerly serviced by gullies and creeks, two wells, two good sized dams, and twelve small dams. As a result of water divining operations there has now been located an underground spring in early 2003. Mr Woods concedes that while the land continues to be used for dairying purposes, it has the potential to be used for beef grazing purposes.
The Use of the Land –
In explaining his operations upon the land, Mr Woods advises that he has continuously farmed the land for most of his 78 years in their locality. During that period the subject land has been used generally for dairying purposes, often in conjunction with two other farms in “Booroobin” and “Wutha”. Prior to the deregulation of the dairying industry in Australia, those three properties had been share-farmed, providing a sound income for all participants. However following deregulation, the three properties now are operated by Mr Woods junior with major upgrading of the milking bales and storage vats and plants becoming necessary. A new herring bone milking system has been installed.
Mr Woods confirms that the subject land is used to milk about 180 cows, and also about 111 calves. The “mountain view” land at Maleny and also the “Wutha” land are used for running dry cows and replacement heifers. The “Alan View” block on the western side of the subject land (Lot 116) was formerly used by Mr Woods’ brother for fattening cattle, but is now used with the balance of the subject land for dairying purposes.
Mr Woods argues that the highest and best use of the subject land remains, in his opinion, for dairying purposes. However he concedes that the current decline in milk prices following deregulation make dairying a less profitable business. Mr Jones believes that beef grazing is now the best use of the lands, noting that the area is currently going through a period of change at present. Mr Jones speculates that Mr Woods personal opinion is perhaps influenced by his recent major capital expenditure on dairy equipment and facilities. Mr Woods also speculates that he believes that there may be future changes in government policy about regulation of the industry which he speculates are likely to support his faith in future dairying operations. Mr Woods also notes that successful beef cattle operation is dependent upon large holdings, which are not available in that locality.
The Method of Valuation –
Mr Woods junior seeks comparisons with the sale of an adjoining property to the south-west. That land is discussed later in the sales comparisons. As a further check on his estimate of the value of the subject land, Mr Woods senior advises that he is currently negotiating with the Main Roads Department in respect of a road resumption in the northern part of the subject land. (Survey Plan SP118010). Mr Woods notes that Main Roads has resumed about 6 acres (2.7 hectares) of some of his best farming land for road realignment purposes. While negotiations have not been finalised at present, the initial offer from Main Roads reflects only $3,000 ($1,364 per hectare). Mr Woods rejects that figure as too low and has engaged valuation and legal advice in that matter. However he argues that level of value is not supportive of the Chief Executive’s current unimproved value of $375,000 ($2,206 per hectare).
While not briefed on that matter, Mr Jones speculates that the $3,000 currently offered by Main Roads perhaps reflects only the initial offer by that department. He also suggests that such a figure may however have been based upon a site value method of valuation, which he comments would not be his method of valuing the good farming land. He has assessed the farming land at about $1,700 to $3,100 per hectare. But he agrees that is merely an opinion in absence of any facts on that situation. Mr Jones rejects such an approach in the current matter. In view of the uncertainties associated with that approach it provides no assistance in that matter.
Comparison of Sales –
As noted Mr Woods relies upon a sale of the adjoining parcel (Lot 1 on RP 843685) of area 37.62 hectares, which was sold in December 2001 for $435,000. He notes that parcel was purchased by Mr Proctor in December 1991 for $485,000. During the intervening period Mr Proctor had spent $60,000 on planting for cabinet timbers. Mr Woods argues that such a loss from the previous purchase price does not support a major increase in the value of the subject land. Mr Woods agrees that the Proctor land has about 18 hectares (50%) of its area as steep landing falling from the edge of the plateau. Mr Jones compares that steep land to the 34 hectares (20%) of the subject land which is similar.
Mr Woods advises that he had discussed that sale with the new purchaser, who intends to maintain the cabinet timbers. He also will use the land for school camp facilities, in conjunction with two other camp sites at Currumundi and Evan Maddock Dam. Mr Woods argues that while the Proctor sale is smaller than the subject land, it is similar country to the subject land.
Mr Jones rejects the use of that sale by Proctor, as he notes it is well after the date of valuation, and it is also a mortgagee sale. Mr Woods agrees that the sale was a mortgagee sale, but argues that it occurred prior to the mortgagee taking possession. Mr Jones argues that the Proctor sale was really a “homesite” sale, and was currently valued unimproved at $185,000. He notes that allowing for the added value of the house, and allowing for clearing and some of the timber plantation expenses, that sale of $430,000 supports the unimproved value of $185,000 for that parcel. Mr Jones also speculates that the previous sale in 1991 was likely to have been at the top of the market at that time.
In considering the sale which is under a mortgagee in possession, I am reminded of the decision of the Land Appeal Court in Mayne Property Development Pty Ltd v Chief Executive, Department of Natural Resources (1996-97) 16 QLCR 709, at 717 to 719. In that matter a sale was considered where evidence was given that the mortgagee had been aware of his obligations under s.85 of the Property Law Act 1974, as discussed by the Queensland Court of Appeal in Emmerson v Custom Credit Corporation Ltd [1994] 1 QdR 516. In that Mayne Property Development, the Land Appeal Court said at 717:
“As the learned President said, not every sale by a mortgagee must be disregarded. This is clear from the cases of Waterhouse v Valuer-General (1927) 8 LGR 137 and Re Murray (1934) 13 LVR 25 to which he referred. It is also clear from the fundamental concepts expressed in Spencer v The Commonwealth of Australia (1907) 5 CLR 418, that it is essential that a sale be free of any suspicion of compulsion on either party if it is to be taken into account.”
After considering the directions of the Property Law Act, the Land Appeal Court concluded at 719:
“It must be noted that the obligation is not to sell a mortgaged property for the market value but to take reasonable steps to ensure that the market value is secured. The two concepts are different and a mortgagee in possession may fulfil his, her or its statutory obligation without actually securing the market value.”
Clearly where a mortgagee in possession is involved, any sale must be critically analysed to assess whether it is in conformity with general market levels. Certainly in such matters caution needs to be applied before accepting the sale as reliable evidence. In the circumstances of this matter, I agree with Mr Jones that the Proctor sale should be treated with some circumspect.
To support his valuation Mr Jones provides the following sales, besides the Proctor sale, which he rejects as discussed:
· Sale 1 - (Rossiter to Holloway – Lot 81 on C311601 and Lot 175 on C31767 – “Tilba”). This is a 315.124 hectare Rural A parcel located about 10 kilometres north-west of Kilcoy, which is used for cattle fattening and eucalypt plantation. The sale has 10 hectares of Oakey Creek flats (3%); 220 hectares of easy to moderate to part steeper forest grazing (70%); and 85.1 hectares of steep to very steep forest (27%). There are three dams and natural creeks and springs. The sale is larger in size, with poorer access, and inferior country and location. The subject land is vastly superior carrying country. The sale sold in February 1999 for $480,000 ($1,356 per hectare), was analysed unimproved at $267,185 ($848 per hectare), and applied at $265,000 ($841 per hectare). The sale sold previously in January 1995 for $380,000, revealing a 31% increase in unimproved land value.
· Sale 2 – (Pratt to Harrison and Tripcony – Lot 177 on C311013 “Spring Creek”). This is a 127.881 hectare Rural A parcel located about 14 kilometres west of Kilcoy, which is used for cattle fattening. The sale has 80 hectares (63%) of moderate to steeper forest, and 47.881 hectares (37%) of steep forest country. There is one spring and five small dams. The subject land has superior fattening ability. The sale sold in June 2000 for $140,000 ($975 per hectare), was analysed at $90,000 ($704 per hectare) and applied at $70,000 ($547 per hectare). That sale property showed a 37% increase in unimproved value since the last valuation.
· Sale 3 – (Kennedy to Webster – Lots 43 and 163 on S 312362 – “Ians”). This is a 185.928 hectare Rural A parcel located about 25.2 kilometres west of Kilcoy, which is used for cattle breeding and fattening. The sale has 28 hectares (15%) of easy gumtop Box and Oakey flat frontage forest; 77 hectares (41%) of steeper vine and bastard scrub; and 80.9 hectares (44%) of moderate to steep Wattle and Brushbox forest. There is seasonal water from Oakey Creek and four dams, one of which is spring fed. The subject land is seen as superior country but smaller in size. The sale sold in June 1999 for $280,000, was analysed at $112,727 ($606 per hectare) and applied at $103,000 ($544 per hectare), reflecting a 30% increase in unimproved value since the previous valuation.
· Sale 4 – (Carseldine to McMahon – Lot 2 on RP 25309 – “McMahons”). This is a 31.211 hectare Rural A parcel located about 9 kilometres east of Kilcoy, and also used for cattle fattening. The sale has 13 hectares (42%) of sandy creek arable land; 9 hectares (29%) of ploughed improved pastures; 7 hectares (27%) of flooded grazing terraces; and 2.2 hectares (7%) of low Iron Bark forest ridges. There is some natural water although the old bores have now collapsed. Overall the sale is smaller in size, and slightly superior country, but has less potential. The sale sold in April 2001 for $150,000, was analysed at $82,372 ($2,639 per hectare); and applied at $81,000 ($2,595 per hectare), showing a 30% increase since the previous valuation.
· Sale 5 – (Keir to Lockbah Pty Ltd – Lot 199 on SP 127770 – “Keirs”). This is a 55.18 hectare Rural parcel located about 18 kilometres north of Woodford. The sale has 27 hectares (49%) easy to moderate arable red stoney rainforest; and 28 hectares (51%) moderate to steep gravely forest. There is seasonal water in gullies and one spring fed dam. The sale is slightly inferior country type, but has poorer access and water. The sale was formerly used for deer farming and hardwood forest, and reflects the changing land use from previously grazing country. The sale reflects a higher rate per hectare due to its smaller size. The sale sold in November 1999 for $450,000, was analysed at $236,955 ($4,294 per hectare) and applied at $200,000 ($3,625 per hectare), reflecting a 203% increase since the last valuation.
In drawing comparisons with the subject land, Mr Jones concludes country type rates for the good rainforest land at $3,100 per hectare, the fair rainforest land at $1,700 per hectare, the steep rainforest and forest land at $500 per hectare, and the forest permit lands at $450 per hectare. Overall he concludes an unimproved value of $389,074, less a severance allowance for the bitumen road (2.5%), finally adopting an overall rate of $2,275 per hectare for usable land. On a relativity basis the subject land is assessed overall to have a carrying capacity of 1 beast per hectare.
Decision:
Before considering the evidence I turn to the legislation and note that the Chief Executive has valued the subject land as being used exclusively for the purposes of farming pursuant to s.17 of the Act which relevantly states:
“17.(1) In making a valuation of the unimproved value of land exclusively used 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.
(2)In subsection (1) –
‘farm improvements’ includes appropriate sheds, other structures, facilities, farm plant and land development for the particular farming business but does not include a dwelling or car accommodation.
‘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; and
if the business or industry represents the dominant use of the land, and –
(c) has a substantial commercial purpose or character by -
(i) having an average gross annual return, calculated over a 3 year period, of at least $5,000; or
(ii) if the business is the establishment and harvesting of native or non-native forests – having an average anticipated gross annual return, calculated over the period from establishment to harvesting, that is usual for the particular species of tree, of at least $5,000; or
(iii)if the business is the maintenance and harvesting of native forests – having an average anticipated gross annual return, calculated over the period from the start of maintenance to harvesting of the particular species of tree – of at least $5,000; or
(iv) having -
(A) a minimum value of farm improvements or plantings of forest or orchard trees of $50,000; and
(B)the appearance of being maintained for farming or expenditure on crops, forest trees, maintenance of farm improvements, livestock or orchard trees; and
(d)is engaged in for the purpose of profit on a continuous or repetitive basis.”
In respect of the nature of the land, I note that the appellant is in agreement with Mr Jones’ classification which apparently has been achieved after a very thorough and complete onsite inspection. The adjustments to the previous unimproved value of $445,000 to $430,000 reflects that better understanding of disabilities upon the subject land.
The Use of the Land –
There is also agreement between the parties that the subject land reflects good quality “farming land”, among the best in that locality. Mr Woods’ very extensive experience, and his personal commitment to maintaining the quality of improvements to the land, no doubt have contributed to that outcome. The question then to be addressed is whether the highest and best use of the land is for either grazing purposes or for dairying purposes. I would agree with Mr Jones that the current high level of recent capital expenditure on dairying equipment is a factor that should be considered in respect of the subject land. Mr Woods’ strategy to jointly manage the “Booroobin” and “Wutha” properties, together with “Fort Lodge” and “Alan View”, reflects a balanced approach to the dairying operation, borne out of many years experience in that undertaking.
While Mr Woods’ long term perspective about the eventual solution to the current deregulation dilemma may prove correct, the matter before this Court is to determine the value of the land in the context of the current market place. That current value would reflect the land’s highest and best use for the most advantageous purpose for a prudent purchaser. While it is the personal choice of the appellant to continue with dairying operations, in spite of declining returns on milk products, any other “farming” use such as for grazing is a factor which must be considered.
Guidance in such an approach was found in the decision of this Court in The Proprietors “Whyanbeel Gardens” Group Titles v Chief Executive, Department of Lands (1992-93) 14 QLCR 524, where the learned Member (now President) said at 532:
“The provisions of Section 11(9) require that if land is used for the purposes of "farming", any enhancement in its value because of a potential use for any other purpose shall be disregarded. However, where that higher potential is within the definition of "farming", it cannot be disregarded. Therefore, all land used for farming must be valued at its highest and best farming use. In the case of the subject land, it is correctly valued at its horticultural value. However, in respect of the lands held by Schultz and by Wertz, if these properties are similar to the subject land and are capable of being used for horticulture, then it is quite incorrect to have them valued at a lesser value simply because they are used for a lesser primary production purpose.” (Section 11(9) is now s.17 in the amended Act.)
Now while that principle ensures that all “farming” lands of a similar highest and best use type are to be valued in a similar manner, it does not direct that all the different types of “farming” use have the same value. For example the value of “farming” land for grazing purposes may well be quite different from the “farming” lands used for dairying purposes. The marketplace itself will govern those respective rates. However what Whyanbeel Gardens demonstrates is that where similar types of land are used for different purposes, but where their highest and best use are seen to be similar, then those lands used for a purpose less than the highest and best use are to be valued as if they were the highest and best use. In that matter the grazing use was accepted as a lesser value, but the highest and best use of those lands currently used for grazing, were seen to be suitable for horticulture, and should be valued accordingly, in spite of the personal decision of the owner not to use it for horticulture purposes. That principle removes any personal effects of choice in the valuation process.
In the current matter the key issue is whether the highest and best use of the subject land is for grazing purposes or for dairying purposes.
However s.17 has identified that the subject land is being used for “farming” purposes, whether that use is either for dairying or for grazing purposes. There is currently no market evidence before this Court to support any further subclassification of types of “farming” use. It is also noted that the Court is not an investigating tribunal. (Qualischefski & Ors v Valuer-General (1979) 6 QLCR 167 at 172). The onus to prove justification for such a proposal lies with the appellant under s.45(4) of the Act, which states in respect of a Notice of Appeal:
“45.(4) Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner.”
On that basis I accept Mr Jones’ opinion that the subject land is suitable for grazing purposes, a matter not disputed by the appellant. Comparisons with sales of land in the general locality, which are used for grazing purposes, would therefore be reasonable in the current matter.
Comparison of Sales –
Before considering the sales themselves, I note that Sale 1 (“Tilba”), Sale 2 (“Spring Creek”), Sale 3 (“Ians”) and Sale 4 (“McMahons”), are all common sales with the recent decision of this Court in Wild & Ors v Department of Natural Resources and Mines (supra). Those matters dealt with valuations in the Kilcoy, Caboolture and Esk Shires, and were treated as representative cases reflecting similar circumstances for a significant number of appeals in those areas. The current appeal has similarities with those matters.
In perusing Wild & Ors, I note that the learned Member expressed some caution in respect of the use of Sale 2 (“Spring Creek”), although it was not disregarded entirely, but was seen as a high sale. I note that in the current matter, while it was analysed at $704 per hectare, it has only been applied at $547 per hectare (78%). I note also that Sale 1 (“Tilba”) was found to reflect unimproved grazing values for the Kilcoy Shire, provided the full value of the timber treatment was recognised, which is also recognised under s.17(2) of the Act. In respect of Sale 3 (“Ians”) the Member also treated that sale with caution, noting also the need to recognise the high timber treatment cost of the natural timber on that parcel. While Mr Jones has analysed that sale at $606 per hectare, he has applied it at $554 per hectare (91%), being an older sale, as also was the “Tilba” sale. In respect of Sale 4 (“McMahons”) the Member found that sale to have limited application due to its size and overall quality, but of assistance in respect of the classification of arable land.
In considering the wider sales evidence in Wild and Ors, the Member found that the overall increase of 30% above the previous valuation was supported by the Kilcoy Shire sales evidence. That now forms that basis of Mr Jones’ valuation in the current matter at $375,000 for the subject land.
If I consider then the nature of the subject land, I find that its good rainforest country at $3,100 per hectare is consistent with the overall Sale 5 (“Keirs”) rate of $3,625 per hectare for the arable red stony rainforest and general forest. The steep rocky forest country at $500 per hectare is consistent with the overall rate at $547 per hectare for Sale 2 (“Spring Creek”) and the fair rainforest country at $1,700 per hectare is a reasonable balance for that land type compared to Sale 4 (“McMahons”) at $2,595 per hectare. There is no other evidence to reject those comparisons. On that basis I accept Mr Jones’ analysis of those land types.
In considering Mr Jones’ adjustments I find the following comparisons:
SaleOverall Rate Carrying Capacity Comparison
per hectaremixed herd
1 (“Tilba”)$841 per hectare 1 to 2.6 Inferior country
and larger
2 (“Spring Creek”) $547 per hectare 1 to 3 Inferior country
3 (“Ians”)$544 per hectare 1 to 2.5 Inferior country
4 (“McMahons”) $2,595 per hectare 1 to 1.2 Slightly superior
country but much
smaller
5 (“Keirs”)$3,625 per hectare 1 to 1.5 Slightly inferior
country but much
smaller
Subject land $2,275 per hectare 1 to 1 -
On those comparisons there is nothing to suggest that Mr Jones has made an error of fact.
I am also reminded that unless the appellant proves that the Chief Executive has made a serious error of fact, or has followed a wrong principle, then the valuation must stand. That was found by the High Court of Australia in Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, where Gibbs J found at 56:
“In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle or made a serious error of fact, the presumption created by section 13(7) is rebutted.”
(Section 13(7) as it then was is now section 33.)
Conclusion:
[40}Having considered the whole of the evidence I am not persuaded that the appellant has proved his case. The appeal is dismissed, and the unimproved value as determined by the Chief Executive in the sum of Three Hundred and Seventy-Five Thousand Dollars ($375,000) is affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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