Andrew v Department of Natural Resources and Mines [2002] QLC 91

LAND COURT OF QUEENSLAND CITATION: Andrew v Department of Natural Resources and Mines [2002] QLC 91 PARTIES: John Stewart Andrew (applicant) v Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO: AV2001/0135 DIVISION: Land Court of Queensland PROCEEDING: Appeal against valuation under the Valuation of Land Act 1944 DELIVERED ON: 15 November 2002 DELIVERED AT: Brisbane HEARD AT: Gympie MEMBER: Dr NG Divett ORDER: 1. The appeal is dismissed, and the unimproved value as determined by the Chief Executive in the sum of $195,000 is affirmed. CATCHWORDS: Valuation of Land Act 1944 – Sec.17 farming – category of farming. APPEARANCES: John Stewart Andrew for the appellant Mr R Paterson for the respondent Background: [1] This matter relates to land at Sandy Creek Road, Nash, and described as Lot 211 on MCH 3535, Lots 118 and 119 on MCH 4629, Lot 87 on MCH 4631, Lot 108 on MCH 4632, and Lots 312 and 430 on MCH 4895, Parish of Gympie. The subject land has an area of 282.6641 hectares, and is located about 14.2 kilometres north of the Gympie Post Office. -- 1 of 12 -- 2 Access to the subject land is to the south via 13 kilometres of bitumen sealed Sandy Creek Road, and then about 1.2 kilometres of formed gravel construction along Langley Road. There is also access from Gardner Road to the north, which is formed gravel construction. It is agreed that access is generally all-weather, suffering only minor delays in heavy rains. Rural power and telephone are connected. The land is zoned Rural under the planning scheme of the Cooloola Shire Council (the Council), effective at the date of valuation of 1 October 2000. The key issues are the nature of the land, use of the land, relativity, the method of valuation, changes in the valuation, impact of Government initiatives, and comparison of sales. [2] On 26 February 2001 the Chief Executive issued a valuation of the subject land at $195,000. Following an objection the Chief Executive confirmed that figure on 23 May 2001. The appellant has now appealed claiming that the unimproved value should more properly be $177,500, which was the unimproved value at the preceding valuation of 1 October 1998. John Stewart Andrew appeared and gave evidence on his own behalf. Mr R Paterson, Principal Legal Officer appeared for the respondent, calling evidence from Peter John Haydon, the departmental registered valuer responsible for determining the valuation. The Nature of the Land - [3] Mr Haydon sees the subject land as comprising moderate to steep forest ridges, particularly in the northern part fronting Gardner Road. As such he agrees with the appellant that the land is poorer class country. It is agreed that the slopes in the south- western part of the subject land carry light to moderate wattle regrowth, although there is now areas of exotic pine plantations as depicted upon the aerial photograph (Exhibit 4, Appendix G). Mr Andrew agrees that it is not an issue for consideration, but argues that it supports his conclusion that the existing forestry use is the best use of the subject land. [4] About 55% of the total area of the subject land is now used as forest production plantations under lease to East Coast Timber Farms, a private company that develops the forest plantations in conjunction with its use in paper productions, and as “environmental offset credit” arrangements for overseas companies. Mr Andrew argues that the relative steepness of the subject land, and its impact upon the mechanized farming equipment, is the factor restricting the use of the land to its current 55% of useful production. Part of the subject land is also used for grazing purposes. [5] However Mr Andrew argues that the remaining 45% of land area really only has use for native timber purposes. He believes that such use as native timber reserves is now so -- 2 of 12 -- 3 controlled by restrictive Government constraints as to make that 45% only of marginal economic value. Mr Andrew sees the tradable “environmental credits” as the factor making the existing use of the land for forest purposes barely economically feasible. He argues that such forestry use, so restricted under the existing Queensland Vegetation Management Act, is a much lesser use than say for grazing or dairying purposes. [6] Mr Andrew supplies contours of the subject land (Exhibit 4, Appendix E), which depict the general topography of the land. Mr Haydon argues that his understanding of the nature of the land was consistent with those contours, and argues that the “all-weather” nature of access to the subject land is a key factor in its market value. While Mr Andrew concedes that generally the roads provide all-weather access, he notes that the gravel roads have an inferior construction surface. The Use of the Land – [7] While it is agreed by both parties that the highest and best use of the land is for “farming” purposes, as defined by s.17 of the Valuation of Land Act 1944 (the Act), there is divergence as to what type of “farming” reflects that highest and best use. Mr Haydon has valued the land as its highest and best use being for grazing purposes. He argues that is consistent with the use of similar lands in the Cooloola Shire area, and also with the long held relativity of the subject land to other similar parcels over the previous 20 years. [8] Mr Haydon further argues that the current use of the subject land for forestry plantation purposes, may not necessarily represent the highest and best use of the land. He argues that the existing land use practices tend to represent the differing personal management styles and expectations of various owners. Because there is no available sales evidence to support that the highest and best use of different land uses has changed from the former relativity of “farming” lots, Mr Haydon has sought representative sales evidence in the area, and maintained the previous relativity of those sale lots to the subject land. [9] Mr Andrew questions whether the subject land has a highest and best use for grazing purposes. He advises that over the last 30 years of farming the subject land he has tried beef cattle production (Hereford stud) and also for dairying, both of which have proved uneconomic. For that reason he now leases the land to others for forest plantation purposes, which he argues is its highest and best use. Mr Haydon agrees that the subject land has potential for forest plantation purposes, but notes that such use may not necessarily prove to have a lower value than grazing. [10] Mr Andrew rejects that conclusion, arguing the current market figures do not demonstrate that forest plantations are even yet viable over time. Mr Haydon was not aware of Mr -- 3 of 12 -- 4 Andrew’s unsuccessful ventures into beef cattle production or dairying, but argues that that history in the absence of evidence to the contrary, tends to support his conclusion of the highest and best use being for grazing purposes. [11] Mr Andrew concedes that there are various groups of types of land use in the Cooloola Shire, including “farming”, residential, rural residential and other types. He also agrees that values for the different land use types can vary from locality to locality. However Mr Andrew argues that within the broad category of “farming” there are differing types of farming categories, each varying in profitability, and therefore value in the market place. Mr Andrew also concedes that there are various land use types within the subject land itself, including improved pastures, grazing pastures and native pastures. Mr Haydon advises that he has allowed for those variations of land use types in his valuation of the subject land. He further confirms that he has made no allowance for any higher potential, such as subdivision or other higher use, in his valuation of the subject land under s.17 of the Act. Changes in the valuation – [12] From his research Mr Andrew concludes that the respondent has applied an inconsistent broad correction to all lands in Cooloola which are used for “farming” purposes. While he has no evidence to support his conclusion, he is of the opinion that the 10% increase in isolation applied to such farming lands may have an undisclosed premeditation by the Government to impact the viability of “farming” enterprises. He notes that such increases in valuation will ultimately lead to higher local government charges. However he agrees that such downstream charges are not matters for consideration by this Court. Mr Haydon was unaware of any approval by government under the Valuation of Land Act to provide incentives in the form of lower valuations for forestry purposes; but notes that some local governments are providing reduced rate incentives for five years for that purpose. [13] Mr Andrew was unaware that in fact there had been a variety of increases to other land types and localities throughout the Shire; which were applied as a result of analyses of sales evidence in those respective areas. Mr Paterson draws attention to other increases in valuations in Tin Can Bay and Rainbow Beach as examples. Mr Haydon advises further that some residential lands had increased 15% while others had declined in value. Relativities – [14] Mr Andrew argues that it is not appropriate to simply maintain former relativities across “farming” type lands, without recognizing the varying levels of economic viability now -- 4 of 12 -- 5 evident in the different land uses. Mr Haydon argues that there is no documented evidence to suggest that the previous relativities had changed, and he therefore maintained those previous relativities. Comparison of Sales – [15] Mr Andrew provides no sales to support his estimate of the unimproved value, relying only upon his conclusion that the value had not increased beyond its level of $177,500 at 1 October 1998. Mr Haydon agrees that the three sales he selected are not directly representative of all land types, but argues that they are comparable to the subject land. He argues that he has chosen sales of “farming” lands, and then analysed those sales to determine whether the analysed unimproved value had increased since 1 October 1998. Noting those increases, he then applied the same percentage increase to the other types of farming land, including the subject land, maintaining the old relativities. [16] In selecting his comparable sales Mr Haydon advises that he rejects out-of-line sales, and forced sales, choosing only sales that meet the guidelines established by the Spencer test as a true indication of market forces. Mr Haydon provides the following sales which he argues are representative of “farming” lands in Cooloola Shire. There was no challenge to Mr Haydon’s analyses of those sales, and each supports the 10% increase supplied. [17] • Sale 1 – (Parry to McKenzie – Lots 6 and 9 on RP 890966). This is a 92.32 hectare farming property located about 20 kilometres east of Gympie. The sale has similar services, location, access and potential highest and best use, is smaller, but has superior water and topography. Overall the sale is seen as superior. The sale sold in December 2000 for $305,000 ($3,303 per hectare), was analysed at $102,768 ($1,113 per hectare) and applied at $1,060 per hectare, or an analysed factor increase of 15%. [18] • Sale 2 – (Everitt to Henderson – Lots 3 to 5 on SP 103053). This is a 83.41 hectare farming property located about 13 kilometres south of Gympie. The sale is comparable in services and use, and while smaller, is superior in all other aspects. Overall the sale is superior. The sale sold in November 2000 for $392,000 ($4,699.80 per hectare), was analysed at $146,036 ($1,750 per hectare), and applied at $1,710 per hectare, or an analysed increase of 12%. [19] • Sale 3 – (Sizer to Hinton – Lot 2 on RP 76192 and Lot 3 on RP 817355). This is a 80.22 hectare farming property located about 16 kilometres south-west of Gympie. -- 5 of 12 -- 6 The sale has a comparable potential use, topography, water, access and services, and while smaller, is overall seen as superior. The sale sold in June 2000 for $300,000 ($3,739.72 per hectare), was analysed at $111,374 ($1,388.36 per hectare), and applied at $1,220 per hectare, or an analysed factor increase of 25%. [20] On the basis of those increases he applied an increase of 10% to all “farming” lands, and maintained the previous relativities. Mr Haydon concludes an unimproved value of the subject land at $195,000 ($690 per hectare). The Method of Valuation – [21] Mr Andrew is critical of the mass appraisal system of valuation applied by the Chief Executive. He notes that such broad scale application applied to the differing land use types, makes inadequate allowance for refinement of land uses, such as for “farming” purposes. He notes that such a broad approach would not appear to be consistent with the Chief Executive’s own published information on the annual valuation process. Mr Andrew in particular concludes from that published information that the various types of rural land use should be separately identified, and sales of each type analysed, before any percentage increase was applied. [22] Mr Haydon concedes that the three sales provided were not representative of all land use types. However as there was no sales evidence available to question the reliability of the previous relativities, he had used those sales, to apply a consistent application across all “farming” lands. Mr Haydon concedes that had there been evidence available of the varying level of value for varying rural farming uses, then he would have revised the relativities between the “farming” categories. Mr Andrew provides no such market evidence to support his conclusions. The Impact of Government Restrictions – [23] Mr Andrew argues that recent introductions of several Government initiatives have impacted the rural communities in the Cooloola Shire. He draws particular attention to the Vegetation Management Act 1999, the Dairy Deregulation Scheme and the Re- afforestation Agreement, all of which he argues are now impacting the property market. He notes also that more stringent planning controls by the Cooloola Shire Council are also discouraging development in the area. He believes such additional “doctrinal bureaucracy” must influence market forces as buyers react to the new constraints. Mr -- 6 of 12 -- 7 Andrew anticipates that negative impacts, particularly from the Vegetation Protection Act, are likely to increase with the passage of time. [24] Mr Haydon rejects that such forces are matters which must be considered separately as special items of disability. He argues that if those forces are restricting the attractiveness of lands, then that will be reflected in the sales experienced in the free market place. Mr Haydon goes further to note that in his opinion, the subject lands are not restricted in their current use for “farming” purposes by way of any long-term restriction for contamination, heritage or vegetation management issues. He argues further that if there was any noticeable impact from the dairy industry reform package, that would also be reflected in the comparable sales he has adopted. He notes that his Sales 1 and 2 were in fact former dairy farms. [25] On the evidence before me there is no conclusive indication that the subject land is impacted by the recent Government initiatives to any greater extent than that demonstrated by sales of comparable lands in the market place. There was no definitive evidence that the subject lands were specifically targeted under the Vegetation Management Act 1999, and I accept Mr Haydon’s advice that special Government restrictions are not of specific impact upon the subject land. Decision: [26] I turn first to the nature of the land and note that there is really little difference between the parties, except perhaps Mr Andrew’s concern that Mr Haydon has underemphasized some of the restrictive nature of the terrain. He notes that the steepness of the forest slopes was really the main contributing factor causing the cessation of pineapple cropping; and the restriction to 55% of total area for the current plantation works. Mr Haydon advises that he has made adequate allowance for those factors in his comparisons with the three sales as follows: Sale Rate per hectare Comparison 1 2 3 Subject land $1,060 $1,710 $1,220 $690 Superior Superior Superior - On those comparisons I would agree with Mr Haydon. -- 7 of 12 -- 8 The Use of the Land – [27] A key difference between the parties is the assessment of the use of the land. Before considering the relevance of the assessment of the definition of “farming”, I turn to the legislation which relevantly states: “17.(1). In making a 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. (2) In subsection (1) – ‘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 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 … (d) is engaged in for the purpose of profit on a continuous or repetitive basis.” [28] In seeking guidance in respect of what is to be considered in the use of the land for “farming”, I am referred to 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 page 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 -- 8 of 12 -- 9 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.” [29] 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 horticultural purposes. The market place itself will govern those respective rates. However what Whyanbeel Gardens demonstrates is that where similar types of lands 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 higher 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. [30] In the current matter the key issue is whether the highest and best use of the subject land is for grazing purposes or for forestry plantation purposes. The Method of Valuation – [31] While Mr Andrew may have concerns that the current computerized mass appraisal system provides an inadequate process for determining unimproved values, court precedents have determined to the contrary. The Land Appeal Court considered the suitability of such a system in BG and AK Wilson v Chief Executive, Department of Lands (1994-95) 15 QLCR 63, where it said at page 70: “It has been said on many occasions that valuation is not an exact science. It rests upon the opinion of those in the market place who will prefer one aspect to another, one suburb to another and so forth. It is the duty of the valuer to interpret and apply that market on principles which require comparisons to be made of “like with like” wherever possible. The process of annual valuations which was introduced by legislation in 1985 was designed to avoid the penalty of an owner being cemented to a value for rating purposes for up to five years and possibly eight years. The scheme of annual valuation enables values to follow the market on an annual basis. The scheme would not work without the aid of computers.” -- 9 of 12 -- 10 The Land Appeal Court went on to say at page 71: “In the context of an annual valuation, the process involves the activity described previously including the “charts” and the collation of that material from the charts by the computer processors through to the public display of the printouts containing the respective valuations and relevant dates. The process is our opinion does not offend the statute.” [32] At the heart of such a system of course is the identification of various sub-market areas (SMAs), which are used to coalesce land use types of similar constituency. In the current matter the Chief Executive has used the category of “farming” to designate such SMAs in the Cooloola Shire, as places where the highest and best use is for “farming” purposes as identified under s.17 of the Act. Mr Haydon argues that unless market place sales are available to demonstrate that further subcategorisation of “farming” are justified, then the current policy of treating all such lands under the one category should be maintained. 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 provide 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.” Comparison of Sales – [33] Mr Haydon has followed the principle of adopting comparison of sales, long preferred by the Courts for establishing the unimproved market value of land. In selecting his sales he has adopted relevant sales which fit the criteria established by the High Court of Australia in Spencer v The Valuer-General (1907) 5 CLR 418, where Isaacs J (later CJ) said at page 441: “To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.” -- 10 of 12 -- 11 The principle of comparison of vacant or lightly improved sales was clearly defined by the Land Appeal Court in PH Clough v Valuer-General (1970-71) 8 QLCR 70, at 76; and also in WM and TJ Fischer v Valuer-General (1983) 9 QLCR 44, where the Land Appeal Court said at page 46: “It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels. Whilst maintenance of correct relativity is also of considerable importance for rating or revenue type valuations, we cannot prefer in the circumstances of this case, the use of the principle of relativity to the exclusion of the sales evidence.” [34] In seeking to apply those sales to the subject land Mr Haydon has then relied upon the long established relativities between the sales parcels and the subject land. In relying upon those relativities he has followed principles espoused in R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, where the Land Appeal Court at page 16: “We are conscious that it is desirable that valuations made for the purposes of the Valuation of Land Act of comparable lands should bear proper relativity, one to the other, if the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis.” [35] However the principle of relativity should not override reliance upon sales evidence as directed in Fischer at page 46. Summary: [36] In summarising this matter I am aware that the appellant has an extensive experience with the operation of the subject land over a period of 30 years. I accept that he has failed to provide a viable profitable commercial venture of grazing, and that he has now moved to have others “farm” the land for forestry plantation purposes. However I accept Mr Haydon’s evidence that the subject land has similarities with other similar rural lands which currently are used for a highest and best use as grazing in the Cooloola Shire. On that basis I see no error in Mr Haydon’s classifying the land for “farming” purposes, which allows for a wide variety of rural industry pursuits. In the absence of market evidence to identify that further subcategorisation should occur in assessing unimproved values, I find no fault in Mr Haydon’s approach. [37] 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 said at page 56: -- 11 of 12 -- 12 “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: [38} 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 $195,000 is affirmed. NG DIVETT MEMBER OF THE LAND COURT -- 12 of 12 --