Driscoll v Chief Executive, Department of Natural Resources [1999] QLC 81 (1999) 20 QLCR 201

LAND COURT BRISBANE 30 JULY 1999 Re: Appeals against Annual Valuations Valuation of Land Act 1944 Shire of Duaringa (AV98-277 to 282) Kevin James Driscoll and Thelma Driscoll v. Chief Executive, Department of Natural Resources (Hearing at Rockhampton) D E C I S I O N These are six appeals by Mr and Mrs Driscoll against the unimproved values applied to their grazing properties by the Chief Executive, Department of Natural Resources, under the provisions of the Valuation of Land Act 1944 ("the Act"). Introduction Mrs Thelma Driscoll is the owner of a property known as "Glen Elgin", with an area of 24,784 ha, and Mr Kevin J Driscoll is the owner of five properties known as "Sandra Downs" with an area of 4,000 ha, "Lenore Hills" with an area of 7,447.196 ha, "Truganinni" with an area of 5,631 ha, "Shauna Hills" with an area of 6,014 ha and "Glover Downs" with an area of 3,179 ha, all situated in the Shire of Duaringa. As at 1 October 1997, the respondent Chief Executive valued all land in the Shire of Duaringa and following objections against the valuations of their properties, the appellants appealed to the Land Court against the respondent's decisions. The valuations appealed against and the appellants' estimates of unimproved value are as follows: Property Unimproved Value appealed against Appellant's Estimate of Unimproved Value AV98-277 "Glen Elgin" $390,000 $320,000 AV98-278 "Sandra Downs" $315,000 $250,000 AV98-279 "Lenore Hills" $129,000 $104,000 AV98-280 "Truganinni" $580,000 $480,000 AV98-281 "Shauna Hills" $430,000 $360,000 AV98-282 "Glover Downs" $285,000 $237,500 [1999] QLC 81 -- 1 of 13 -- 2 The appellants were represented in these cases by Mr R Mowatt, Company Secretary of the Driscoll Pastoral Company. Evidence was given on their behalf by Mr Mark Driscoll, General Manager of the Driscoll Pastoral Company and by Mr Gary Bishop, Manager of Primac Elders, Rockhampton, and formerly Manager of Elders Limited at Moura from 1990 to 1996. The respondent was represented by Mr John Thomas, Senior Valuer, of the Department of Natural Resources at Rockhampton, and evidence for the respondent was given by Mr Mark Craig, a registered valuer employed by the Department of Natural Resources. The Tenure and Description of the Properties Details set out below are taken from the reports of Mr Craig. "Glen Elgin" has a mixture of tenures, including freehold, Grazing Homestead Perpetual Lease and Special Lease over State forest. According to Mr Craig, the property consists of 1,600 ha (6%) easy to moderate scrub grazing, 6,800 ha (27%) fair forest, 3,700 ha (15%) average forest ridges and 12,684 ha (52%) very steep to unavailable forest. "Sandra Downs" is of Grazing Homestead Perpetual Lease tenure and according to Mr Craig comprises about 220 ha (5%) of downs grazing, 1,500 ha (38%) easy scrub grazing and 2,280 ha (57%) fair to medium forest grazing. "Lenore Hills" is of Special Lease tenure over State forest and forestry reserves. According to Mr Craig, it comprises about 500 ha (7%) easy to moderate softwood scrub, 2,850 ha (38%) easy to moderate forest ridges timbered with broadleaf ironbark, bloodwood, with some spotted gum and 4,097 ha (55%) very steep to unavailable forest of lancewood, wattle and budgeroo. "Truganinni" is freehold with some Special Lease over State forest and according to Mr Craig consists of about 3,865 ha (69%) easy to moderate scrub grazing, 967 ha (17%) fair forest and 799 ha (14%) average forest ridges. "Shauna Hills" is of Grazing Homestead Perpetual Lease tenure with some Special Lease over State forest. According to Mr Craig, it consists of about 2,750 ha (46%) grazing scrub, 800 ha (13%) good forest grazing, 900 ha (15%) fair forest grazing and 1,564 ha (26%) average forest grazing. "Glover Downs" is of freehold tenure and according to Mr Craig consists of about 2,450 ha (77%) scrub grazing, 450 ha (14%) good forest grazing and 279 ha (9%) unavailable country. -- 2 of 13 -- 3 The Issues between the Parties Parthenium Infestation It was common ground that throughout the whole of the area occupied by the subject properties there is widespread infestation of the noxious weed parthenium. Of the subject properties, only "Sandra Downs" and "Glover Downs" are not yet affected, however it was likely that they will be in the future. As Mr Bishop put it when describing parthenium infestation on properties in the area, "… there are those that have it and there are those that are about to get it". Mr Driscoll explained that parthenium was of particular concern on black soil country with natural grasses as there was no opportunity of choking it out as was possible on improved scrub buffel grass country. In his opinion, parthenium had caused a decline of about 20% to 25% in the carrying capacity of downs country and about 10% to 15% on developed scrub country, depending on the quality and pasture thickness of the buffel grass. Mr Driscoll also explained that there was expense and difficulty in shifting cattle between infested and clean country and the plant had a detrimental effect on the health of people working in infested areas. In Mr Driscoll's opinion, there was no economic means of controlling parthenium. The appellants had ceased spraying, but were working in conjunction with various Government Departments in their efforts to find a biological means of control. In Mr Bishop's opinion, the only chance of controlling parthenium is to reduce stocking rates dramatically and try to choke it out. Because of the loss of productivity and the costs involved in controlling parthenium, the appellants contend that there should be an allowance made in the valuations of the infested properties. Mr Craig did not disagree with the appellants' evidence concerning the extent or effect of parthenium infestation. However, he explained that he had not made allowances in his valuations of those properties that were affected because the whole area was affected by parthenium in one way or another. The sales that he had used as the basis for his valuations were also infested. He reasoned that those sales would indicate the prices that informed purchasers were prepared to pay for properties which were infested. On the other hand, he had not added a loading to the valuations of those properties which were not affected. His reasoning was no doubt based on the accepted view that those properties would be affected in the future and in the -- 3 of 13 -- 4 meantime there were added costs and working difficulties in moving cattle between infested and clean areas. I am of the opinion that Mr Craig was correct in not making an allowance for parthenium infestation in an area where infestation is so widespread and has affected both the sales and the subject properties. By using sales which were themselves infested, any adverse effect on the value of the land would be reflected in the sale price and hence in the unimproved value derived from those sales. Of course, that must be subject to the proviso that the sales were appropriate in terms of market level and comparability. I will examine the appropriateness of the sales later. Native Title The appellants contend that native title claims over properties in the area have adversely affected the value of their less secure leasehold properties, particularly in relation to tenures such as that of "Lenore Hills", which consists of special leases over forestry lands. There was no suggestion that the value of freehold or perpetual lease tenures was affected. No details of specific native title claims were provided, but the respondent accepted that the subject properties were subject to a native title claim or claims. For the purpose of these cases, I will assume that the whole of the subject area is subject to a native title claim or claims. Mr Driscoll gave evidence of the appellants' attempts to sell "Lenore Hills" at auction. The property was advertised throughout Queensland and the Northern Territory, but was eventually withdrawn from auction on the advice of their agents, Primac Elders, because of the lack of interest in the property, even from neighbouring property owners. The agents advised the appellants that potential purchasers were deterred because of the uncertainty of the property's tenure and its vulnerability to native title claims. Mr Bishop confirmed that "Lenore Hills" had been withdrawn from auction on his advice. He attributed the lack of interest to the property's tenure. He felt that there was less interest in leasehold properties than freehold and that part of that concern related to native title claims. He also stated that the number of sales of leasehold land had declined and the price of such properties had eased since 1990, when he went to Moura. Mr Bishop was not able to refer to any instance where a native title claim had prevented the sale or reduced the price obtained for a property. However, he asserted that the less secure leasehold tenures had reduced in price. He referred to the sale of -- 4 of 13 -- 5 "Bedourie", to the south of the subject lands, as an example of a very good property which sold at what he regarded as a "very disappointing" price because a large part of it was "forestry lease". Mr Craig agreed that the turnover in leasehold properties had decreased, but he was not aware of a completed sale for a price that had been reduced because of a native title claim. In his opinion, reduced demand did not mean reduced value. Although he was not aware of any leasehold sales having taken place in the immediate area of the subject lands, he knew that they were selling in other areas. He thought that the fact that leasehold lands were not selling readily indicated that vendors were not prepared to sell them for the prices that they were being offered. Those offers could have been affected by such things as rental increases and tree clearing restrictions, as well as concern about native title. In any case, Mr Craig was of the opinion that the provisions of the Act required him to value the subject leasehold lands as if they were freehold. Accordingly, he felt that he was required to ignore the insecure tenure, including the effects of native title thereon. The Sales used by the Respondent Mr Craig relied on two sales to support the respondent's valuations of the subject lands. "Oakland Park" is a Grazing Homestead Freeholding Lease with an area of 2,196 ha and adjoins "Glen Elgin" to the south-east. That property sold in January 1997 for $900,000 and was analysed to show an unimproved value of $336,994, or $153.46 per ha. As at 1 October 1997, the respondent applied $305,000, or $140 per ha, to "Oakland Park". Mr Craig described "Oakland Park" as comprising 200 ha of cultivation, 1,596 ha of undulating scrub grazing and 400 ha of grazing forest. He regarded it as superior to each of the subject lands. Mr Driscoll knew the property well, as the Driscoll Pastoral Company had bid to $1,035,000, at the auction in July 1996 when the property was passed in. Mr Driscoll contended that the subsequent sale of the property represented a fall in the market of $135,000 in the intervening period. Mr Driscoll rejected "Oakland Park" as being relevant to the valuation of the subject lands. He considered that it was not comparable, being too small and having a large proportion of farming country (he thought up to 1,000 acres); it was simply not relevant to the valuation of larger grazing properties. -- 5 of 13 -- 6 Mr Bishop handled the sale for "Oakland Park" when the property went to auction on 14 July 1996. He confirmed that it had been passed in to the Driscoll Pastoral Company at $1,035,000 and was subsequently sold on 31 January 1997 for $900,000. In his opinion the difference between the prices was due to the fact that no- one would offer any more money, despite the best efforts of the agents. They finally advised the vendors to accept the $900,000 because no other potential purchasers were interested in the property. In the circumstances, he thought that the price of $900,000 was "a pretty reasonable buy". Mr Craig defended the sale of "Oakland Park" as an appropriate basis for the valuation of the subject lands. He conceded that it was smaller and that a large area had been farmed. However, he said that the purchaser had returned that area to grass and operated the property as a grazing enterprise. He made the point that he did not rely upon the offer by the appellants of $1,035,000 but upon the later concluded sale for $900,000. Indeed, the evidence would tend to indicate that the Driscoll Pastoral Company's offer may well have been high at the time as it came from an adjoining owner and the vendors were not able to achieve any offers of that magnitude later. Mr Craig went on to say that the sale indicated a valuation higher than the previous valuations made by the respondent, which had remained at the same level since 1989. Mr Craig's analysis of the sale was challenged by Mr Mowatt in cross- examination. Mr Craig explained that he had adopted an added value approach to the valuation of improvements. In particular, he was questioned about his belief that 15 km of contour banks added no value to the property. He explained that the cultivation had been returned to pasture. In his opinion, an incoming purchaser would attribute no value to those contour banks if the intended use of the land was for grazing purposes. Mr Craig also relied as a basis for the valuation of the subject properties on the sale of a freehold property known as "Hillview", with an area of 3,470 ha, which sold in November 1995 for $1,300,000. That sale was analysed to show an unimproved value of $358,020, or $103.19 per ha. As at the relevant date of valuation the respondent had applied an unimproved value of $350,000, or $100 per ha to that property. Mr Craig described "Hillview" as comprising 475 ha of scrub cultivation, 710 ha of fair to good scrub grazing, 400 ha of good forest grazing, 1,300 ha of poor scrub -- 6 of 13 -- 7 and 584 ha of fair forest grazing. He regarded the sale as superior per hectare to five of the six subject properties. Mr Driscoll rejected the sale of "Hillview" as an appropriate basis of valuation. He considered it to be irrelevant for three reasons: it was almost completely cultivation; the sale was in November 1995, almost two years prior to the date of valuation; and it was purchased by a large national property trust. Mr Craig felt that the sale was not out of line with the sale of "Oakland Park". He explained that there were few sales in the area and he had to use what sales were available. Although they were much further removed, he felt that sales in the adjoining Shires of Banana and Taroom reflected an upward movement in the market since the previous valuation. The Statutory Responsibilities of the Respondent The issues raised in these cases makes it necessary to consider the statutory responsibilities which the Act imposes on the respondent Chief Executive. Section 37(1) requires the Chief Executive to make an annual valuation of all lands in an area, although in certain circumstances an annual valuation will not be made (subsections (2) and (4) of s.37). If an annual valuation is not made, the previous valuation continues in force. The term "valuation" in these circumstances means "unimproved value" which is defined in s.3 as follows: "For the purposes of this Act – 'unimproved value' of land means – (a) … (b) in relation to improved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist. (2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act." The term "the value of improvements" is defined by s.5: "(1) The 'value of improvements' means, in relation to land, the added value which the improvements give to the land at the time as at -- 7 of 13 -- 8 which the value is required to be ascertained for the purposes of this Act, irrespective of the cost of the improvements, including in such added value the value of any hotel licence the value of which has been included in the improved value. (2) However, the added value shall in no case exceed the amount that should reasonably be involved in effecting, at the time as at which the value is required to be ascertained for the purposes of this Act, improvements of a nature and efficiency equivalent to the existing improvements." Section 14 makes it clear that land which is held for an estate less than fee simple must be valued as if it was held in fee simple: "(1) For the purpose of deciding the unimproved value of land that is not granted in fee simple, the land is taken to be land granted in fee simple. (2) For the purpose of deciding the unimproved value – (a) of land held from the Crown for an estate of leasehold upon a tenure which is subject to any restriction, limitation, or other onerous covenant or condition; … the unimproved value of the land must be ascertained without regard to the restriction, limitation or other covenant or condition." However, in the case of certain leases, licences and permits, the restrictions or limitations on use must be taken into account in making the valuation. Subsection (5) of s.14 provides: "(5) In making, under this part, the valuation of the unimproved value of any land – (a) in respect of which a stock grazing permit granted under the Forestry Act 1959, section 35 or the National Parks and Wildlife Act 1975, section 33 is in force; or (b) in a lease, licence, permit or permission to occupy under the Land Act 1994 or granted or issued by the coordinator- general or the Primary Industries Corporation; or (c) in a lease from Queensland Rail; or (d) subject to a heritage agreement under the Queensland Heritage Act 1992, part 6; the unimproved value of that land shall be determined having regard to and making proper allowance for any restriction or limitation of use -- 8 of 13 -- 9 having regard to the purpose and conditions to which that permit, lease, licence permission to occupy or agreement is subject." It is well established that the best basis for the assessment of unimproved value is the use of sales of vacant or lightly improved land (see Grahn v. The Valuer- General (1992-93) 14 QLCR 327 at 328). However, as in the present cases, there were no such sales available, then the valuer must resort to the analyses of sales of more highly improved land. In undertaking the analysis of sales, the valuer must have regard to the requirements of s.5 when determining the value of improvements, particularly with regard to the added value of those improvements, irrespective of their original cost (see for example, O'Brien Nominee Pty Ltd v. The Valuer-General (1979) 6 QLCR 280). I now turn to consider the facts of these cases in relation to those statutory requirements. Native Title There was no evidence that native title claims have affected the value of leasehold land. Mr Driscoll felt that the lack of interest in "Lenore Hills" was at least partly due to native title claim over that land. Mr Bishop did not go so far. He gave evidence of the reduction in the number of leasehold sales, which he attributed to the concern of potential purchasers about leasehold tenure generally, particularly the less secure forms of tenure. However, he did not say that native title claims had prevented a sale or had adversely affected the value of any land. He was only prepared to say that potential purchasers had used the existence of native title claims as a negotiating factor. His example of the sale of "Bedourie" may be an indication of the state of the market for lands of leasehold tenure, but not necessarily because of native title concerns. The evidence did not even extend to the details of the sale or establish whether or not "Bedourie" was the subject of a native title claim. In any case, I have come to the conclusion that Mr Craig was correct. Section 14 of the Act requires that the leasehold land be valued as if it was held in fee simple, subject to the requirements contained in s.14(5). The existence of a native title claim is not one of the limitations contained in sub-s.(5). Therefore, in my view, the leasehold lands in these cases must be valued as if they were freehold. The appellants have not suggested that the market for freehold land is affected by any native title claim. Therefore, in accordance with the evidence and at law, Mr Craig was correct to ignore the existence of such claim or claims when valuing the subject lands. -- 9 of 13 -- 10 The Sales The appellants challenge the validity of the two sales used by the respondent as the basis for the subject valuations. However, the respondent could hardly have ignored the sale of "Oakland Park". It took place close to the date of valuation and it adjoins "Glen Elgin". The appellants allege that it is not comparable because it has a large proportion of farming country. However, Mr Craig says that the purchaser has returned the farming land to pasture and Mr Driscoll confirmed this from his own observations. This would seem to indicate that it was purchased for the purpose of grazing, rather than farming. An attempt was made to attack Mr Craig's analysis of the sale, however, as required by s.5 of the Act, Mr Craig adopted an added value approach to the value of improvements. I accept his reasoning that there was no added value in the contour banks to an incoming purchaser as the cultivation has been returned to grazing pasture. In the circumstances, I can see no reason why Mr Craig's analysis of the sale of "Oakland Park" should not be used as a basis is to determine the unimproved value of the subject lands, so long as appropriate adjustments were made for the differences between the sale and the subject properties; Since there was no challenge to those comparisons, I accept that appropriate differences have been made. The appellants also challenged the sale of "Hillview" as not comparable. Little evidence was given about that sale. Mr Driscoll and Mr Bishop felt that it was different because it was virtually all farming country. Mr Craig's description would seem to indicate that there was also a large proportion of grazing country on "Hillview". Mr Craig defended its use by saying that it was not out of line with the sale of "Oakland Park". However, he made no comment on the fact that the sale occurred some two years prior to the date of valuation except to say there were few sales in the area and he must make use of what sales there were. These cases concerned appeals against annual valuations and it is difficult to see that much assistance can be derived from a sale two years prior to the date of valuation. In my view, the sale of "Hillview" seems to depend for its validity as a basis of valuation on Mr Craig's reasoning that it is not out of line with the later sale of "Oakland Park". Perhaps he reasoned that the sale of "Hillview" was high at the date when it occurred, or at best was not acted upon to increase the valuations in the area at that time, but that the market demonstrated by the sale of "Oakland Park" had since caught it up. However, he did not articulate that reasoning. -- 10 of 13 -- 11 Although the sale of "Hillview" has less evidentiary value than the sale of "Oakland Park", I am not prepared to reject it as entirely inappropriate. Although it does contain an area of farming land, was purchased by a large national company and occurred some two years prior to the date of valuation, it does indicate a level of value which, together with other sales, has led the respondent to increase the valuations of properties in the Bauhinia Downs area above previous valuations which had not been altered since 1989. This leads me to consider the general state of the market. The Market for Land at the Date of Valuation Mr Driscoll felt that the market had fallen since the last valuation because of the fall in cattle prices. This opinion was supported to some extent by that of Mr Bishop who felt that the market for land had fallen in the last five years. However, he gave no specific instances, apart from the sale of "Bedourie". Mr Driscoll's opinion seems to be based largely on the difference between the price which the Driscoll Pastoral Company was prepared to pay for "Oakland Park" in July 1996 and the subsequent sale some seven months later for $135,000 less. However, the earlier offer did not result in a concluded sale and, at best, represents what an adjoining owner was prepared to offer on the day. The fact that the vendor was prepared to accept less money some seven months later does not prove a fall in the market. The evidence of Mr Bishop tends to confirm that the vendor may well have had over- optimistic expectations of the market until, on the advice of his agents, he was prepared to accept a realistic price. Mr Bishop's evidence of the state of the market was general rather than specific, and not sufficient to prove a falling market between 1996 and 1997. His opinion was that the market had come back from the heady days of the 1980s, when much of the Bauhinia Downs area was growing grain. He also ventured the general opinion that the market had fallen in the last five years. However, that opinion was not backed by specific sales. In my opinion, the best evidence of value as at 1 October 1997, is the sale of "Oakland Park". If Mr Craig's analysis of that sale is correct, and I have found that it withstood the challenge mounted by the appellants, then it demonstrates an increase over the previous valuation. Having regard to the figure applied to "Oakland Park" itself, it seems to me that the increase has been applied conservatively. The appellants have not produced evidence of any other sale to indicate a different market level. -- 11 of 13 -- 12 Conclusion Section 45(4) of the Act places the burden of proof upon the appellants. If they fail to discharge that burden then the valuations made by the respondent are deemed to be correct. Section 33 reads as follows: "Any and every valuation, or alteration to the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered." In Brisbane City Council v. The Valuer-General for the State of Queensland (1978) 140 CLR 41 at pp.56-67, the High Court considered the provisions of the predecessor to s.33 (s.13(7)) of the Act. Gibbs J (as he then was), with whom the other members of the Court agreed, said: "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 … In my opinion once it is shown that a valuation was made by a method fundamentally erroneous the presumption is rebutted." In these cases, there is no evidence that the respondent acted upon a wrong principle. On the contrary, I have found that Mr Craig adopted the correct principles in accordance with the provisions of the Act. Nor can it be said that the respondent made a serious error of fact. There was general agreement on the facts of these cases, the issues between the parties arose from the interpretation of those facts. Finally, it cannot be said that the respondent made the valuation by a fundamentally erroneous method. As I have found, Mr Craig adopted the approved method of direct comparison of the subject lands with sales of comparable lands. While issue was joined about the comparability of those sales and the analysis of one of them, I can find no great fault with Mr Craig's approach. In these cases, the appellants have raised issues of fact and law which have been of real concern to them . They were not trivial issues, but matters of real importance. However, despite the best efforts of Mr Mowatt and Mr Driscoll, they were not able to rebut the respondent's cases in either fact or law. Indeed, without professional legal and valuation assistance, it would have been extremely difficult for any appellants to meet the required standard of proof and to challenge the basis of the valuations. In the circumstances, I have no alternative other than to find that the appellants have not discharged the burden of proof and that the statutory presumption of correctness of the valuations must stand. -- 12 of 13 -- 13 Accordingly, the appeals are dismissed and the unimproved values of the Chief Executive are affirmed. JJ TRICKETT PRESIDENT OF THE LAND COURT -- 13 of 13 --