Brenchley v Chief Executive, Department of Natural Resources [1998] QLC 45

LAND COURT BRISBANE 6 May 1998 Re: Determination of Unimproved Value - Local Authority: Hervey Bay - (V97-59). NC and SN Brenchley v. Chief Executive, Department of Natural Resources (Hearing at Brisbane) D E C I S I O N This is an appeal against the determination by the respondent Chief Executive of an interim unimproved valuation of $706,000 for a 1,009.534 hectare parcel of land described as Lots 13 and 14 on Plan C37299, Lots 97, 99 and 100 on Plan 893007 and Lots 3, 4 and 98 on Plan 893008, Parish of Walsh, County of Cook. The land is situated between Burrum Heads Road and the Burrum River, approximately 7 kms south of the township of Burrum Heads. Access to the land is via the bitumen sealed Burrum Heads Road, or via Raintree Avenue which is also a bitumen sealed road. The land is zoned "Rural" under the provisions of the Hervey Bay City Town Planning Scheme which was gazetted on 29 March 1996. Under the provisions of the Plan, the minimum subdivisional size permitted is 50 hectares. The relevant date for the determination of the unimproved value is 1 January 1996, and the date of issue of the valuation which was made under the provisions of section 28 of the Valuation of Land Act 1944 was 19 December 1996. The valuation under appeal was made by the Chief Executive on the basis of the highest and best use of the land as a rural homesite subdivision. The appellants contend in the notice of appeal for an unimproved value of $153,000 on the basis that the land should have been valued under the provisions of section 17(2) of the Valuation of Land Act as land used for the purposes of "farming". In the event that the Court finds that the land should be so valued then the respondent Chief Executive would have valued it at $140,000, a valuation with which the appellants understandably agree. The subject land can generally be described as consisting of easy undulating coastal forest country (often called wallum) running down to the tidal Burrum River frontage. It is in virtually an unimproved state with only natural commercial timber having been harvested. The valuation was made by Registered Departmental Valuer Bryan Allwyn Lyons as [1998] QLC 45 -- 1 of 9 -- 2 follows: Lot 13 - $165,000 Lot 14 - $165,000 Lot 97 - $300,000 Lots 99 & 100 - $126,000 Lot 3 - $ 65,000 Lot 4 - $ 65,000 Lot 98 - $200,000 $1,086,000 Less 35% bulk holding allowance $ 380,100 $ 705,900 Say, $ 706,000 or 1,009.534ha @ $700 per ha - $706,673 Say, $ 706,000 Norman Charles Brenchley represented himself and his wife appellant and furnished evidence in support of the grounds of appeal which read: "1.We object to the valuation applying to our land as contained in the Notice of Valuation issued by the Department of Natural Resources as the land is used in the course of a primary production business and has not been valued as such. 2.We object to the valuation as we are primary producers and our land is exclusively used for the business and purposes and activities of farming, specifically grazing and forestry, and complies with the conditions as contained in section 17 of the Valuation of Land Act 1944 and should be valued as such. 3.We contend that the correct valuation applicable to our land is the valuation that previously applied, being $170,000 less approximately ten percent. The reduced valuation is applied by taking into account the fall in value of rural properties due to the significant rural downturn. " The test as to whether during any given relevant period land falls to be valued for the purposes of farming is embodied within section 17(2) of the Valuation of Land Act 1944. The sub-section defines "farming" for us as follows: " "farming" means - -- 2 of 9 -- 3 (a)the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or (b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock; if the business or industry represents the dominant use of the land and - (c)has a significant and substantial commercial purpose or character; and (d)is engaged in for the purpose of profit on a continuous or repetitive basis. " Mr Brenchley says that the valuation under appeal reflects a change in its basis from primary industry to non-primary industry. The appellants object to this change as they claim the land is primary industry production land and should be valued as such. Mr Brenchley regards the farming activities on the land comply with the requirements of section 17(2) of the Act as the farming business is that of cattle grazing and forestry, that it has a significant and substantial commercial purpose, and that it is engaged in for the purpose of profit on a continuous or repetitive basis. Mr Brenchley correctly submits that section 17 of the Act excludes enhancement of the value due to potential subdivisional use of the land. He submits that as at the relevant date for the valuation (1 January 1996), none of the then-proposed subdivisional lots had been sold. The subdivisional plan was not registered until 5 February 1996, and for this reason Mr Brenchley urges the Court to find that the Chief Executive has erred in valuing the land as for its highest and best use (rural residential land). Mr Brenchley told us that the appellants have owned the land since 1972. They are farmers who live on a property called "Nanlindy", in the Bendemeer District of New South Wales. Mr Brenchley says that the farming activities carried out by the appellants on the subject land include that of cattle grazing with agistment cattle having been on the property for various periods since 1972. The last period during which cattle were agisted ended in 1995 when the agreement was terminated due to the failure of the agister to meet his dues. Since that time, advertisements have been run for replacement agistment, but boundary fencing which apparently was removed as part of the subdivisional development has not as yet been repaired and/or replaced. Until this is done, there is difficulty in agisting the land for livestock. Mr Brenchley told us that since 1990, the appellants had spent $9521.25 in direct labour and materials exclusively on re-fencing the entire boundary of the property - together with rebuilding the cattle yards for the purpose of grazing cattle. Mr Brenchley outlined the history of the sale of timber from the land which he says the appellants originally purchased because of its timber stands and cattle grazing potential. They -- 3 of 9 -- 4 at one time owned a large timber mill at Kempsey and are experienced in the industry in New South Wales. The first sale of timber was made in two contracts to millers Hyne & Son of Maryborough. They were in 1990 for the sum of $44,173 and in 1991 for the sum of $22,494. Mr Brenchley does not think there have been any earlier sales of timber from the block. Between 26 January 1991 and 12 October 1992, a Mr Doug McCarthy of Brooweena was contracted to cut sleepers. He cut 3,265 sleepers in the period which yielded the owners about $16,000. A Mr Kevin Muller of Burrum Heads set up a small sawmill on the land to cut landscape timbers. From February 1994 to February 1995 Mr Muller sold landscape timbers which netted the owners $9,000. At present Mr Brenchley says that negotiations for the sale of more timber are being again made with Hyne & Son for wood chipping. Mr Brenchley told us that the balance of good young straight trees are to be grown out as future millable logs. Mr Brenchley does not practice any timber husbandry of the naturally grown native species of timber other than for an occasional burn - perhaps annually or every two years. He says it is not necessary to "farm" native timbers. Mr Brenchley informed the Court that financial hardship in the farming industry was the catalyst in him selling timber from the land in 1990 and 1991. For the same reason, combined with the lack of desire of his sons to continue with his farming interests, the appellants decided to sell the subject land. It was placed in the hands of a local real-estate agent originally for sale as a whole. Although some market interest was shown, no sale resulted. It was then that Mr Brenchley decided to subdivide the land as agents suggested to him there was a demand for rural homesites (50 hectares). The owners had to construct an internal subdivisional road (known as "The Yachtsman's Drive"), which was built under a contract for $221,000. In addition, electricity reticulation cost $37,000, survey fees $28,000, and the Council required upgrading of its access road through the subject land to a national park on its northern boundary at a cost of $200,000. Because of these costs outlays, Mr Brenchley considers that the valuation made by Mr Lyons on the basis of its highest and best use is in error in that the above costs should have been subtracted from his gross realisation figure ($1,086,000) instead of the allowance for bulk holding (35% - or $380,100). This contention is not sustainable since the bulk holding allowance in the valuation process is just what it is - an allowance for discount for a bulk holding of a number of lots - not an allowance for subdivisional development costs. During the course of his evidence, Mr Brenchley was asked to confirm the prices at which the subject subdivisional lots were listed for sale in May 1996 at Hookers Real Estate Agency in Hervey Bay so as a comparison could be made between the asking prices for the subdivisions and the valuation of them by Mr Lyons. Mr Brenchley confirmed that the listed prices were above the valuations under appeal, but nothing turns on this as it is well established in this jurisdiction that asking prices do not constitute a valid basis for valuation. Evidence of -- 4 of 9 -- 5 concluded sale contracts are to be preferred. Mr Lyons has made the valuation on the basis of the land's highest and best use with reference to three sales of vacant rural homesites. Details are: Sale 1 - Lot 42 on Plan MCH127, Parish of Vernon - 402.9 hectares - Stowline Investments Pty Ltd to Fannie Bay Investments Pty Ltd on 27 August 1994 for $325,000 - analysed unimproved value $300,000 ($750 per ha). Unimproved value applied $100,000 (concessional valuation under section 17) - situation Toogoom Cane Road, approximately 5 kms south east of Toogoom. Mr Lyons comments that this property was purchased by an investor for future subdivisional potential. It is being used for grazing cattle. Mr Lyons considers the sale property to be inferior to the subject as it is smaller but it has a superior location. The country type is similar but the sale property does not have any river frontage. Overall Mr Lyons considers this sale property to be slightly superior to the subject on a per hectare basis, mainly due to the size difference. Sale 2 - Lot 1 on RP 217481, Parish of Vernon - 19.64 hectares - R & G Harry to R & S Moller on 17 July 1995 for $142,000 - analysed unimproved value $120,000 - applied unimproved value $115,000 - situation Toogoom Road, approximately 4 kms south of Toogoom. Mr Lyons says that this sale lot has good bitumen road access and a good waterfrontage to Beelbi Creek, and a superior location to the subject land. Sale 3 - Lot 151 on Plan C37810, Parish of Walsh - 64.75 hectares - Burrum Park Estates Pty Ltd to Yacf Pty Ltd on 26 September 1996 for $225,000 - analysed unimproved value $225,000 - applied unimproved value $220,000 - situation approximately 1 km west of Burrum Heads on the Esplanade. Mr Lyons points out that this is an after relevant date sale, but indicative of values at the date of valuation. The sale property has poor earth road access and only has esplanade frontage and not river frontage. Mr Lyons sees the sale land as having a superior location on the river, being closer to the river mouth. He says the sale land is superior to the subject lots but it supports the values applied to the individual lots. There is another sale (Sale 4) which took place well after the relevant date for valuation under appeal. Details are - Sale 4 - Lot 3 on RP 893008, Parish of Walsh - 50.23 hectares - SN & NC Brenchley to J Mendez on 1 October 1997 for $65,000 - analysed unimproved value $65,000 - applied unimproved value $65,000 - situation "The Yachtman's Drive", approximately 9 kms south-west of Burrum Heads. It is to be noted that Sale No 4 land is part of the subject property (Lot 3 on RP 893008). Notwithstanding that it is a post-relevant date sale, Mr Lyons believes it gives support to -- 5 of 9 -- 6 his valuation of Lot 3 since the market for rural residential sites in the area certainly has not increased and probably reflects a decrease since the relevant date. I note that Mr Brenchley agrees with Mr Lyons about this market trend. Mr Lyons does not feel that farming activities carried out on the subject land during the relevant period are such for it to be valued under section 17(2) of the Act as land used for the purposes of "farming". He says there is quite a lot of useless timber on the land and that a normal practice of farming timber would involve the thinning-out of the poorer timber. Mr Lyons says that basically he saw the early 1990s as having quite a quantity of timber sales when the first sales occurred since 1972, and that this sale and subsequent sales did not amount to a significant volume of timber sales when converted to an annual basis. Mr Lyons concludes that the farming activities do not meet the test for the application of section 17(2) emanating from previous cases in this Court. Mr Brenchley had some difficulty during the case coming to grips with the proposition that while the appellants' land has to be valued at the relevant date for valuation (1 January 1996), events such as whether the subsequent use of the land qualifies it to be valued under section 17(2) as land used for the purposes of farming, and that the land was subdivided by them after the date of valuation can be taken into consideration in the valuation process. But the principle that events which have taken place between the relevant date of the valuation and the date of issue of such valuation can be considered has been entrenched in the valuation process since as early as 1978 following the judgment of the Land Appeal Court in Re: Appeals by GA and BH Walker against determinations of the Valuer-General - Shire of Maroochy (1978) 5 QLCR 347 where at p. 349, in respect of a valuation concerning the application of the now repealed section 11(1)(vii) of the Valuation of Land Act 1944 (the business of primary production arm of the Act), the Land Appeal Court endorsed a statement by the former President of this Court, Mr Smith, which reads: "As it is relevant to my consideration of the evidence, I should at this stage mention that my jurisdiction as to the use to which the subject lands are put is confined to the period commencing with the date as at which the value has to be found (31 March 1975) and finishing on the date as at which the notice of valuation issued (28 October 1976). If a business of primary production commenced later than 28 October 1976, its effect, if any, on the unimproved value of the land is properly a matter for an application for a revaluation in terms of section 13 of the Valuation of Land Act. I have no power to give retrospective effect in valuation form to exclusive use for any such business of primary production. Amongst the most significant cases concerning the application of Section 17 of the Valuation of Land Act in so far as to the consideration of the eligibility of activities for farming -- 6 of 9 -- 7 purposes during the relevant period is the judgment of the Land Appeal Court on 3 March 1995 in Re: AR Thomason v. Chief Executive, Department of Lands (1994-95) 15 QLCR 286, where at p. 293, that Court found that each and every element in the section 17(2) definition of farming (as previously set out) must be satisfied to establish that the land is being "exclusively used .... for the purpose of farming". But Mr Brenchley is of the view that if the use of the land complies with any one of the definitions (and he suggests it meets definition (d) since the activities are engaged in for the purpose of profit on a repetitive basis), then the test is satisfied. Now in the light of the Land Appeal Court's finding, the appellants' claim that section 17(2) should be applied in the valuation of the subject land must fail. Further, during the period during which it is competent for us to consider the activities on the land (commencing on the relevant date of the valuation - 1 January 1996, and ending on the date of issue of the valuation 19 December 1996) - there was no cattle grazing on the subject land. The agistee had been removed from the property, and the property was no longer stock proof due to the disturbance of the boundary fencing for the subdivisional development work. Further, there were no timber sales, only the prospect of some future woodchip timber sales to Hyne & Sons. I agree with the submission made by the respondent that there was no real farming activity on the land, and that if there was a business or industry of farming, there was certainly no input made to it by the owners. It may even be debatable, if and when the subdivisional lots are sold (and six have already been sold), that timber will ever be again sold from the blocks, but that is a matter for consideration in the future. Further, it cannot be said that the dominant use of the land during the relevant period was for the business or industry of grazing and forestry. It was clearly for rural residential subdivision with the subdivisional plans having been registered on 5 February 1996. The Court is indebted to Counsel representing the Chief Executive for reminding me of my unreported decision in Re ST and LM Hall v. The Valuer-General dated 21 November 1986, in which, again concerning an appeal against the valuation of land under the now repealed provisions of section 11(1)(vii) of the Act in a case where timber was naturally grown, the Court found itself fully in agreement with the remarks again made by the former learned President, Mr Smith, in Re CW Beaton v. The Valuer-General - Shire of Maroochy (1978) 5 QLCR 171 p.173, where the learned President said: "If this property is to receive the protection of the primary production basis of value afforded by section 11(1)(vii) of the Valuation of Land Act, the appellant is required to show that he exclusively uses the property for the business of primary production which, in the subject case, would be for the business of forestry. " On the facts enumerated in the Beaton case (the appellant had never done any work in the nature of tending or cultivating the naturally grown timber nor had he cleared undergrowth -- 7 of 9 -- 8 nor made firetracks, he just permitted the timber to grow naturally unaided by any effort on his part), the learned President could not hold that the appellant was using the land for a business, which connotes an activity, diligence and operation which would have some significant commercial purpose or character - a degree of substantiality or viability although not necessarily always profitable. In that case, with facts and circumstances quite like the present case, the learned President could not hold that the appellant was using the land for a business which would connote an activity, diligence and operation which would have some significant commercial purpose or character. One further matter deserves comment. Although Mr Brenchley did indicate that he was attempting to make further timber sales for wood chipping, he simply did not indicate the level of return expected from these sales nor from any other future sale source from the property. In all the circumstances of this case, I cannot find that the subject land was used during the relevant period for the business or industry of "farming". It follows that the appellants fail on this aspect of their case. I should now turn to consider the valuation of the land on the basis of its highest and best use, but the necessity to do so is virtually negated by the grounds of appeal as earlier outlined in this decision. Section 56(2) of the Valuation of Land Act 1944 provides, in relation to filing a notice of appeal against a valuation, that "such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every ground shall be on the owner". The grounds of appeal in this case cannot be construed in any other way than that they refer to the question of the use of the land for the purposes of "farming". Following my decision on this aspect of the appeal, that in reality is the end of the matter. But I should say, perhaps to inform the appellants, that virtually their only attack on Mr Lyons' valuation was that what he has valued is not the unimproved value of the land but the improved value (including the cost of provision of roads, electricity, etc.) has no foundation in law. These facilities cannot be regarded as improvements under the provisions of the Valuation of Land Act. Section 6(1) of the Act defines "improvements" as, in relation to land, improvements thereon or appertaining thereto, where the visible or invisible .... Now the so-called improvements in the form of roadworks and electricity reticulation are not on the appellants' land but on dedicated roadways and cannot be lawfully regarded as improvements. An authority for this finding is the judgment of the Land Appeal Court in the Appeal by PH Clough against the determination of the Valuer-General - Shire of Caboolture (1981-82) 8 QLCR 70 where at p. 73/74 in respect of this proposition, the Court said: "A road, or service (sewerage, water, electricity) are not in the strict legal sense appurtenant to a parcel of land. They do not belong to it as a property right. They do not pass with it as an appendage to its -- 8 of 9 -- 9 ownership. In point of fact the land in the road is owned by the Crown. Similarly the wires, pipes, or drains exterior to the parcel (and in some cases within the boundary of the parcel) are owned by the relevant service authority. No improvement which is not on the subject parcel or strictly appurtenant thereto can be considered an improvement for the purposes of section 12 of the Valuation of Land Act. " I might add that the now repealed section 12 of the Act was the definition section which includes the definition of "improvements". For the foregoing reasons, the appeal fails, and the unimproved value of Lots 13 and 14 on Plan C37299, Lots 97, 99 and 100 on Plan 893007 and Lots 3, 4 and 98 on Plan 893008, Parish of Walsh, as determined by the respondent Chief Executive in the sum of $706,000 is affirmed. (CH Carter) Member of the Land Court -- 9 of 9 --