Betulla Pty Ltd v Chief Executive, Department of Natural Resources [2001] QLC 1

LAND COURT, BRISBANE 19 January 2001 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Shire of Banana. (AV99-1166). Betulla Pty Ltd v. Chief Executive, Department of Natural Resources (Hearing at Biloela) D E C I S I O N This is an appeal by Betulla Pty Ltd against the unimproved value applied to its property in the Shire of Banana by the Chief Executive, Department of Natural Resources, under the provisions of the Valuation of Land Act 1944 (the Act). Background: Betulla Pty Ltd (the appellant) is the owner of land described as Lot 1 on RP620374 (30598041) and Lot 2 on RP801344, Parish of Callide, containing an area of 316.33 hectares (the subject land). As at 1 October 1998, the Chief Executive, Department of Natural Resources, under s.37 of the Act, determined the unimproved value of that property at $38,000. The appellant company objected against that valuation and succeeded in having the unimproved value reduced to $34,000 (or $107.50 per hectare). The appellant company then appealed to the Land Court against the Chief Executive's decision upon its objection, advising that its estimate of the unimproved value was more properly $15,816. The grounds of its appeal were: "The valuation of this block is not consistent with comparable neighbouring land, considering it does not have creek frontage. The only existing water supply is sufficient for only 10 head of cattle. Test bores have been unable to find a new supply." [2001] QLC 1 -- 1 of 7 -- 2 The grounds of appeal are therefore narrow and particular, concerning the relativity between the valuation of the subject land, which has a water disadvantage, and other land, which has a water advantage. The subject land is situated approximately 22km east of Biloela, with access by means of 16km of bitumen road and about 6km of formed gravel road. Electricity and telephone services are available. The property is described in a report tendered by the respondent's valuer as comprising approximately 220ha of easy to moderate broadleaf ironbark forest grazing and 96.33ha of moderate narrowleaf ironbark forest grazing. It is used for cattle grazing purposes. It was watered by one bore, which went dry and one small dam, which leaked. Because of the water problems, the owner pipes water from a bore located on adjoining land, which is owned by a member of the Crisp family. The respondent regards the subject land as sufficiently watered. The Appellant's Evidence: Mr IR Crisp, a director of the appellant company, appeared and gave evidence. He explained that Betulla Pty Ltd is the trustee company for the Crisp Family Trust. His contentions were directed in support of the company's grounds of appeal which were firstly, that the valuation was not consistent with the valuations of adjacent country of similar type land and secondly, that not enough weight had been given to the lack of water on the subject land. Mr Crisp said that when the appellant company purchased the subject land about 11 or 12 years ago, the bore and dam on the land were quite adequate to water it. Since then there had been a series of dry years and although the bore held up well, it went dry in 1998. Several attempts have been made to drill for alternative supplies, but without success. From his knowledge of the performance of bores on neighbouring properties, Mr Crisp has come to the conclusion that only bores in the vicinity of Kroombit Creek will continue to have good supplies. That creek is fed by water from the Kroombit Dam, which is about 8km upstream and from which water is released for irrigators downstream of the Crisp properties. The released water recharges the aquifer and hence maintains the supply for those properties with bores on the creek frontage. Furthermore, Mr Crisp did not think it would be economic to build a dam on the subject land, which would cost between $15,000 to $20,000, as the catch was not good and it would not fill every year. -- 2 of 7 -- 3 While piping water from the adjoining property was satisfactory for the present, Mr Crisp thought that the lack of water on the subject land meant it could be sold only to a neighbour, as the cost of building a dam would be prohibitive for the size of the property. In respect of the appellant's relativity argument, Mr Crisp referred to the valuations applied by the respondent to three neighbouring properties, all of which had Kroombit Creek frontage and were watered by reliable bores adjacent to Kroombit Creek. His comparisons were with: (a) The adjoining property owned by DA Crisp of 315.625ha was valued at $25,500, or $80.79 per hectare. That property had similar forest country with some cultivation, but with a larger proportion of rougher and steeper slopes. (b) The nearby property owned by Tableland Pastures Pty Ltd (a subsidiary of the appellant company) of 1613ha was valued at $47,000, or $29.44 per hectare. That property also comprises similar forest country, with about 40ha of forage cultivation, but with about 50% of its area comprising rougher forest. (c) The nearby property owned by AC and NA Rideout, of 1598ha, valued at $135,000, or $84.43 per hectare. That property comprises mostly cleared softwood scrub country with extensive cultivation (about 240ha), sown to buffel and panic grasses and although it had steeper slopes on Mt Kroombit, Mr Crisp described it as a "top grazing block", with a much better carrying capacity than the subject land. The Respondent's Evidence: Mr A Haks, a registered valuer employed by the Department of Natural Resources, gave evidence on behalf of the respondent. He explained that he had been made aware of the lack of water on the subject land and had made allowance for it following the objection by the appellant company. He reduced the valuation by $4,000 to cover what he considered to be the cost of piping water from the bore on the neighbouring property. Mr Haks explained that he adopted this method only after reference to a number of decided cases and referred to two previous decisions of the Land Court, Fitzgerald v. The Valuer-General (1975) 2 QLCR 137 and Lindenmayer v. Chief Executive, Department of Lands (V95-53) 25 June 1996 (not reported). The first case concerned two parcels of land in family ownership, one of which had no separate -- 3 of 7 -- 4 access. The second concerned a situation similar to the present case, where an unwatered block relied on water pumped from the adjoining family property. Mr Haks claimed that those two cases supported his reasoning in the present valuation. In Fitzgerald's case, while the Land Court found that the arrangement whereby access was gained through adjoining family land would not adversely affect the running of the property in its present ownership and that possibly some form of easement access would be arranged if the property was to be sold, the Court endorsed the approach adopted by the valuer for the respondent in making an allowance because of lack of access. In Lindenmayer's case, the valuer for the respondent had made an allowance for the cost of piping water to the unwatered property in a similar manner to that adopted by Mr Haks in the present case. However, the Court found that further allowance should be made. The important point, as recognised by Mr Haks, is that in neither case did the Court find that the land should be valued as if the existing arrangements could be continued into the future without some effect on the value of the land and in each case found that allowance for the problems, lack of access in one case and lack of water in the other, should be made. Mr Haks relied upon two sales to support his valuation of $107.50 per hectare on the subject land. Sale No 1 is situated close to the subject land on Valentine Plains Road and contains an area of 518ha. That property sold in July 1997 for $410,000 and was analysed to show an unimproved value of $86,969, or $167.90 per hectare. As at 1 October 1998, the respondent applied an unimproved value of $86,000, or $166 per hectare to that property. Mr Haks described that property as comprising 16ha of irrigation, 8ha dry cultivation, 240 of easy to moderate scrub grazing and 39ha of very steep forest grazing. He regards it at superior to the subject property because of its country type. Sale No 2 is situated on the Jambin to Dakenba Road, some distance to the north-west of the subject land and contains an area of 243.5ha. That property sold in April 1998 for $300,000 and was analysed to show an unimproved value of $78,357. As at 1 October 1998, the respondent applied an unimproved value of $70,000, or $287.50 per hectare. That property was described as comprising 135ha of forest cultivation, 100ha of easy forest grazing and 8.5ha of moderate forest grazing. Mr -- 4 of 7 -- 5 Haks considered the sale property to be superior to the subject land, because it is larger and has superior overall country type. The sale's basis is not ideal for valuing the subject land; both sales are significantly superior and the applied values reflect the extent of the superiority of the sales. However, it seems that sales in the general area (the two referred to and perhaps others) indicated an increase in the unimproved value of grazing lands of 25%, while the value of agricultural land remained the same. Mr Haks seems to have applied the general grazing increase to the subject land; it was only when considering the owner's objection that he became aware of the water difficulties for which he made the $4,000 reduction. There is no point in discussing the basis for the valuation or the reasoning that led to an increase of 25% on the grazing land. They were not seriously challenged. This was a case involving two issues: (1) relativity and (2) the allowance for water difficulties, both of which are at least to some extent interrelated. The thorny issue of relativity of the valuation of the subject land with the values applied to other lands, needs to be carefully considered. The Land Appeal Court in Grahn v. Valuer-General (1992) 14 QLCR 327 warned at 328 and 329: "(a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as 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. (R and MM Barnwell v. The Valuer-General (1989) 13 QLCR 13 at p.16 and cases cited in it). … (e) Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v. The Valuer- General (1983) 9 QLCR 44, at p.46). (f) If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error (R and MM Barnwell v. The Valuer- General (1989) 13 QLCR 13, at pp.16-17 and cases cited in it). " -- 5 of 7 -- 6 Prima facie, it would appear from Mr Crisp's comparisons that there is indeed something wrong with the valuation of the subject land. However, Mr Haks explained that comparisons (a) and (b) had larger proportions of steeper forest than the subject land, while comparison (c), although better country, was much larger, leading to a lesser value per hectare. In the circumstances, without further evidence of the sales used to value various classes and sizes of property, I am not prepared to find that the relativity as such is incorrect. That leaves the remaining ground, that not sufficient allowance had been made for the water difficulties affecting the subject land. Mr Haks reasoned that the cost of piping water from the bore on the adjoining family property is the appropriate allowance. From a pragmatic viewpoint it is difficult to find fault with Mr Haks' reasoning. However, that arrangement could continue only while the land remained in their present ownership. From a purely legal standpoint, I have come to the conclusion that such an approach is not open to the respondent. The Act requires the respondent to make a valuation of all land in an area, either annually or at other periods (s.37). However, only land which is separately held by an owner is valued as a separate parcel (s.2) or included in one valuation (s.34). Lands which are separately owned are to be separately valued (s.35). There is no dispute that the subject land and the land on which the bore is situated are owned by separate by legal entities. The present arrangement is appropriate only because the two owners are associated through the Crisp family. However, that arrangement could be terminated on the sale of either property. If either parcel of land was to be sold, some form of water agreement would have to be negotiated as well as some form of easement or other arrangement for the pipeline. In my view, a hypothetical prudent purchaser as envisaged by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418, would be mindful of the fragility and cost of such arrangements. In his evidence Mr Crisp recognised that such arrangements "become a bit messy". The extent of the allowance that should be made in the present case is a matter of judgment. Mr Haks has allowed for the cost of piping water, which he assessed at $4,000. That would be appropriate if it could be assumed that the present arrangement would continue. However, as pointed out above, in my view that is not the correct legal approach to take. I am of the opinion that a prudent purchaser would make a greater allowance for the water problem. In the absence of evidence about -- 6 of 7 -- 7 just what that would be, I must simply make a judgment on what I think would be reasonable in the circumstances. I therefore propose to allow a further $4,000. Accordingly, the appeal is allowed, the valuation of the respondent is set aside and the unimproved value of the subject land as at 1 October 1998, is determined at Thirty thousand dollars ($30,000). (JJ Trickett) President of the Land Court -- 7 of 7 --