Arthur v Chief Executive, Department of Natural Resources [1997] QLC 201

LAND COURT BRISBANE 18 DECEMBER 1997 Re: AV96-456 An appeal against an unimproved valuation - Valuation of Land Act 1944 - Local Government: Paroo M.E. and B.J. Arthur v. Chief Executive, Department of Natural Resources (Hearing at St George) D E C I S I O N As at 1 January 1996 the unimproved valuation of the land comprising the property "Yankalilla" is assessed by the chief executive in the amount of $270,000. This determination resulted from decisions by the chief executive to reduce the valuation as originally issued, first on objection, then under s.68 of the Valuation of Land Act (alteration after appeal). The owners' estimate of unimproved value is $220,000. "Yankalilla" is situated about 120 km south-east of Cunnamulla and contains an area of 37,156 ha being an aggregation of land described as Lot 5 on Plan NB32:GHFL 15/1414; Lot 1 on Plan NB26:GHFL 15/1476; Lot 2 on Plan NB26:GHFL 15/1526, Parish of Bundaleer and Lot 1 on Plan NO11:GHFL 15/1502, Parish of Widgeegoara. By the time the matter came before the Court, the appellants and the chief executive had reached agreement as to the nature and classification of country on "Yankalilla" and its carrying capacity, for sheep breeding and wool growing. Although the grounds of appeal were drawn widely, the single ground causing dispute is the owners' claim that the chief executive's valuation had not included proper allowance for the relatively expensive cost of providing adequate stock water on "Yankalilla". The appellants' case was conducted by their solicitor, Mr I. Coutts and Mr M.E. Arthur gave evidence in support of a tendered statement with various water-related attachments. Mr Paterson, barrister and legal officer with the Department of Natural Resources, conducted the chief executive's case. Mr B.M. Tannock, a senior registered valuer with the [1997] QLC 201 -- 1 of 8 -- Department was responsible for the valuation appealed against and gave evidence accordingly. The appellants are strongly of the opinion that the southern section, or part of the southern section of "Yankalilla" lies within a geographical belt which has comparatively poor access to the underlying Artesian Basin, resulting in generally low volume bore flows. That, in turn, results, in comparison with the high volume bores in other locations, in a significant limitation to the area of "Yankalilla" capable of being watered by the various individual bores. It was not suggested that "Yankalilla" is alone in this perceived disability. Mr Arthur produced a map showing the location of both low, medium and high-flow bores on neighbouring or nearby properties. He interpreted that information as indicating a pattern of low-flow bores affecting several properties including "Yankalilla". The properties favoured by the high-flow bores were capable of distributing water by extensive bore drain reticulation, which in terms of stock husbandry was considered a low cost, efficient and desirable feature regardless of water conservation inefficiencies. In contrast, water from low-flow and/or low-pressure bores required controlled and piped reticulation to specific points at significantly greater cost than bore drains with water conservation benefits offset by grazing inefficiencies and potential land degradation through concentration of stock at the watering points. "Yankalilla's" stock water was provided by a total of seven bores, augmented by private bore drain supply from other properties in the northern sector. Generally, subsoils are of a porous nature and unsuitable for construction of earth tanks. The oldest bore (No. 4517) located centrally in the southern section had been drilled in 1892, to a depth of 2,035 feet when most local bores were around 1,500 feet in depth. Even so, its initial flow was only 20,000 gallons per day when the flow from some of the older bores in the locality had flowed at well in excess of 300,000 gallons per day, allowing low cost bore drain distribution. Bore No. 4517 had subsequently receded in flow to the degree that it is now "just a trickle". The next bore to be drilled had been No. 4527, in 1905, near the western boundary northerly of the centre, with a flow of 600,000 gallons per day but at low pressure. That flow had subsequently receded to about 30,000 gallons per day by 1990. Another bore, No. 11683, was constructed in 1950 in the north-eastern quarter with an initial flow of about 70,000 gallons per day, subsequently reducing to about 30,000 gallons per day. Bore No. 12832 was drilled in 1955 but only to about 1,300 feet when the drill broke off, denying the full potential of the bore to be tested by further drilling. That bore flows at about 10,000 gallons per day and its use has been limited to a house and garden supply. Bore No. 11749 was drilled in 1951 in the south-western quarter westerly of Bore 4517. It flowed initially at 27,000 -- 2 of 8 -- 3 gallons per day but that flow had reduced to 11,000 gallons per day in 1952. Bore No. 12134 was then drilled in 1953 to the east of Bore 4517 and flowed at 21,000 gallons per day reducing to about 2,400 gallons per day in 1954. The bore was deepened in 1960 to flow again at about 22,000 gallons per day but that flow had reduced to about 5,800 gallons per day by 1968. In 1957 Bore No. 12796 was drilled towards the southern boundary and achieved a "substantially better flow" of about 106,000 gallons per day. Mr Arthur commented that "had that bore been the first bore constructed in that area it might well have been the only additional bore required to supplement the aborted supply from Bore No. 4517." As it happened, however, it had proved necessary to sink three bores additional to 4517 (being 11749, 12134 and 12796) to adequately water an area of only about 14,500 ha in the southern section of "Yankalilla". Mr Arthur had calculated that the replacement cost of all water facilities on "Yankalilla" would have been the equivalent of $11.09 per ha. In comparison the properties "Camden" which had an area of 32,570 ha and two bores with flow of 649,000 gallons per day into bore drains; "Avondale" of 17,150 ha with one bore flowing at 385,000 gallons per day to bore drains; "Widgee" of 21,450 ha with one bore flowing at 132,000 gallons per day to pipes and troughs and bore drains - had estimated water replacement costs of $4.29 per ha, $3.75 per ha and $4.46 per ha respectively. Mr Arthur had calculated the watering capacities of bores on 19 local properties including "Yankalilla". The average area served by each bore on "Yankalilla" was 13,116 acres as opposed to, for example, 40,167 acres on "Camden", 40,883 acres on "Avondale" and 53,005 acres on "Widgee". The property "Waverley" immediately to the south had, on that basis of comparison, an even worse disability than "Yankalilla" with the equivalent of only 8,741 acres served by each bore, while the properties "Penetrate" and "Barrygowan" the equivalent areas were 12,476 acres and 12,980 acres respectively. The property "Glen Oxford" adjoining to the south-west (and part of a basic sale property used for comparison purposes by Mr Tannock) had an equivalent area of 17,630 acres watered by each of its two bores. Mr Arthur took the view that the chief executive's valuation of $270,000 was "excessive to the extent of $50,000 and should be reduced to $220,000 to allow for the higher water costs which apply to our property when compared with the relatively low water costs which apply to the properties like 'Camden', 'Widgee' and 'Avondale'." There was however, no cogent explanation given to the Court as to why the valuation should be precisely $50,000 -- 3 of 8 -- 4 less than that determined by the chief executive. Neither was the Court informed as to the valuations applied by the chief executive, to the three abovenamed properties. Mr Tannock was well aware of the appellants' opinions relative to the cost of watering "Yankalilla". After reviewing the initial valuation he was satisfied that the valuation now appealed against was not only well supported by the sales evidence but demonstrated reasonable relativity, at least on the basis of the nature of the country, with valuations applied to neighbouring properties. A locality map which identified various neighbouring or nearby properties and the applied hectarage values was tendered with Mr Tannock's valuation report. That information did not however identify the overall valuations applied to the total aggregations of the properties "Camden", "Widgee" and "Avondale". The property "Waverley" which was identified by Mr Arthur as having an even greater disability relative to flows from bores, had an applied value of $9.08 per ha (in comparison to "Yankalilla's" $7.25 per ha). However, as I understood the evidence, "Waverley" also had overall superior country. The crux of the issue between the parties is that Mr Tannock does not accept that "Yankalilla" has any different relationship with the underlying artesian basin than any other property in the locality. He held this view regardless of the history of drilling on parts of "Yankalilla" and the high flows which had been obtained from other bores in the locality. His opinion as it related to the underlying artesian basin was based on his interpretation of relevant geological mapping of the locality. He claimed no particular expertise in hydrological related matters, but believed that poor flow performances from at least some of the "Yankalilla" bores may have been the result of unsatisfactory construction techniques. In any event, as he interpreted modern licensing requirements, the volume of artesian flow from bores is now controlled by the Department of Natural Resources and is required to be reticulated by piping rather than by the less expensive open drains, in line with modern water conservation policies. The evidence confirms that some of the "Yankalilla" bores are suffering from obsolescence and one from the depth restriction caused by the loss of drilling equipment, but it is also a fact that at least three bores in the southern part including the one drilled as early as 1895, provided initial poor results even at greater than normal depth. There is no evidence to verify that unsatisfactory construction was the cause of the result from at least the Bores Nos. 11749 and 12134, drilled during the 1950s. Nevertheless, it cannot be said that -- 4 of 8 -- 5 good quality volume is unavailable in the whole of the southern section of "Yankalilla". Bore No. 12796 would disprove any such assertion. Regardless of Mr Tannock's opinion that the geological information available would indicate that all artesian bores similarly drilled and constructed in this locality should produce similar results, it is difficult to accept that as being the reality of the situation. It seems more likely that identical drilling and bore construction techniques will produce different results, depending on the selection of the drilling site. It seems reasonable to accept that there are locations on the southern section of "Yankalilla" where, despite the construction technique, drilling will provide relatively poor results. Similarly, other bore sites both on the southern section and elsewhere have proved relatively successful. It is probable that had the better producing bores been sunk first the phenomenon would never have been known. However as it relates to the appellants' case, how can it be shown, and indeed who would now be interested in establishing whether properties with good bore supplies do not also have locations where inferior flows might have resulted had they by chance been first selected for drilling? There does seem to be an element of fortuity which is difficult then to reduce to a consideration in assessing unimproved value. Nevertheless, it would seem to be a mathematical fact that a sale of a property with an adequate and demonstrably inexpensive artificial water supply would, on analysis, reflect a higher unimproved value than had that water supply been more expensive to obtain. The only sales evidence before the Court came from Mr Tannock. His valuation was based on the evidence provided by two sales, being of the properties "Tuen Plains" and "Huntley Downs"/"Glen Oxford". The sale of "Tuen Plains" of 8,403.7 ha took place in June 1995 to show an analysed unimproved value of $9.37 per ha. An unimproved valuation of $8.80 per ha had been applied as at 1 January 1996. In comparison with "Yankalilla", "Tuen Plains" was described as having better location and access together with a greater proportion of better quality flooded country. Its water supply came from one artesian bore (which was very old and obsolete) reticulating to 14 km of bore drains and tanks; catchment tanks; and access to a Government bore. Under cross-examination, Mr Tannock agreed that a permit to occupy a stock route had been transferred to the purchaser at the same time. Access to the Warrego River was gained through the stock route. Although he agreed that the purchaser of "Tuen Plains" had considered that river access to possess value, Mr Tannock had apportioned no -- 5 of 8 -- 6 value to the permit to occupy. That approach was criticised as being an omission. It seems to me that, while the permit could well have, at best, nominal market value in itself, the potential available to "Tuen Plains" to gain access to the stock route and river, would be a positive feature in comparison with an otherwise similar property not enjoying such potential. Indeed, real doubt was created by Mr Coutts' cross-examination of Mr Tannock as to the comparability with the subject property of the water supply seen to be available to that "Tuen Plains". The second sale was of the amalgamated property "Huntley Downs"/"Glen Oxford" of 30,030 ha. It sold in April 1994, showing an analysed unimproved value of $8.90 per ha. As at 1 January 1996, an unimproved value equivalent to $8.27 per ha overall had been applied. The "Glen Oxford" section adjoined the south-western corner of "Yankalilla". In comparison the sale property was described by Mr Tannock as having similar location and access, slightly superior quality soil and country types, with less woody weed and regrowth problems. The sale property is watered by four artesian bores and 10 earth tanks. Of the four bores, two have good flows, one of which, however, is at low pressure. Two have poor flows (including the one bore which is closest to "Yankalilla"). On Mr Arthur's own basis of comparison of area served by each bore, the overall average on the sale property is about 18,500 acres per bore. "Yankalilla's" average is about 13,000 acres per bore if all existing bores should be considered. One bore on "Yankalilla" is, of course, virtually useless (No. 4517) and the supply from Bore 12832 is affected by the lost drilling equipment. The average area per useful existing bore on "Yankalilla" would be, at worst, 15,302 acres or excluding Bore 12832, 18,363 acres. It is acknowledged that at some time in the future, Mr Arthur envisages another bore being required in the northern section, if existing bore drains are to be replaced. The valuation applied to the "Huntley Downs"/"Glen Oxford" property overall at $8.27 per ha would show about $24.80 unimproved per dry sheep area on the carrying capacity which was estimated as one sheep to 3 ha. The valuation applied to "Yankalilla" is rounded from $7.25 per ha with carrying capacity accepted as one sheep to 3.2 ha, being about $23.20 unimproved per dry sheep area. It is observed that in the analysis of the sale of "Huntley Downs"/"Glen Oxford", the added value of water improvements was assessed by Mr Tannock as being $244,621 which equates about $8.15 per ha. Mr Arthur's assessed replacement cost, as opposed to the added value, of the water improvements on "Yankalilla" was $11.09 per ha. On the evidence, the added value of Bore 4517 would be nominal, if any -- 6 of 8 -- 7 value, and the added value of the other water improvements would, due to age, condition and utility, be less than replacement cost. It is likely that the added value of the water improvements per ha on "Yankalilla" could be comparable to the sale property. Mr Tannock was examined at some length as to the approach he would have taken to the analysis of a (hypothetical) sale of "Yankalilla" relative to the water improvements. While he did not disagree with the replacement cost estimates provided by Mr Arthur, he had not considered such an exercise and was, quite reasonably, not in a position to provide precise estimates of added value unless given the opportunity to closely consider the circumstances of each bore. He was able to say with confidence however that Bore 4517 would not be expected to add any value. It seems obvious that with all other things being equal, a property with a natural disability would be less valuable, unimproved, than one not so affected. Similarly, one with a natural attribute would be more valuable, unimproved, than one without it. The appellants say that properties such as "Camden", "Widgee" and "Avondale" with their superior artesian water supplies, should carry unimproved values which recognise that superiority when compared to the unimproved values applied to properties such as the subject or "Waverley" with relatively expensive watering costs. While there may have been some merit in that argument if the superiority could be demonstrated, the appellants would still face a difficult task in proving that the level of value applied to "Yankalilla" is wrong. In Fischer v. The Valuer-General (1983) 9 QLCR 44 and repeated on many occasions, the Land Appeal Court said at 46: "Whilst maintenance of correct relativity is also of considerable importance for rating or revenue type valuations, we cannot prefer in the circumstances of this case, the use of the principle of relativity to the exclusion of the sales evidence." The evidence in this matter indicates to me that at least the "Glen Oxford" section of the "Huntley Downs" aggregation has comparable proved access to the artesian basin as does the southern section of the subject property. The "Huntley Downs"/"Glen Oxford" sale provides sound evidence to support the valuation appealed against. In the end result I am unable to accept that the appellants' case has been proved. If it was able to be shown that the valuations of other properties with relatively inexpensive watering facilities are too low in comparison, (and I have been provided with no evidence to that effect) that would identify a problem with relativity but not necessarily that the valuation of "Yankalilla" is too high. -- 7 of 8 -- 8 The appeal is dismissed and the valuation of the chief executive affirmed. RE WENCK MEMBER OF THE LAND COURT -- 8 of 8 --