Carter v Chief Executive, Department of Natural Resources and Mines [2002] QLAC 52

LAND COURT OF QUEENSLAND CITATION: Carter v. Chief Executive, Department of Natural Resources and Mines [2002] QLAC 52 PARTIES: Helen M Carter (appellant) v Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO: LAC2001/0697 DIVISION: Land Appeal Court PROCEEDING: Land Appeal Court appeal against unimproved valuation Shire of Dalrymple ORIGINATING COURT: Land Court DELIVERED ON: 28 June 2002 DELIVERED AT: Townsville HEARD AT: Townsville JUDGE/MEMBERS: Cullinane J RE Wenck, Member CAC MacDonald, Member ORDER: 1. The appeal is allowed. The determination of the Land Court is set aside and the unimproved value of "Felspar" as at 1 October 1999 determined in the amount of Five Hundred and Forty-eight Thousand Dollars ($548,000). CATCHWORDS: 1. STATUTORY VALUATION - Valuation of Land Act 1944 - chief executive's annual valuation methodology - no obligation to inspect or individually detail each lot per period - permissible to rely on existing relativities unless challenged. [9] [10] [13] -- 1 of 11 -- 2 2. STATUTORY VALUATION - Valuation of Land Act 1944 - unimproved value - proper approach to assessing value of improvements - added value rather than replacement cost less depreciation - need to consider present economic worth of carrying out certain improvements. [22] [23] 3. VALUATION - Sales - use of sales - family sale after valuation by private valuer - but no unimproved value provided by such valuer - subsequent analysis by owner - approach rejected by Court. [19] [22] [33] [56] 4. VALUATION - Sales - use of sales - vast difference in size between subject and sale (220,000 ha/23,000 ha) - no cogent market comparison when other sales evidence considered - sale rejected as valid basis. [22] [27] APPEARANCES: Mr Harvey G Carter for the appellant Mr J O'Rourke for the respondent [1] As at 1 October 1999, the chief executive made an unimproved valuation of the property known as "Felspar" and owned by Mrs Helen M Carter, in the amount of $620,000. On appeal to the Land Court the chief executive's valuer Mr SB Gilbert led evidence to a valuation of $610,000. [2] Mr HG Carter, the husband of the appellant, appeared at the Land Court hearing to conduct the appellant's case and gave evidence in support of the estimate of value contained in the Notice of Appeal, in the amount of $400,000. [3] The learned Member of the Land Court in his reasons for judgment, comprehensively detailed the evidence before him and concluded that Mr Gilbert's valuation approach was to be preferred. He found that while Mr Gilbert's valuation figure was supported by the evidence some adjustment was warranted, and for the reasons given determined the unimproved value in the amount of $595,000. [4] Mrs Carter appealed to this Court from the decision of the Land Court. The grounds of appeal will be detailed later. [5] Mr HG Carter appeared before us on behalf of the appellant. Mr J B O'Rourke, Principal Legal Officer, Department of Natural Resources and Mines, appeared on behalf of the respondent chief executive. -- 2 of 11 -- 3 [6] "Felspar" is a cattle grazing property containing an area of 22,853 ha, situated in Dalrymple Shire about 143 km north-west of Charters Towers. It is accessed by 57 km of the bitumenised Lynd Highway, then 82 km of formed earth and gravel road with small sections of bitumen. Access to the property may be impassable in wet weather. [7] At the outset, as he had in the Land Court, Mr Carter complained to us of an alleged error in principle said to have been made by the chief executive in that the valuation had issued in the absence of inspections of the subject property or the comparable sale properties, by the valuer responsible for the valuation. [8] The evidence before the Land Court was that a number of sales had been inspected by a valuer colleague of Mr Gilbert in connection with the annual valuation of the local government area. When the unimproved values derived from analyses of those sales were compared to the existing valuations of the sale lands, a decision was taken to alter the level of existing valuations of properties such as "Felspar" [9] The mass valuation task with which the chief executive's valuers are faced does not permit inspections of other than the sale properties, the process relying on the correctness of existing relativities between valuations as established over a long statutory valuation history and resulting from past inspections. Existing relativities may be altered when considered necessary as a result of the objection and appeal process. [10] This Court, in Wilson v. Chief Executive, Department of Lands (1994-95) 15 QLCR 63 found that the mass annual valuation methodology employed by the chief executive including the issuing of valuations in the absence of individual property inspections at each date of valuation, is not offensive to the Statute. [11] The learned Member below referred to the annual valuation process at para [4]of his reasons and observed the evidential problems for the chief executive which the "skeletal method" might have presented, had Mr Gilbert not himself inspected "Felspar" and the relevant comparable sale properties. This Mr Gilbert had done albeit subsequent to the issue of the valuation, for the dual purpose of defending the valuation and then assisting the Land Court with relevant evidence. [12] The further complaint from Mr Carter was that Mr Gilbert's inspection was inadequate for the purposes of gaining a proper understanding of the negative features of "Felspar". The learned Member was not persuaded that "for the purposes of carrying out the valuations, Mr Gilbert's inspections were inadequate. To the extent that he may have overlooked something relevant or formed a wrong view, the appeal process provides an opportunity for the appellant to correct such errors." -- 3 of 11 -- 4 [13] We will return to the appeal process later but on the evidence before the Land Court and now this Court, we are not persuaded that the chief executive made an error in principle or judgment in the inspection and valuation methodology which was employed. [14] It was part of Mr Carter's submission that Mr Gilbert and through acceptance of his evidence, the learned Member, had formed a wrong view as to the effect of negative features of "Felspar" including the nature of the terrain, inadequate natural water, weed infestation and the causes of that infestation. Mr Carter submitted that disabilities of the terrain and the lack of, or lack of access to, permanent natural water were significant factors affecting the productive capacity of the land in its unimproved state and to a significantly greater degree than was the case with the comparable sale lands. [15] Mr Carter had accepted, as the learned Member observed, that "Felspar" had the productive potential for its cattle carrying capacity to be reasonably similar to the comparable sale properties. However Mr Carter submitted that, as observed by the learned Member, there had been some confusion in evidence given in the Land Court as to the basis of assessment of carrying capacity potential of the various lands in their "natural state". [16] Mr Carter revisited the evidence he gave in the Land Court, that in its unimproved state, "Felspar" suffered significantly in comparison with the sale properties, first because of lack of access to comparable natural permanent water then because of the rougher nature of the basalt country and the consequent limitations on stock access and grazing opportunity. Those difficulties had been overcome to the extent that the carrying capacity of "Felspar" was generally now comparable to the sale properties, but only because far greater expenditure than would have been the case with those sale properties, had been outlaid to provide strategically located artificial stock watering points, stock control through fencing and past ringbarking and tordoning of in excess of 8,000 ha of the basalt country. [17] In the Land Court, Mr Carter admitted that the cost of similarly treating the vegetation on that area of land at the date of valuation would have become prohibitive. However, the fact was that the work had been effected, and in his opinion the timber treatment had been one of the important elements in improving the carrying capacity of "Felspar" to a level comparable to the sale properties. [18] The valuation approach which Mr Carter had taken in the Land Court, but which was rejected by the learned Member, included an analysis of a sale of "Felspar" from Mr Carter's father to the appellant, at a sale price derived from an independent valuation by a private valuer, as at 16 April 1999. The parties had first agreed to adopt the valuation -- 4 of 11 -- 5 figure of $1,500,000 excluding livestock, plant and machinery as the sale price. The settlement did not take place until 30 June 2000, and by that time it had been agreed "to adjust the price by deducting $300,000 from the $1,500,000 figure to reflect the value of livestock, plant and equipment included in the transaction." [19] The valuation report had been produced in the Land Court and accepted as an exhibit on the basis that the opinion of improved value expressed therein had been adopted as correct by the appellant. The valuation contained an apportionment of $1,259,784 for the land as "fenced and watered". Mr Carter's valuations of the fencing and water improvements as submitted to the Land Court were $285,500 and $475,000 respectively. However, in his analysis, he valued the 8,000 ha of timber treatment at $680,000. Those figures left a negative land value of $180,716. Mr Carter had agreed in the Land Court that such a result was absurd but his argument was that at least it demonstrated that his $400,000 estimate as the unimproved value of "Felspar" was fair and reasonable. [20] Understandably the learned Member did not accept that Mr Carter's analysis provided any support for the appellant's contention that the land was worth $400,000 unimproved. [21] In his written submissions to this Court, Mr Carter had indicated his willingness to "negotiate with DNRM" with regard to the valuation of the timber treatment, fencing and water improvements. That invitation had not been accepted by the chief executive. The Court accepted an amended version of the analysis as an explanation of Mr Carter's submission. For the purpose of removing any perception of conservativeness in the private valuation, Mr Carter had increased the "fenced and watered" valuation to $1,400,000 (from $1,259,784) and then provided what was in his opinion a "low" range of $520,000 for the timber treatment, $148,000 for fencing and $340,000 for water, leaving an unimproved land content of $392,000. [22] We have not found this amended analysis to assist the appellant's case. Even if the land value "fenced and watered" or as extended by Mr Carter to "treated , fenced and watered" was accepted as being reasonable, it is not the depreciated replacement value of the improvements which would be relevant in the analysis, but the value which the improvements add to the land. That assessment is a task best performed by a professional valuer because "added value" does not always equate "depreciated value". As an example, Mr Carter suggested that the valuation of the timber treatment lay in the range of $520,000 to $680,000. In his formal valuation report at p.123 of the Record of Proceedings in the Land Court, Mr Gilbert had stated: "About 8100 hectares has been treated, some 5670 hectares rung and the balance tordoned. No regard has been had to this achieved potential as it is thought that in present day circumstances such treatment would not be -- 5 of 11 -- 6 economically viable. Clearing large areas is not district practice for this locality." [23] Mr Carter had been adamant that the productive capacity of "Felspar", as improved, had been increased by this past timber treatment. That, no doubt, is correct. One question which would need to be addressed however in considering the "added value" is by what degree the timber treatment has increased the carrying capacity from "fenced and watered" only, and how much extra would a prudent purchaser pay for that improved capacity. [24] A matter which was not addressed in detail in the sales analyses produced by Mr Gilbert was the extent of timber treatment on the sale properties "Amelia Downs" and "Junction Creek" which resulted in the relatively nominal assessments of added value of $13,065 and $9,493 respectively. [25] Mr Carter had argued in the Land Court that the valuation of "Felspar" had in fact decreased rather than increased as at the relevant date of valuation. He had endeavoured to prove his argument by introducing historical sales evidence. The Member correctly found that it was not the extent of increase above a previous valuation which was relevant to the task confronting him but instead the correctness of the valuation appealed against as at the relevant date of valuation. [26] Another argument of the appellant in the Land Court and then in the submissions to this Court, was that the chief executive's valuation of "Felspar" and then the Land Court's determination, were excessive in comparison with the chief executive's valuation of the nearby 220,000 ha "Wandovale", which had been sold in April 1998. The learned Member had considered the valuation evidence in this regard and had found that comparison between "Wandovale" and the subject property was not appropriate for valuation purposes when considered against the sales relied upon by Mr Gilbert. [27] Any mathematical correctness in Mr Carter's argument has no relevance, in the absence of market support for his submission. The sales evidence placed before the Land Court supports the opinion that no cogent market comparison can be made between a property of 220,000 ha and one of about 23,000 ha. [28] We now turn to the specific grounds of appeal and the submissions received from the respondent chief executive. Ground 1 - The Land Court failed to give adequate consideration to the negative geological and other unfavourable natural features of Felspar. [29] The respondent submits that there is no basis for this assertion. -- 6 of 11 -- 7 [30] The learned Member was careful to consider the evidence before him as to these matters as is indicated in paras [20], [22], [24] and [25] of the Reasons for Judgment. [31] We are not persuaded that there was a failure to give consideration to these features. The question of whether the consideration was inadequate will be reflected in our findings. Ground 2 - The Land Court failed to give adequate consideration to the value of improvements on Felspar or their application as a useful instrument in calculating unimproved value. [32] The respondent submitted that the sale of the subject property was not to be relied upon as it was a family sale and there was no validity in the appellant's assertion that the value of improvements should have been assessed and subtracted as suggested. It was further submitted that the learned Member's approach had been correct. [33] We have already discussed this family transaction. In the circumstances, the valuation commissioned by the parties to the transaction did not appear to have found a controversial result, although the correctness of that result was not admitted by the chief executive. The valuation did not and was not required to address the question of unimproved value or the added value of timber treatment, fencing or water improvements. The analysis of the result as provided to the Land Court was clearly of no assistance to the Land Court nor were the submissions made by the appellant before us. [34] This ground of appeal fails accordingly. Ground 3 - The Land Court failed to adequately consider the enormity of the weed problem confronting Felspar. [35] The respondent referred the Court to Mr Gilbert's evidence in this regard and the learned Member's reference to that evidence as well as Mr Carter's evidence before him at para [23] in the Reasons for Judgment. [36] We are not persuaded that there was a failure to give consideration to the "enormity" of the weed problem, based on the evidence before the Land Court. The question of whether the consideration was inadequate will be reflected in our finding. Ground 4 - The Land Court failed to compare sufficiently Grounds 1, 2, 3 above with DNR sale comparisons. [37] The respondent referred the Court to the evidence given by Mr Gilbert as to the comparability of the three sale properties with the subject land and the learned Member's general acceptance of that evidence. [38] It is clear that of the basic sales evidence relied upon by Mr Gilbert, the sale properties "Amelia Downs" and "Junction Creek" were considered by the parties and the learned Member to provide the better evidence of value for comparison with "Felspar". -- 7 of 11 -- 8 [39] The learned Member dealt with Mr Gilbert's comparisons between "Amelia Downs" and "Felspar" at paras [29] to [34] inclusive then Mr Carter's opinion as to those comparisons at paras [35] and [36]. The conclusion was that Mr Gilbert had taken the matters raised by Mr Carter into account except for altitude and resultant climate differences. At para [52] a "small allowance" was made "for the fact that in comparison with 'Amelia Downs' the subject is the colder property". [40] The opinions of comparisons between "Junction Creek" and "Felspar" were dealt with in paras [37] and [38]. In the latter paragraph the learned Member commented that "Mr Carter has not convinced me that Mr Gilbert has made a material error in his description of natural water, nor that he has inadequately taken into account the difference in the presence of rock between the sale property and 'Felspar' nor the propensity for weed invasion". [41] We return to the following observations of the learned Member at para [21] where the confusion which had occurred in the manner in which carrying capacities of the subject and comparable sale properties had been discussed. "In the end, however there appeared to me to be nothing between the parties with respect to carrying capacity as Mr Carter agreed that the carrying capacities assessed by Mr Gilbert for each of the properties was consistent with that of other properties in the basalt country on an improved basis. Of course, … the carrying capacity, as improved, is a reflection of the natural potential of a property in its unimproved state and is an appropriate method of classification of country, in my view. Notwithstanding this apparent agreement, Mr Carter stressed that the achievement of the carrying capacity of 'Felspar' resulted only from the level of improvements carried out there. He said that timber treatment of about 8,100 ha, the installation of artificial waters and the construction of appropriate fencing all contributed to the achievement of 'Felspar's' optimum carrying capacity. He said that additional improvements were needed on 'Felspar' compared with other properties in the area because the basalt ridges and walls interfered with the ability of cattle to walk between water and feed. That disability had to be compensated for by the installation of these additional improvements. I did not understand Mr Gilbert to disagree with that proposition, however, he did not agree with Mr Carter's view that the construction of fenced laneways on 'Felspar' was a requirement resulting from the nature of the country. Mr Gilbert was of the view that whilst laneways were quite popular in current times, the choice as to whether laneways ought to be constructed was largely a matter of management and was not dictated by the country exclusively. I accept that view." (emphasis added in italics) [42] The view which was accepted clearly related to Mr Gilbert's opinion regarding the laneways. [43] After reviewing the evidence, and considering Mr Carter's oral submissions, we are not convinced that there was agreement between the parties on the carrying capacity -- 8 of 11 -- 9 argument. It seems to us that, for relativity purposes, Mr Carter was prepared to agree that the carrying capacities of "Felspar", "Amelia Downs" and "Junction Creek" were comparable only after the more expensive development, including the timber treatment, on "Felspar" had been effected. Mr Gilbert's statement to which reference was made earlier, indicated that his assessment of carrying capacity for "Felspar" had disregarded any increase resulting from timber treatment. [44] When it comes to comparing "like with like" Mr Carter was concerned in the Land Court that where features of properties being compared were described by the responsible valuer as superior or inferior, and the degree of difference is not quantified, it is difficult, if not impossible to gauge whether, or how, those differences have been properly weighted. It was clearly his opinion that, as is enunciated in Ground 4, the extent of superiority of those relevant features have not been sufficiently expressed in Mr Gilbert's valuation of "Felspar". [45] It is observed that before the adjustment to the valuation of "Felspar" which was made based on comparison with "Amelia Downs" and then the worsement issue, the chief executive's valuations of "Felspar" and "Junction Creek" were near identical on an overall per ha basis ($26.69 per ha and $26.67 per ha respectively). [46] There was no dispute that "Junction Creek's" location and access were inferior to those of "Felspar" and that "Junction Creek" was higher in elevation with colder winters. [47] Mr Carter did not agree with Mr Gilbert's opinion that the carrying capacities were similar, except on an improved basis (including the effect of the timber treatment on "Felspar"). [48] The "quantity and distribution" of natural water on "Junction Creek" was, according to Mr Gilbert superior and, on Mr Carter's evidence significantly so, with the need for greater expenditure on artificial water infrastructure on "Felspar". [49] Mr Gilbert's oral evidence (Record p.75, lines 32-34) was that "'Junction Creek' is nowhere near as affected by basalt walls, there are areas of surface stone on the property " ("Junction Creek") "but nothing like 'Felspar' and I'd agree with Mr Carter in that aspect." [50] The potential for ongoing weed infestation, in Mr Gilbert's opinion was "slightly" less for "Junction Creek" and in Mr Carter's opinion "considerably" less. In his oral evidence Mr Gilbert agreed and accepted that "Felspar" "is a particularly heavy infested property". In his valuation report, he stated that "Junction Creek" "does not currently possess a major weed problem". [51] Mr Gilbert considered the subject land to be similar overall to "Junction Creek" while Mr Carter's opinion was that only on an improved basis (treated, fenced and watered) could -- 9 of 11 -- 10 the properties be regarded as similar with "Felspar" significantly inferior on an unimproved basis. [52] Mr Gilbert's inspection of both properties was not as complete as he may have preferred, given the constraints on the time available to him. We assume he would have had the benefit of historical departmental records. Mr Carter was well informed as to the nature of "Junction Creek" having conducted an inspection for its possible purchase. He obviously possesses an intimate knowledge of "Felspar". [53] The result of the learned Member's decision has been to determine the unimproved value of "Felspar" at a little less than "Junction Creek", but on the basis of a comparison made with "Amelia Downs". Otherwise he accepted Mr Gilbert's comparison between "Junction Creek" and "Felspar". [54] We have been persuaded by Mr Carter's evidence in the Land Court and the submissions before us that, in comparison with "Junction Creek" any positive features of "Felspar", ie location, access and elevation, would not equate in valuation terms the negative features, ie inferior natural water, rougher basalt country and as a consequence the more expensive costs involved in achieving comparable carrying capacity as improved land, before consideration of the weed infestation which exists on "Felspar". [55] We have decided to make some further adjustment to the Land Court determination to more widely separate the valuation of "Felspar" in comparison with the valuation applied to "Junction Creek" based on its sale. [56] For the reasons given we are unable however to accept Mr Carter's valuation approach particularly in the absence of professional assistance as to interpretation of "added value" of improvements and the unimproved value of "Felspar". [57] We have decided to adopt an unimproved valuation of $24 per ha overall for "Felspar" with the result rounded to $548,000. [58] We do not see that this further adjustment to the valuation of "Felspar" based on a direct comparison with the valuation applied to "Junction Creek" necessarily causes lack of reasonable relativity with the valuation applied to "Amelia Downs". It is of course open to the chief executive to reconsider relativities between individual valuations should that be seen as worthy of specific consideration at some future date of valuation. -- 10 of 11 -- 11 Order [59] The appeal is allowed. The determination of the Land Court is set aside and the unimproved value of "Felspar" as at 1 October 1999 determined in the amount of Five Hundred and Forty-eight Thousand Dollars ($548,000). CULLINANE J JUSTICE OF THE SUPREME COURT RE WENCK MEMBER OF THE LAND COURT CAC MacDONALD MEMBER OF THE LAND COURT -- 11 of 11 --