Bell v Chief Executive, Department of Natural Resources [1997] QLC 144

LAND COURT BRISBANE 12 SEPTEMBER 1997 Re: AV96-404 An appeal against an unimproved valuation - Valuation of Land Act 1944 - Nebo Shire A.R. Bell v. Chief Executive, Department of Natural Resources (Hearing at Mackay) D E C I S I O N Mr Anthony R. Bell is the owner of land described as GHFL 3946 - Lot 1 on Plan WHS24 and GHFL 3945 - Lot 2 on Plan WHS191, Parish of Wambrook, County of Wodehouse, containing 10,648 ha. The property is known as "Strathdee" and is situated about 80 km west of Mackay and about 20 km east of Nebo. As at 1 January 1996, the respondent assessed the unimproved value of the land in the amount of $610,000 and disallowed an objection against that valuation. A Notice of Appeal was filed in the Court. Then, under s.68 of the Valuation of Land Act 1944 (Alteration After Appeal) the respondent reduced the valuation to $540,000. It is against that amount which the appeal now lies. In the Notice of Appeal the appellant estimated the unimproved value to be $476,000. Mr Bell was represented at the hearing by Mr S.P. Wright, Solicitor, and evidence was led through Mr J.D. Dodds, a registered valuer in private practice. Mr Dodds assessed the unimproved value as being $44 per ha rounded to a total amount of $468,500. "Strathdee" was described by Mr Dodds as being a large grazing holding in a broadacre beef cattle grazing district extending across the western slopes of the sub-coastal ranges, and consisting entirely of sub-coastal forest country which traditionally provided adequate grazing in good seasons but having the disadvantage of not holding throughout dry winters, or in extended periods of dry weather. Mr Dodds classified the subject land as comprising:  8,840 ha of easy to moderately sloping ironbark and bloodwood broken forest ridge country rising from narrow creek flats with generally red to brown sandy loam soils. [1997] QLC 144 -- 1 of 10 --  1,800 ha of generally steep broken ironbark and grasstree ridge country with outcrops of stone and some zamia infestation. The carrying capacity of "Strathdee" was adopted as being 1,043 head. Mr Dodds had understood that capacity had been agreed during past discussions with representatives of the Department. He had based his assessment on the sale of the property "Rookwood" which he said had been analysed to show $61 per ha, together with a relativity comparison with an adjoining property "Mt Spencer", the unimproved value of which had been determined at $38 per ha. In his relativity exercise, Mr Dodds adopted the carrying capacity of "Mt Spencer" containing 10,452 ha as being 823 head (1 beast to 12.7 ha). Again that capacity was as he understood had been agreed in past discussions with the Department. Mr R.M. Bein, registered valuer, took responsibility for the valuation now appealed against. He described the land as comprising "good mixed poplar gum and box flats mixed with low narrowleaf ironbark ridges running into steep and rugged ridges in the south. There are some narrow flats along the intersecting creeks among the low ridge. Grasstree and zamia are found in the higher steeper ridges. About 11% (1,200 ha) is considered to be steep and rough." Mr Bein's estimate of carrying capacity, as contained within his written report, was 986 head or 1 beast to 10.8 ha. In his verbal evidence he suggested that there was conflicting information on the Department's file as to agreements reached on carrying capacity, and while Mr Dodds' evidence might be accepted as correct, he had adopted an earlier estimate which seemed to be consistent with information offered to him by the owner that "Strathdee" averaged "about 1,000 head year in and year out". Mr Bein was able to confirm that the Department had adopted a carrying capacity of 823 head for the property "Mt Spencer". It seems that the valuation of "Mt Spencer" of $38 per ha had been rounded to a total $400,000. Mr Bein's valuation of "Strathdee", the subject property, was based on an adopted rate per ha of $50.70. Basic Sales Evidence - Nebo and Broadsound Shires Appeals relevant to 1 January 1996 valuations of grazing properties in both Nebo and Broadsound Shires were heard during the same (and one adjourned) sitting of the Court. These have been referred to as the Angus, Turner, Bell and Driscoll appeals. Evidence relating to sales of the properties "Chesterfield", "Daunia", "Mavis Downs", "Suttor Creek North" and "Rookwood" was received from various sources. I see it as both reasonable and necessary to consider the totality of the sales evidence as it has been placed before the Court in individual appeals. The following comments as -- 2 of 10 -- 3 they apply to sales and relativities will therefore appear in the decisions, where considered appropriate. "Mavis Downs" This property, containing 6,169.4 ha, had sold in May 1994 for $1,180,000. The sale had, according to Mr Bein, been analysed to show an unimproved value of $517,476 or approximately $84 per ha. Mr Bein confirmed that the valuation applied at the relevant date had been $480,000 (approximately $78 per ha). Mr Bein's analysis had not been challenged during his examinations in the various appeals. However, Mr Angus' statement contained the information, that he had been "informed the Crown analysed the sale of 'Mavis Downs' at a far greater figure than what they applied ...". Reference earlier in the statement had been made to an analysis of unimproved value having been shown as $99.30 per ha. Indeed, in an exhibit tendered through Mr Bein in the Angus and Turner appeals, being a schedule titled "Sales Carrying Capacity & BAV" the analysed BAV was shown against the details of "Mavis Downs" as being $567 for an estimated carrying capacity of 1,102 head of cattle. That would have indicated an unimproved value analysis of 1,102 x $567 or $624,834 equating $101.28 per ha. The scheduled carrying capacity of 1,102 head (1 beast to 5.6 ha) had been as adopted by Mr Bein. On his tendered analysis, the beast area value (BAV) reduced to $470 and the applied valuation reflected a BAV of $435. The carrying capacity for "Mavis Downs" as estimated by Mr Bein or alternatively the relativity between the valuation applied to "Mavis Downs" was consistently challenged in the Angus, Turner and Bell appeals. Mr Bein's classification of "Mavis Downs" was as follows: About 3,800 ha (62%) brigalow scrub with sections of blackbutt, yellowwood and associated scrub timbers. About 1,970 ha (32%) mixed box, ironbark, bloodwood and Moreton Bay ash, undulating forest on sandy and black to brown clay loams. About 400 ha (6%) downs timbered with coolibah and sections of brigalow, blackbutt. The appellants Angus and Turner accepted as fact the contents of the sales brochure in which a carrying capacity of 2,000 head or 1 beast to 3 ha had been suggested. Mr Dodds, valuer in the Bell appeal, was concerned with forest country so inferior, in his opinion, to the quality of "Mavis Downs" (which he described as a bullock fattening paddock with arable usage) for the sale to be of no assistance in that matter. While I am not influenced by the -- 3 of 10 -- 4 sales brochure estimates prepared by some person who was not available for examination, Mr Angus had specifically inspected "Mavis Downs" as a prospective acquisition, before finally purchasing "Chesterfield". At least, his strong challenge to the opinion of Mr Bein relative to the carrying capacity and quality of "Mavis Downs" cannot be disregarded. Mr Bein suggested that while the carrying capacity of the scrub content of "Mavis Downs" might have been "slightly better" than 1 beast to 5 ha, it was his personal opinion that no scrub country in Nebo Shire should be generally regarded as having greater potential than 1 beast to 5 ha. He agreed that areas of "Mavis Downs" had been cultivated but felt that such use would have been seen in the marketplace as marginal. He saw the severance of "Mavis Downs" by both a road and railway as creating a management problem and a negative feature of the property. The question of the quality of "Mavis Downs" in comparison with the relevant appeal blocks will be dealt with later. "Suttor Creek North" It was Mr Bein's evidence that this sale had not been included in the original basic evidence because of some confusion as to the actual date of sale. It had been confirmed however that the sale had occurred in January 1994 and, in Mr Bein's opinion, that was within the period relevant to the 1 January 1996 valuation. "Suttor Creek North" contains 6,730 ha. It sold for $1,550,000, the sale analysed by Mr Bein to show an unimproved value of $480,138 or $71 per ha. A valuation of $65 per ha had been applied. The carrying capacity was stated by Mr Bein as being 1 beast to 8 ha. That would equate 841 head, suggesting an analysed BAV of $571 or an applied BAV of $520. The appellants Angus and Turner were caught somewhat by surprise in finding that the sale of "Daunia" had been replaced by "Suttor Creek North", as part of the basic evidence of value. They knew of the property but not sufficiently well enough to challenge the details provided by Mr Bein. Mr Dodds however did have close knowledge of this property. In his opinion it was considerably superior to the country with which he was concerned in the Bell appeal. He described it as including "very good forest country - it's been highly developed - it has coolibah and blue gum forest country and it has a carrying capacity of some 1,250 head of cattle." If he was correct that would equate 1 beast to 5.4 ha. Mr Bein's description of "Suttor Creek North" was as follows: -- 4 of 10 -- 5 About 2,330 ha (35%) mixed brigalow, blackbutt, sandalwood and softwood scrub. About 3,700 ha (55%) Moreton Bay ash, poplar gum with some bluegum and areas of steeper ironbark and bloodwood ridges. About 700 ha (10%) hard forest ridges of bendee, lancewood and wattle. It was also described as "a very well improved property ... three houses and three large sheds". He had not thought that the improvements would be classed as normal on a grazing property of that size. However, as the purchaser "had other interests" and was using the property in association with those other interests, Mr Bein said that in his sale analysis, he had applied "full value" to each of the improvements. The real difference of opinion between Mr Bein and Mr Dodds which developed in the Bell appeal was the carrying capacity potential of "Suttor Creek North", although Mr Dodds' assessment was not specifically challenged in cross-examination. "Rookwood" The sale of this property became relevant to the Turner, Bell and Driscoll appeals. Mr Bein was the Department's valuer in Turner and Bell, while Mr Eisenmenger had taken responsibility for the Driscoll appeal. Mr Bein had offered the sale as primary evidence in Turner, but not in Bell. The sale was Mr Dodds' primary evidence in Bell. Mr Dodds analysed the sale to show an unimproved value of $61 per ha. He estimated the carrying capacity potential as 2,652 head, or 1 beast to 6.6 ha overall. That potential reflected an unimproved BAV of $403, or, on the basis as adopted by Mr Dodds, a BAV of $550 including the cost of clearing and pasture development, excluding water and fencing improvements. He classified the country as: 4,566 ha of frontage country (c/c 1 to 7). 7,000 ha of brigalow scrub (c/c 1 to 5). 6,000 ha of forest (c/c 1 to 10). It was Mr Bein's evidence that he had adopted the analysis of another valuer, but had inspected "Rookwood" prior to the appeal. The Department's analysis (which had been carried out by Mr Eisenmenger) showed an unimproved value of $65.20 per ha and the land was classified as follows: About 5,140 ha (29%) mixed brigalow, blackbutt, yellowwood and associated scrub. About 2,185 ha (12%) flooded mixed brigalow scrub and coolibah. About 9,110 ha (52%) mixed box, ironbark, bloodwood and Moreton Bay ash forest on mainly red sandy soils. About 1,132 ha (7%) hard forest ridges and tableland with rosewood and lancewood. In the Driscoll appeal, Mr Eisenmenger gave his opinion of the carrying capacity potential of "Rookwood" as being 1 beast to 7 ha or a rounded 2,500 head, but suggested -- 5 of 10 -- 6 that was a conservative estimate. In the document tendered through Mr Bein in the Angus and Turner appeals ("Sales Carrying Capacity and BAV") referred to earlier, the carrying capacity of "Rookwood" was shown as "1 to 8", but the total number of head as 2,500. The BAV was shown as $459 (unimproved) which is reasonably consistent with Mr Eisenmenger's evidence (1 beast to 7 ha - unimproved analysis of $65.20 per ha = BAV $456). In the Bell appeal, Mr Bein was quite specific in confirming his estimate of carrying capacity for "Rookwood" . When discussing Mr Dodds' evidence he said - "I think his overall carrying capacity is 2,600 head - well we've assessed the Department's carrying capacity (as) roughly 2,200 head, so I think Mr Dodds is possibly a bit generous on some of the forest country ...". Then later - "just what the file says, it's historically been 1 to 8 right through or ever since they started bringing in the potential in the scrub country." Summary of Sales Evidence and Relativities There are inconsistencies in the Department's evidence which are seen to have some impact on the important aspect of comparison of the quality of the land contained within the sale properties as compared to the properties the valuations of which are subject of the various appeals. The carrying capacity potential of grazing properties with no arable content, is the logical criterion on which market considerations are based. It would be seen as the common denominator upon which cogent comparisons are possible. Clearly, the market would also be expected to recognise particular features both positive and negative with regard to individual properties, in that comparison process. The valuer's expertise comes from the ability to first compare like with like and then to identify those features of individual properties which would affect market value. As Mr Bein says, even if an assessment of carrying capacity is arguable, possibly because of various management practices, it is important to ensure that consistency of approach is adopted in the comparison process. In valuations used for revenue-gathering purposes, the importance of establishing correct relativity from property to property cannot be overstated. The sales evidence in these matters is clearly not ideal for general valuation comfort to be obtained by the various valuers. The real problem is not seen to be so much the lack of sales evidence however but the differing opinions as to the quality of the sale properties in comparison with the appeal lands. -- 6 of 10 -- 7 It seems that there has been some tinkering with the sales analyses, from valuer to valuer, to cause the inconsistencies in the evidence as tendered for the chief executive. The apparent original analysis of the "Mavis Downs" sale, for example, might well have indicated that the quality of that country is significantly superior to the level of value applied. Similarly, either the potential of properties such as "Suttor Creek North" and "Rookwood" is greater than that adopted, at least by Mr Bein, or those sales show too high an analysed unimproved value in comparison with Mr Bein's analysis of the "Mavis Downs" sale. There is insufficient evidence before the Court for it to be suggested that, apart from the identified problem between the section of Bowen Shire and Nebo Shire as mentioned in the Angus appeal, there are glaring examples of lack of relativity within the individual shires. Nevertheless, there does seem to be sufficient evidence to support the complaints of some of the appellants relevant to the margin between valuations applied to the various qualities of land. It seems to me that with the passage of time, historical estimates as to carrying capacities may not necessarily reflect modern management practices, particularly with regard to the better quality lands and there may have developed too narrow a margin between the values applied by the Department's valuers, between the inferior and superior classes of grazing country. In summary, there is no evidence on which I can accept other than Mr Bein's analysis of the sale of "Mavis Downs" as indicating an unimproved value of $84 per ha with an application, for relativity purposes of $78 per ha. The evidence I have heard suggests that in comparison with the appeal lands, the estimate of the carrying capacity and quality of "Mavis Downs" as suggested by Mr Bein, is too conservative, regardless of the perceived effect of the management difficulties caused by severances. Again, with "Suttor Creek North", there is no cogent challenge to the analysis of the sale showing an unimproved value of $71 per ha, with an application for relativity purposes, of $65 per ha. It is observed however that there was in Mr Dodds' evidence an indirect challenge to Mr Bein's estimate of carrying capacity of 1 beast to 8 ha (given in the Angus appeal). Mr Dodds' estimate was 1,250 head (1 beast to 5.4 ha) and that again was not challenged in his cross-examination. It is further observed that in the Bell appeal, Mr Bein agreed that "Suttor Creek North" was superior in quality to the much larger "Rookwood" on which he had also estimated a carrying capacity of 1 beast to 8 ha (Mr Eisenmenger - 1 beast to 7 ha). -- 7 of 10 -- 8 I have come to the conclusion again that Mr Bein's stated estimate of the carrying capacity potential and quality of "Suttor Creek North" is too conservative. As it applies to Mr Bein's evidence, I have come to the same conclusion relative to the sale property "Rookwood". Basis of Valuation While he did not see it as an ideal comparison, Mr Dodds suggested that the sale of "Rookwood" was the best evidence available to support his valuation of the subject property. His analysis of that sale was not tendered, but resulted in a total unimproved value of $1,071,587. To that amount he added $385,000 as the cost of clearing and pasture development of 7,000 ha of brigalow, to bring "Rookwood" to its optimum carrying capacity potential of 2,652 head - on his assessment. It was his opinion that it was necessary to establish a beast area value (BAV) capable of comparison with lands such as the subject which were not suitable for clearing and pasture development. The resultant BAV (ex water and fencing improvements) for "Rookwood" was $550. He saw "Rookwood" with optimum development as comprising significantly superior land with more economical management potential than was the subject with natural pasture and no further development potential. Using his professional judgment, he held the opinion that in comparison, a BAV of $440 (20% less than "Rookwood") was reasonable for the subject property. The estimated carrying capacity of 1,043 head indicated an optimum value (ex fencing and water) of $458,920 (1,043 x $440) with natural pasture which he said was equivalent to its unimproved state. That calculation was equivalent to about $43 per ha. In his second approach by direct application of the unimproved value determined for "Mt Spencer" on a BAV basis ($38 per ha x 10,452 ha  823 head = $482) the calculation for "Strathdee" would have been $502,726 (1,043 head x $482) or $47.21 per ha. In the end result he adopted a valuation of $44 per ha. Mr Bein's valuation of $50.70 per ha was said to have resulted from a direct comparison with the sales of "Mavis Downs" and "Suttor Creek North", representing 65% and 78% of the valuations applied to those properties respectively. In his direct comparison commentary, relative to "Mavis Downs", he referred to the "permanent" natural water on the subject property, in Boundary Creek. That statement was challenged by Mr Dodds whose evidence it was that Boundary Creek had been dry for two years during the recent drought. Nevertheless, the availability of water in Boundary Creek during most seasons was a natural water feature superior to any available on "Mavis Downs". Broadly, Mr Bein considered -- 8 of 10 -- 9 "Mavis Downs" to have superior country, inferior natural water, location, access and severance problems in comparison with "Strathdee". "Suttor Creek North", in his opinion had superior country, location, access and comparable water. Mr Bein accepted that the sale of "Rookwood" afforded evidence of value for the subject land of equivalent assistance to the sales evidence he had presented. Findings The evidence of value in this matter is derived from sales of land with significantly superior quality and development potential than that of the subject land. Valuation has been described as "a matter of estimation, not of precise mathematical calculation" (Mason J in Federal Commissioner of Taxation v. St. Helen's Farm (ACT) Pty Ltd (1980-1981) 146 CLR 336 at 381). It would seem that there must have been some methodology to assist in the process of direct comparison with the sales evidence, as suggested by Mr Bein, to allow him to arrive at such a precise valuation base of $50.70 per ha. If there was some checking and balancing process adopted by Mr Bein then it was not exposed to the Court. While the direct comparison approach is no doubt in response to wide criticism of the classification approach to valuations of grazing lands, particularly when there is no sales evidence available as to specific classifications of land, it is seen as an extraordinarily difficult task for grazing lands of varying classifications, to be cogently compared, unless some common denominator such as carrying capacity potential, is introduced to assist in the comparison process. At least Mr Dodds explained how the sale of "Rookwood" had been adjusted by him to allow that comparison process to be reduced first to the common denominator of BAV. Mr Bein had no problem with the approach taken by Mr Dodds in allowing the effect of the cost involved in developing the scrub country to be offset against the potential of that country to be improved from its natural state. Mr Bein pointed out, however, that just as he had found it necessary to adjust the unimproved values shown by the sales in comparison with the subject land, it had also been necessary for Mr Dodds to use his judgment as to the discount necessary to directly compare the "Rookwood" sale to the subject land. There is mathematical support to Mr Dodds' calculation. The common denominator comparison is the BAV. However, inherent in his approach is the assumption that, in the -- 9 of 10 -- 10 absence of other evidence and, all other things being equal, the various classifications of grazing land will have equivalent BAV based on optimum development. If, as an example, there was need for consideration to be given to the component land classifications on "Rookwood", on the basis of Mr Dodds' analysis, then the inferior land carrying 1 beast to 10 ha would reflect the same BAV as the flooded country carrying 1 beast to 7 ha, and then both those classifications would have equivalent BAV to the scrub country but only after it has had $50 per ha or $275 per beast area (at a carrying capacity of 1 beast to 5 ha) spent on it. The validity of that assumption is of course lacking proof. If there had been proof from sales evidence, for example, of the BAV shown in the marketplace for forest country with optimum carrying capacity potential of 1 beast to 10 ha, then there would have been no need for the exercise conducted by Mr Dodds. I am also concerned that Mr Dodds' exercise could also be interpreted to the effect that he himself had allowed insufficient margin between the unimproved value which might be apportioned to the country with superior potential as compared to, for example, the inferior quality forest country. The overall evidence which I have heard relative to valuations in Nebo and Broadsound Shires, has influenced me to accept that on the carrying capacity potential "of about 1,000 head" for the subject property, the Department's valuation is excessive, regardless of its location. Although the sales evidence is far from ideal, I am not persuaded to consider Mr Dodds' relativity argument for that necessitates the presumption that the valuation of "Mt Spencer" is correct, when there is also no sales evidence before me in support of that level of value.. Instead I am led to the conclusion that the unimproved valuation of "Strathdee" should not significantly exceed Mr Dodds' base valuation of $43 per hectare. The appeal is allowed, the determination of the chief executive set aside and the unimproved value of "Strathdee" as at 1 January 1996 is determined in the amount of Four Hundred and Sixty Thousand Dollars ($460,000). RE WENCK MEMBER OF THE LAND COURT -- 10 of 10 --