Armstrong v Chief Executive, Department of Natural Resources [1998] QLC 151

LAND COURT, BRISBANE 4 December 1998 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll Nos: 81593 and 81594. (AV97-437). Roy T Armstrong v. Chief Executive, Department of Natural Resources AND (AV97-436) Roy T and Helen M Armstrong v. Chief Executive, Department of Natural Resources (Hearing at Ipswich) D E C I S I O N Background: These two matters deal with two adjoining properties located at Ipswich - Rosewood Road, Rosewood, and described as Lots 6 and 7 on M111829, Lot 1 on RP35498, and Lot 1 on RP35529 (AV97-436 - Parcel A), and Pt A of Lot 122 on CC3641 (being permit to occupy 6790; part of Reserve 346), Lots 3 and 4 on M111829, Lot 2 on RP 35498, Parish of Walloon, and Lot 2 on RP 176308, Parish of Jeebropilly (AV97-437 - Parcel B). Parcel A has an area of 90.363ha, and Parcel B has an area of 110.3 hectares. The properties are located about 2.5 to 3kms south-east of Rosewood, and about 16kms south-west of Ipswich. The southern boundaries of the properties adjoin the Bremer River. There is good access to Parcels A and B from Ipswich - Rosewood Road which is bitumen sealed, and Lot 2 on RP 176308 has access to Ebenezer Road which is also bitumen sealed. Telephone and electricity are connected to both parcels, and mail and school bus services are also available along Ipswich - Rosewood Road. Parcel A comprises open blue gum flats, while Parcel B consists mostly of open blue gum flats on the northern land with a frontage of 2kms to the Bremer River. [1998] QLC 151 -- 1 of 12 -- 2 The southern part (30%) of 33 hectares comprises Lot 2 on RP 176308, being easy to moderate forest ridges, and is separated from the rest of Parcel B by about 900 metres. Parcel B also has access to water from an irrigation bore for 9,000 to 10,000 gallons per hour, and a 12-hectare irrigation licence from the Bremer River. Parcels A and B are used in conjunction as a dairy farm, and have been valued under section 17 of the Valuation of Land Act as for that purpose. Parcel B consists of two separate parcels which do not adjoin, and have been valued as a single assessment under sections 34(1)(b) of the Act. The Chief Executive, Department of Natural Resources, issued valuations on 3 March 1997 for Parcel A ($185,000) and Parcel B ($210,000). Following objections the Chief Executive confirmed those figures on 2 October 1997. The appellants have now appealed those figures claiming the unimproved value should more properly be $145,000 (Parcel A) and $150,000 (Parcel B). Mr T Armstrong appeared for the appellants, calling evidence from Mr RT Armstrong. Mr D O’Connor appeared for the respondent, calling evidence from Mr DR Wall, the Departmental Registered Valuer responsible for determining the valuations. These matters were heard in conjunction with another matter for Mr TR Armstrong (AV97-438), and part of that evidence should also be considered in this matter. The Evidence: (1) The Nature of the Land - Mr RT Armstrong argues that he has extensive experience in farming in that area since 1975, and claims that there are considerable differences in soil types upon Parcels A and B. He argues that, while the soils have good nutrient fertility, they also have problems with a clay subsoil and extensive waterlogging. There is little arable land, and he is unable to cultivate successfully other than for clover or rye grasses for fodder for his cattle. He feels there is little comparison with soils on other lands along Warrill Creek or in the Lockyer Valley. The agricultural suitability study of the Moreton Shire, undertaken by the Department of Primary Industries, classifies the land as limited arable B type soils. Mr Armstrong confirms the existence of two bores plus an irrigation licence upon Parcel B. However he notes that there has been a drop-off in the capacity of the main bore from 15,000 gallons per hour, to now 9,000 per hour. He notes that capacity has not increased since the heavy rains of May 1996. He believes that there is a local influence as well as the general drought which is causing the decline in bore -- 2 of 12 -- 3 capacity. His experience, and that of his neighbours upstream, suggests that the current excavation (80 metres deep) in the Ebenezer Mine is causing reduction in the water table. The bores are for stock and domestic purposes, and there are two bores on Parcel B, and one windmill bore on Parcel A. Mr Armstrong advises that one farmer interviewed by Mr Armstrong as part of preparation for this appeal, had access to water from other underground mine workings, but had also experienced a decline in his bore capacity. Mr Wall confirms Mr Armstrong’s conclusions in respect of the soils and underground water. However Mr Wall argues that since the long dry period in the early part of this decade, all underground water supplies in the area have been reduced. Mr Wall also notes that the Ebenezer Mine has purchased various parcels along the Bremer River, which has the effect of reducing the number of users drawing from the stream. He suggests that such a reduction in water use from the river would, in some way, help in reducing any impact from the mining excavations. In comparing the availability of electricity services to Parcels A and B, Mr Armstrong argues that electricity had to be brought about 0.5 to 1 km from the north side of the Bremer River. Such costs, he argues, should be reflected in the unimproved value of the subject lands. However, while Mr Wall concedes such costs should be allowed for, he argues that would not be significant in determining the unimproved values. Mr Armstrong also argues that, as the appellants work Parcels A and B as a single farming enterprise of some 200 hectares, the rate per hectare should reflect that larger area. Mr Wall argues that Parcels A and B are held in different names, and therefore must be assessed as smaller separate valuations. Mr Wall concedes that had the two parcels been held as one single assessment, then a reduction of some 5% to 10% might be applicable. It was noted that the appellants also ran their cattle on about 20 hectares of agisted land across the Bremer River, and currently held on a legal standing arrangement from the Ebenezer Mine. The conditions of the lease are such that the mine can rescind the lease on 6 months notice, and the lease rental is only nominal. The lease has advantages to both the mine and the appellants in that it removes any third party who may become the source of unrest and complaint, and the appellants in turn benefit from not having to fence off part of the Bremer River. (2) Use for Farming - -- 3 of 12 -- 4 There is agreement between the parties that the appellants milk about 160 head of cattle upon the subject lands, and raise a further 30 heifers upon another property in the area. It is also agreed that the land is to be valued for “farming” purposes under section 17 of the Act. (3) Changes in the Unimproved Values - The matter of significant changes in the recent unimproved values, and whether they were supported by other indicators in the community, was also discussed similar to that found in AV97-438. I had previously analysed those conclusions in that matter, and do not intend to repeat myself here. For a full examination of those reasons please refer to that decision. (4) Relativity - The matter of relativity was also canvassed in my decision in AV97-348, and has similar relevance to this matter. In considering relativity between Parcel A ($2,047 per hectare) and Parcel B ($1,909 per hectare), Mr Wall notes that, while the northern part of Parcel B is seen as superior to Parcel A because of the better availability of water, the overall rate per hectare is reduced because of the nature of the 33 hectares of forest country in Lot 2 on RP 176308 in Ebenezer Road. (5) The Impact of Mining The impacts of the mining operations are similar to those discussed in AV97- 348, however, because of their closer proximity to Parcels A and B (400 metres to Parcel B and 1 km to Parcel A), they have greater severity upon the current subject lands. The extension of the mine to the south-west will further exacerbate those impacts. The presence of the bund wall at the date of valuation had a severe impact upon Parcel B, in that it tended to increase the impact of flooding by damming the river water from spreading out into the mine area. That is discussed later in this decision. In respect of comparing the impact of the mine upon Mr Wall’s Sale 2 in this matter, I believe the subject lands are more severely impacted due to their location. A matter previously discussed was the possible impact upon the underground water table as a consequence of mining activities. While there is no conclusive evidence that those matters are directly connected, the persuasiveness of the physical nature of the mining excavations to a depth of 80 metres lends some weight to their credibility. I am advised that the alluvial soils in the area go to a depth of only 20 metres, and the underground water runs into the open cut face of the mine at a depth of some 80 metres, in spite of efforts to backfill the excavation with rocks. In an effort to locate -- 4 of 12 -- 5 further underground sources of water, Mr Armstrong has drilled 6 test holes recently achieving only a maximum flow rate of 4,500 litres per hour. The drop in the water table and flow rate has had an impact upon the productivity of the farm and, in Mr Armstrong’s opinion, hence the unimproved value of the land. In the matter of noise and dust pollution from mining excavations, Mr Armstrong has good relations with the mine management, who seek to co-operate as adjoining neighbours. The mine management has shown no interest in acquiring the subject lands, even had they been for sale, but, because of closer residential settlement problems in other directions, blasting often occurs when prevailing winds blow towards the subject lands. Mr Armstrong understands that, in those circumstances, it is the lesser evil for mine management. However that does not reduce the impact upon Parcels A and B, even though the major impact is air blast rather than noise. Mr Armstrong also notes that he has had a problem with high cadmium contamination in his beef on one occasion, which he feels was some way affected by leaching from the mine. While he cannot prove that connection, he argues such doubts raise unhealthy concerns about the impact upon the farm as a consequence of mining. Mr Armstrong also notes that the mine virtually owns all of the land for 5kms downstream on the southern side of the Bremer River. The mine tends to remove objectors by buying them out to use the land as buffer zones. Mr Armstrong is also aware that allowance was formerly made in the unimproved value of Parcel B to allow for the Ebenezer branch railway line, and that reduction is included in the current values. (6) Flooding - A key issue for Mr Armstrong is the impact of flooding from the Bremer River. He notes that, while Mr Wall’s Sale 2 has been selected to demonstrate land that is subject to flooding, Mr Armstrong argues that Sale 2 is on Western Creek and not on the Bremer River, so that Parcels A and B are subject to greater flows of water. Mr Armstrong has a good understanding of the probabilities of flood prediction, and argues that he has recently experienced two severe floods during 1988 and 1991, which totally inundated the property. He provides photos taken, presumably at the height of those floods, which show all of the lowlands under water. The floods occurred prior to the erection of any bund wall around the mine. To support his concerns Mr Armstrong provides extracts from a flood impact assessment study by consultants for an Environmental Management Overview Study for the Ebenezer -- 5 of 12 -- 6 Mine. The impact assessment investigated three potential locations for a new bund wall to protect the mine, recommending a mid-path option (Option 1), which is claimed to be a compromise between winning all the available coal deposit, and minimising impact upon the area. The outcome of Option 1, which has been adopted by the mine, is to raise a normal 1:10 year flood in the Bremer River by some 0.31 metres at about the location of Parcel B. The rise in the flood height at that point, because of the bund wall, was predicted to be: Flood Frequency Additional Height of Water 1:2 years 0.11 metres 1:10 years 0.310 metres 1:20 years 0.340 metres 1:100 years 0.350 metres Mr Armstrong notes that Mr Wall argues that the flood assessment study claims that it is unlikely that the residents upon Parcels A and B would suffer any flooding above floor level, unless there was a severe flood in excess of 1:100 year frequency event, during the operational life of the bund. The report goes on to state that the probability of such an event during the expected operational life of the bund wall was considered unlikely. As the operational life of the bund was unknown, the engineers provided a comparison of recurring stream flows for periods for the bund from 3 to 10 years. The report concluded that the western extension of the mine, and its operational retaining bund wall, would have only minimal impact on flood levels or stream velocity. However, the report conceded that any impact will be limited to the area immediately adjacent to the mine site. However, Mr Armstrong argues that the report ignores several important impacts upon the subject lands, which are virtually unique to those parcels. During his lifetime of living upon the property, Mr Armstrong has experienced five or six occasions when the flood waters have virtually practically covered the entire property. The floods in 1988 and 1991, he estimates, were of a frequency of 1:20 years, and any increase in the flood heights due to the bund wall would, in his opinion, be devastating to his livestock. Because of his location immediately adjoining the bund wall, the maximum damage would occur to the subject lands. As an example of his almost unique disabilities from the bund wall, Mr Armstrong cites a past experience, where he lost 10 heifers drowned during flooding. A former bund wall in place in October 1996, had caused flooding in the area of his -- 6 of 12 -- 7 land to occur, much sooner than otherwise. However, he concedes that darkness had occurred on that occasion at a critical stage in the flood, which had also played a role in the loss of cattle. He also agrees that flooding is a greater problem in Parcel B than on Parcel A. Mr Wall concedes that, as the proposed new bund wall will not be built for a further 18 months, any additional impact from increased flooding from that wall has still to be applied to the unimproved values. (7) Comparison of Sales - In support of his estimate of the unimproved values Mr Armstrong also relies upon the sales discussed separately in AV97-348, and in particular compares that Sale A as superior to the subject lands, Sale B as similar in fertility, and Sale C as superior. Mr Wall provides the following sales for comparison:  Sale 1 - (Warrill View Peak Crossing - Pegg to Korner). This is the same sale as Sale A in AV97-438. The sale has a total area of 110.78 hectares and comprises two transactions, as the property is held in different ownerships. The sale comprises blue gum flats of 52 hectares (47%) which is better quality cultivation, and 45 hectares (42%) of heavy wet soils. The balance of 12 hectares (11%) comprises creeks and gullies. It has frontage to Warrill Creek and a good water supply. Overall the sale is seen as superior on a per hectare basis due to water availability and country type. Services, access and topography are all similar, and both sale and subjects are affected by flooding. The sale sold in February 1996 for $900,000, which after allowing for improvements was analysed at $394,900 ($3,565 per hectare), and applied at a notional unimproved value of $385,000 ($3,475 per hectare).  Sale 2 - (Reilly’s Road, Mt Walker - Lot 6 on CH 3150.) This is the same sale as Sale C in AV97-438. The sale has an area of 38.85 hectares and comprises level blue gum flats with frontage to Western Creek. There is a small bore (3,000 gallons per hour), and a 12-hectare water licence. The sale is entirely subject to flooding, and is within 150 metres of the Rosewood sewerage treatment works. Access is via Reilly’s Road which is formed gravel. Overall the sale is superior on a per hectare basis, mainly due to its smaller size and forest ridge component. The sale has similar services and location, but inferior access, and is close to the sewerage treatment works. The sale is also subject to flooding. -- 7 of 12 -- 8 The sale sold in September 1997 for $184,000, which after allowing for improvements was analysed at $98,404 ($2,533 per hectare), and applied at $95,000 ($2,445 per hectare).  Sale 3 - (Lubes Road, Warrill Creek - Lot 81 on CC3477). This sale of 56.175 hectares - Chandler to Burton - is the same sale as Sale 2 in AV97-438. Overall the sale is seen as inferior to the subjects on a rate per hectare basis, due mainly to inferior country, topography and access. Services are similar, and both the sale and subjects are subject to flooding. However the sale is smaller and has superior water available. The sale was analysed to have an applied rate of $1,780 per hectare.  Sale 4 - (Cunningham Highway, Mutdapilly - Guardian Trust Australia to Bradshaw.) This is the same sale as Sale B in AV97-438. The sale has a total area of 181.65 hectares, and comprises 48 hectares (26%) of blue gum flats suitable for cultivation, with the balance 133.65 hectares (74%) low-lying flats with low forest ridges. The sale fronts Cunningham Highway to the west, and Warrill Creek to the east, and was previously used as a dairy farm. Overall the sale is seen as inferior on a rate per hectare basis, due to its lesser cultivation area and overall larger size. Services and access are similar, and both sale and subjects are subject to flooding. The sale sold in June 1997 for $705,000, which after allowing for improvements was analysed at $314,390 ($1,730 per hectare), and applied at $290,000 ($1,596 per hectare). Mr Wall confirms that the previous sale of Sale 4 for $1,395,000 in 1987, contained a milk entitlement as a former operating dairy farm. At the time of the resale of that property in June 1997, the sale was no longer operating as a dairy, with no cattle or milk entitlement. It was in a run-down condition, with cultivation badly affected by weed. While the sale occurred well after the relevant date for valuation, Mr Wall considers that there had been no change in the property market in the intervening period, and, in accordance with principles discussed in Daandine Pastoral Company v. Commissioner of Land Tax (1943) 7 “The Valuer” 299, he accepts Sale 4 as a reasonable comparison. The principles of Daandine (supra) were discussed fully in AV97-438 and I will not repeat myself in this matter. There were several other sales mentioned briefly by Mr T Armstrong during AV97-438, although there were no in-depth analyses of those sales, some of which -- 8 of 12 -- 9 occurred as early as 1984, 1987 and 1993. In the end those comparisons provide little assistance in these matters. Decision: (i) The Nature of the Land - I note first that there is agreement in respect of the nature and capacity of the soils, and the declining availability of underground water. However, Mr Wall believes that the lessening of underground water availability is a wider phenomenon, not just related to the presence of mining operations in the area. While Mr Wall’s conclusion that a lessening of water demand on the aquifers, as a consequence of the mining company’s buying up downstream adjoining owners, may have some substance, the evidence of an 80-metre deep coalface, with percolating water into the backfilling of the mine, lends support to the view that mining operations are partially impacting the availability of water. In considering any costs that would be required to bring power across the Bremer River to the subject lands, I note that Mr Wall concedes there would be some small additional allowance made for that purpose. However I believe any additional reduction in the unimproved value is likely to be balanced by the additional benefit brought to the land as a consequence of the adjoining agisted land currently used under a nominal fee lease arrangement with the mining company. In the end I feel those matters balance each other out. In the matter of whether parcels A and B should be treated as one parcel, in view of their common use as a single dairy farm, I note Mr Wall’s advice that the Valuation of Land Act directs that any separate parcels held in different ownerships are to be valued separately. Any concessions allowed for the combined use of the land has already been provided for under section 17 of the Act, where it is agreed that the two parcels may be afforded “farming” status. Where there are separate parcels of land which adjoin, and which are owned by the same person, section 34(1) makes provision for them to be valued as one valuation. However, the key condition in that provision is that the land must be owned by the same person. In the current matters Parcels A and B are in separate ownerships, and it is appropriate for them to be valued as separate entities. (ii) The Impact of Mining - In considering the impact of mining upon Parcels A and B it is clear that those parcels are more heavily impacted than parcels further removed from the mine. It is -- 9 of 12 -- 10 also clear that, because of the paucity of people residing to the south-west of the mine, as prevailing breezes tend to come from the north-east, the subject lands are likely to suffer the maximum impact from any noise or dust from the workings of the mine. It is also noted that allowance has already been made in the valuation for the impact of the Ebenezer spur railway line, and the general presence of the mining operations. Once those operations commence excavating in the new area towards the south-west, the impacts will further increase. However while they are yet to commence, the potential impact is likely to influence public expectation about a declining value for the land. (iii) Flooding - The largest disability I believe lies in the potential for extensive flooding of the parcels, particularly Parcel B, which is nearest to the mine. I am aware that Mr Wall has sought comparison with other similar lands which are also subject to flooding. However, I believe the former presence of the bund wall that existed in October 1996, and the impending new bund wall, both add to the general flooding potential in that area. I can understand that Mr Armstrong draws little comfort from the conclusions of the flood assessment study that the farm residence is unlikely to be flooded except in most unusual circumstances. As Mr Armstrong notes, if the residence (which is on 2-metre stumps) was to be just clear of the flood waters, then the entire farm and livestock would be completely washed away. It may be a reasonable conclusion for the flood engineers to assume that the impact of the new bund wall will only raise the flood level by 0.31 metres during the 1:10 year flood, but any prudent purchaser would take that into consideration when deciding on the value of the land. Because the bund wall will be an essential part of the future mining operation, in order to prevent flooding of the mine area, its probability of occurring is very high. For that reason it would, in my opinion, be reasonable to make some provision for impact of that bund wall, even prior to the construction of a wall. Because of the special location of Parcel B in relation to the bund wall, I believe any reduction would be constrained almost totally to Parcel B, with a lesser impact upon Parcel A. If a potential prudent purchaser of the subject lands was to consider the risk of not making any allowance for the increased flooding, he would need to consider such a likelihood in the context of the mining operation. The fact that the mining company has already decided to proceed with the new bund wall in a mid-location (Option 1), and as a consequence to forego some underground coal, -- 10 of 12 -- 11 1 $ 3,475 110.78 Inferior Inferior 2 $ 2,445 38.85 Inferior Inferior 3 $ 1,780 56.175 Superior Superior 4 $ 1,596 181.65 Superior Superior Applied Rate Per Hectare Adopted $2,047 $ suggests that the mining company sees potential flooding as a real risk to the mine. As a corollary of that conclusion, there is also a real risk to the farming operations of the subject lands. (iv) Comparison of Sales - In considering the sales evidence provided, I see little to discredit Mr Wall’s sales. He has sought to apply comparable lands, all generally subject to flooding. As discussed in AV97-438, I see little support for the argument to discredit the current method of direct comparison of sales in contrast to seeking support from any annual trend to be drawn from an analysis of old former sales of property. For the reasons explained in AV97-438, I will adopt a direct comparison of sales as the preferred method. In summarising I find that Mr Wall has determined: Sale Applied Rate Per Hectare Area (hectares) Comparison Parcel A Parcel B (90.363ha) (110.3ha) 1,909 On the basis of those comparisons I find there is nothing to discredit Mr Wall’s conclusions. However as discussed earlier I believe that Mr Wall has underestimated the potential impact of the flooding, particularly as a consequence of the new bund wall soon to be built. Allowing for the differences in area of Sales 2 and 3, it is likely that a further allowance for flooding could reduce the rate per hectare to approximately $1,950 per hectare (Parcel A) and $1,800 (Parcel B) respectively. On that basis reasonable unimproved values would be $175,000 (Parcel A) and $200,000 (Parcel B). Conclusion: Having considered the whole of the evidence I am persuaded that the appellants have partly proved their case. The unimproved values as determined by the Chief Executive are set aside, and the unimproved value of Parcel A (AV97-436) is determined at One hundred and seventy-five thousand dollars ($175,000); and -- 11 of 12 -- 12 the unimproved value of Parcel B (AV97-437) is determined at Two hundred thousand dollars ($200,000). (NG Divett) Member of the Land Court -- 12 of 12 --