Dougherty, Ralston & Ors v Chief Executive, Department of Natural Resources [1997] QLC 364

LAND COURT BRISBANE 3 September 1997 Re: Determination of Unimproved Value - Shire of Maroochy - (Ref. V96-648) MD Dougherty, DJ Ralston and Others v. Chief Executive, Department of Natural Resources D E C I S I O N Re: Cost of, or Added Value of Timber Treatment on Cane Growing Lands This appeal is but one of 52 appeals filed in the Land Court Registry against valuations made by the respondent Chief Executive of cane farms in the Shire of Maroochy and the City of Caloundra as at a relevant date of 1 January 1996. The appeals have been prepared and lodged on behalf of the growers by the Cane Growers' Moreton Area Committee. At the request of the parties, this appeal was set down for hearing at Maroochydore on 21 July 1997, to enable the Court to be seized of jurisdiction to consider a preliminary submission made at a previous callover of the cases. The Court is asked to make a decision as to what is an appropriate allowance to be made by the valuers involved in the cases for the cost of and/or added value of timber treatment in their respective basic sale analyses used for the purpose of determining the unimproved values under appeal. It is further submitted by the parties that it is the issue of an appropriate allowance for timber treatment alone which stands between the valuers, and if the quantum of timber treatment allowance can be resolved, then there exists an opportunity for all the cane grower appeals to be resolved without the need for further litigation in this Court. In these circumstances, the Court has responded positively to the submission. At the outset of the hearing, the Court pointed out to the parties that, in the circumstances, a finding on what is to be the appropriate cost and/or added value of timber treatment in itself is not capable of litigation, since the function of the Court in appeals under the provisions of the Valuation of Land Act 1944 is only to determine unimproved value and that, should either or both of the parties wish to contest the Court's finding as to an appropriate timber treatment allowance, then the listed appeal (V96-648), along with any other of the filed appeals, would have to be heard to enable the Court to make a determination as to unimproved [1997] QLC 364 -- 1 of 8 -- 2 value. This determination then, of course, would be justiciable on the ground that the Court erred in making its finding as to an appropriate allowance to be made for the cost of timber treatment. Section 5(1) of the Valuation of Land Act tells us what is the meaning of the term "Value of Improvements", and this includes the value of timber treatment. The relevant part of the sub-section reads: "The 'Value of Improvements' means, in relation to land, the added value which the improvements give to the land at the time as at which the value is required to be ascertained for the purposes of this Act, irrespective of the cost of the improvements, .... " Now that the value of timber treatment (land clearing) on cane lands within the Shire of Maroochy and the City of Caloundra as at the relevant date for valuation in the appeals filed equates the cost of carrying out the timber treatment is not in dispute in this hearing. It is said that, at the relevant date, the market for cane lands was sufficiently buoyant to carry, for the purpose of the analyses of sales, the cost of effecting the improvement of timber treatment, and so we are not concerned with the "added value" factor in making a finding as to the cost of timber treatment. The appellant canegrowers called in evidence three witnesses. They are Registered Practising Valuer Noel Lloyd Maddern, Graham William Colley, who is a district cane grower and Chairman of the Moreton Cane Growers Committee for the last 13 years, and Troy Craig Apps, who is a member of a long-standing cane growing family in the Moreton Mill Area. The respondent Chief Executive called one witnesses, he being Departmental Registered Valuer, Damian Peter Hyde, who is the valuer responsible for the valuation of cane growing lands within the Maroochy Shire as at the relevant date of 1 January 1996. But before considering the evidence of the witnesses, I should say that the allowance to be made for the cost of timber treatment is for the analyses by Mr Hyde of six sales of cane farming lands, all of which took place in the calendar year of 1995 (from January to September). It is Mr Hyde's analyses of these sales which formed the basis for the revaluation of the cane lands as at the relevant date of 1 January 1996. The revaluation resulted from the use of mass appraisal methodology based on a uniform factorial increment in the valuation of all sugar cane lands in the Moreton Mill Area. Mr Hyde told us that his allowance for the cost of timber treatment in all of his sales analyses was $3,400 per hectare. He says the timber treatment effected on each of the sale properties was of an original stand of heavy wet and dry sclerophyll forest. It is Mr Maddern's opinion that the allowance for the cost of timber treatment for heavy dry forest as at the respective dates of the sales should have been $5,000 per hectare. This indicates the extent of the dispute on the point as between the appellant cane growers and the respondent Chief -- 2 of 8 -- 3 Executive. Much evidence was called by both parties. It is not possible nor profitable for me to refer to all of it in this decision but it is my intention to refer to such of it as has been helpful in assisting me to come to a conclusion. But before proceeding further, I should say that it was the hope of the respondent Chief Executive that the Court would make a finding as to the cost of timber treatment to be used in the sale analyses for a variety of virgin timber coverage - ranging from light whipstick ti-tree to medium density ti-tree to heavy ti-tree, and for light wet and dry sclerophyll forest to medium to heavy dry forest. Now as I indicated during the hearing of the matter, I really have no evidence from either party as to timber treatment costs for other than heavy forest and medium to heavy ti-tree. As a result, and especially as the original timber cover on the basic sale properties was heavy forest, I will confine my finding to the cost of treating that type of timber. It seems to me that even if I had the appropriate evidence, to make a finding over the range of virgin timber coverage would not assist in deciding the outcome of the appeals. Mr Maddern has made enquiry as to timber treatment costs from a Mr Peter Harders, who is the Chief Cane Inspector with the Moreton Mill and manager of the mill's farming properties. Mr Harders informed Mr Maddern that since 1987, the mill has brought on average 35 hectares of new land under cane each year. Mr Maddern says a lot of this land had been used for cattle grazing purposes and as such had been partly previously cleared. Mr Harders told Mr Maddern that it cost the mill between $1,000 and $1,500 per hectare to get the timber down and stacked. He said the mill initially started on the most productive, or easiest to clear, land and has then proceeded to the lesser productive - or more expensive land to develop. Mr Harders estimated the total cost to bring the easiest to clear land into production would have been between $2,500 and $3,000 per hectare before planting. But Mr Harders said much of this land had previously been cleared and planted to improve pastures or was carrying regrowth. Mr Maddern accordingly suggests these costs are low as they did not involve the total timber treatment operation. The work involved included drainage, pushing, stacking, burning, cutterbarring, ripping, stickpicking (the use of rakes was not possible due to their being a lot of stumps left after the original operation), and the application of lime/phosphate. Mr Harders advised that in the more recently cleared areas, the operation has had to include laser levelling at a cost of between $300 to $400 per hectare before the application of lime. Mr Harders advised that during 1996 the mill had cleared an area of mainly regrowth ti-tree in the Coolum area at a cost of $3,200 per hectare prior to lime application. There were some larger trees which were about an excavator swing apart. The clearing process involved getting the timber down, stacking, burning, cutterbarring, ripping and laser levelling. Mr Harders says the application of lime has yet to be done and this will cost about $170 per hectare, giving a total cost of about $3,370 per hectare. Mr Maddern stresses that this cost is not for a -- 3 of 8 -- 4 total operation as the land was mostly regrowth ti-tree. Mr Harders advised Mr Maddern that an experienced local contractor told him that it would cost between $4,000 and $5,000 per hectare to bring some "green" forest, typical of the original timber in the Doonan/Veridale area, to the stage of laser levelling. Lime application and laser levelling costs bring this total estimated timber treatment cost to the planting stage for green forest to from $4,470 per hectare to $5,570 per hectare. Perhaps the most relevant timber treatment costing obtained by Mr Maddern was in respect of the clearing by the Apps family of about 24.3 hectares (60 acres) of medium to dense ti-tree on land in Valdora Road, Valdora, during the latter half of 1996. Mr Apps told Mr Maddern that he kept diary records of the hours worked, machines used, labour employed, and the operations undertaken from which a schedule of costs for the treatment of the land was prepared. (This schedule is attached to this decision and is Schedule A). Mr Maddern says the Apps family have cleared large areas of land in the Maroochy Shire for cane production over many years. The cited clearing was undertaken during an extended period of dry weather, and this resulted in some costs being kept to a minimum. Mr Maddern says that the hourly rates allowed for the use of machinery owned by the Apps family are in line with contractors' rates operative at that time. Mr Maddern has adjusted the November 1996 Apps cost to 1995 levels (the sale dates) as shown in Appendix A. It should be pointed out that contract bulldozing and cutterbarring of the heavy original ti-tree timber stand was carried out by Ken McCord on a "dry" basis, the fuel being provided by the Apps family. In summary, Mr Maddern says the cost of treatment of the almost virgin stand of ti-tree timber to the planting stage was $5,488 per hectare - or adjusted to 1995 levels, $5,052 per hectare. Mr Maddern says that the Apps cost represents $5,318 per hectare and $4,882 per hectare before the lime application, and he says this cost is in line with the contractor's estimate obtained by and provided by Mr Harders. The Apps operation included pushing, stacking, burning, ripping, cutterbarring, pedrick raking, stickpicking, reburning, second stickpicking and laser levelling. It became evident during the hearing that Mr Maddern did not take into consideration pre-drainage costs (at about $300 per hectare) for ti-tree development but that is not an issue as no pre-drainage is required in the heavy sclerophyll forest country. Mr Apps described in some detail the operations which were involved in the clearing and preparation of his land for cane growing. I am satisfied on his evidence that the timber treatment and subsequent preparation was a very intense and thorough operation, consistent with the Apps family's recognised high farming standards. But the respondent Chief Executive may have a point when he suggested during the case that the standard of clearing by the Apps family may have exceeded normal district standards. Mr Maddern next told us that he interviewed Mr Ken McCord, who is one of the main clearing contractors in the area. It is to be noted that he was the contractor involved in the -- 4 of 8 -- 5 clearing of the Apps' land. Mr McCord advised Mr Maddern that his machine pushed about 17 hectares of virgin ti-tree country on the Apps' property. He said that the timber was not particularly large but was reasonably thick except for about 2 hectares where it was sparse. The soil type was such that the trees were difficult to break off and most of the larger trees brought out big root balls. Mr McCord confirmed that weather conditions during the Apps' clearing operation were very favourable during the burning period, and said that if it had rained, the burning cost could easily have been increased by 50%. Mr Maddern interviewed a Mr Steve Dwyer who leases land from Ms J Sealy at Ringtail, via Pomona. He schedules the cost of the timber treatment of 32.4 hectares of land on the Sealy property. It is not helpful to discuss this cost here as Mr Maddern considers it to be low at $1,583 per hectare. Mr Maddern told us that Mr Ray Ladewig had about 40 hectares of forest land cleared near Cooroy about four to five years ago at a cost of $13,343 per hectare. Again this cost is not of assistance as Mr Maddern considers to be too high. Mr Maddern referred the Court to other timber treatment costs on farms owned by Mr Tom Kennedy ($5,253 per hectare in the Cooroy District), J Chandler ($5,000 per hectare in the Coolum District), but I feel the best evidence of cost is that provided by Mr Maddern from his interview with Mr Harders and the Apps family cost. I now turn to deal with such parts of Mr Hyde's evidence which appear relevant. Mr Hyde has prepared matrix of the cost of timber treatment of various virgin timber types. It is perhaps useful if this matrix be appended to this decision. It is Appendix "B". Mr Hyde has interviewed a clearing contractor, Mr Keith Roberts, about the cost of clearing land to the cultivation stage for cane growing. Mr Roberts advised that the operation involved in treating ti-tree country by the contractor was to push, stack, burn, rake, cutterbar, and to cross rip, with all necessary operations to bring the land to pre-plant stage being normally undertaken by the farmer. Ti-tree country creates a problem with waterlogging which prevents access to the job during wetter periods. Mr Hyde says that the operations for timber treating forest country are the same as for ti-tree country, but points out that the forest timbers are normally easier to burn. Mr Hyde sets out in his tendered statement details of costs provided by Mr Roberts for what he calls the primary stage clearing. It is in the hands of the parties for reference. It is for the classes of timber treatment outlined in his matrix. For the heavy sclerophyll forest, the cost is calculated for pushing, stacking, raking and burning of $900 per hectare in 1997 - representing an adjusted cost of $765 per hectare in 1995. The cost of the same operation in heavy ti-tree is calculated by Mr Hyde on Mr Roberts' advice to be $1,000 per hectare in 1997, adjusted to $850 per hectare in 1995. Mr Hyde calculates the cost of ripping for both forest and ti-tree to be $150 per hectare in 1997, or $130 per hectare in 1995. He says the cutterbarring -- 5 of 8 -- 6 cost is the same as for ripping. In summary Mr Hyde calculates the cost of what he calls the push, stack and reburn component of the primary stage clearing in heavy forest to be $1,200 per hectare in 1997 (adjusted to $1,025 per hectare in 1995), and for heavy ti-tree to be $1,300 per hectare in 1997 (adjusted to $1,110 per hectare in 1995). Mr Hyde has also interviewed Mr Peter Harders of the Moreton Mill who provided him with costs of clearing medium density coastal ti-tree to the cultivation stage on Lot 6 on RP 27021 and Lot 8 on RP 27021, Parish of Maroochy. This land was cleared by Mr Keith Roberts in early 1995. The area involved in the clearing operation was 21 hectares. Mill staff worked with rubber-wheeled tractors providing additional ripping to the land following burning of the timber stacks. Mr Hyde was able to cross-check the advice of Mr Harders by inspecting details of mill costings. These are: Push, stack and burn $ 714 per hectare Stick rake and burn $ 100 per hectare Disc with baby giant $ 105 per hectare Rip and cutterbar $ 142 per hectare Rip by mill $ 142 per hectare Cross rip $ 142 per hectare Stick picking $ 632 per hectare Total Cost $1,977 per hectare Mr Hyde sought from Mr Harders advice as to the cost involved in what he calls the secondary stage treatment of the mill's cleared ti-tree land. This involves the preparation of the land for planting following stickpicking. The operations included two discings, laser levelling, ripping, application of lime, discing in lime and rotary hoe-ing (if necessary). Mr Hyde has applied the following costs to the mill operations: Two discings $ 80 per hectare - adjusted to $70 per hectare for 1995/96 Laser levelling $450 per hectare - no adjustment for 1995/96 Ripping $142 per hectare - no adjustment for 1995/96 Lime application $150 per hectare - no adjustment for 1995/96 Discing $40 per hectare - adjusted to $35 per hectare for 1995/96 -- 6 of 8 -- 7 Rotary Hoe-ing $100 per hectare - adjusted to $90 per hectare for 1995/96 As a result Mr Hyde concludes that what he calls the secondary operation cost of bringing former ti-tree country to the cultivation stage is $1,000 per hectare for 1996/97, and $950 per hectare for 1995/96. (These are rounded off figures). Principally as a result of his enquiries with Mr Harders, and adopting what he calls generous figures as to costs, Mr Hyde came to the conclusion that an appropriate allowance to be made in the analyses of his sales for the clearing of heavy sclerophyll forest to the planting stage was $3,400 per hectare. Although he had no sales of ti-tree land, he would have applied a cost of $4,000 per hectare for clearing heavy ti-tree country inclusive of a pre-drainage cost of $300 per hectare. Mr Hyde provided the Court with costs for laser levelling which, it seems, is a standard practice in development of cane growing lands at the relevant time. It is $444 per hectare on the Moreton Mill-owned land. He adopts a rate of $450 per hectare and there is no dispute between the parties as to this allowance for laser levelling. Mr Hyde's allowance for stickpicking in his matrix (Appendix "B") results again from his enquiry of Mr Harders on the development of the mill land. Mr Harders advised that the use of rakes was not possible as the country was too wet to use them. As a result, it was all done manually at a calculated cost of $632 per hectare. Further costings provided by Mr Hyde include pre-drainage ($300 per hectare), and a cost of converting a grassland paddock to cultivation ($400 per hectare). Mr Hyde telephoned a Mr Selwyn Woods about the cost of clearing selectively-cleared forest and straightening a creek on Lot 3 on RP 867978, Parish of Maroochy. This cost was calculated by Mr Hyde to be for all stages to cultivation of $2,700 per hectare for medium to heavy sclerophyll forest. Mr Hyde also referred to a cost for primary stage clearing on a property owned by a Mrs Stella Sattler. The timber was thick scribbly gum and bloodwood forest with a stand of ti-tree at the bottom end. The work was done under contract, and the cost to the cultivation stage was $1,644 per hectare for the primary stage clearing and $274 per hectare for drainage. But the evidence of Mr Colley, who is a long-standing and experienced cane grower in the area and who inspected this land, convinces me that the standard of clearing it is below average. He also says this was so on some of the other costing farms referred to in evidence by Mr Hyde. Now perhaps the biggest problem for the Court in this matter is the reconciliation of the evidence of Mr Harders as to the differing clearing costs provided to the valuers. After reading the transcript and consideration of this evidence, it occurs to me that a meaningful reconciliation is not possible. Suffice it to say that the Court should place equal weight on each set of costings provided by Mr Harders. It is perhaps unfortunate that he was not called in the hearing. -- 7 of 8 -- 8 I feel the best evidence of clearing cost is that carried out on the Apps' farm, although I have some doubt that the Apps diary entries as to the owner tractor hours and other time spent by the owner in the clearing operation meet the test of satisfying the standard of proof. An examination of the allowance made for the use of the owners' tractors in Annexure "A" represents a very significant proportion of the total cost, and the proposition put forward by the respondent Chief Executive that more detail should have been provided (such as tacometer hours on tractors) is noted. The resolution of the differences between the valuers in respect of timber treatment costs is not easy. This is normally the case involving the valuation of cane lands (vide Appeals against determinations of Valuer-General - Shire of Kolan - (1977) 4 QLCR 206. The difficulty is amply illustrated in answers by the valuers to a range of questions as to the cost of timber treatment by opening remarks akin to "it depends". Before proceeding with my finding, I should comment that there is a difference of opinion as between the appellants, on the one hand, and the respondent Chief Executive on the other, about the relative costs of clearing heavy ti-tree and heavy sclerophyll forest to the cultivation stage. The appellants contend the costs for both timber types are the same, and Mr Hyde suggests the costs for clearing heavy sclerophyll forest is 90% of the cost of clearing heavy ti-tree. Given the problems with ti-tree clearing in the event of unfavourable weather, and giving weight to the suggestion by Mr Keith Roberts that timber work in the forest is 10% faster for his machinery than in the ti-tree, I adopt the respondent Chief Executive's view that an allowance for the cost of clearing heavy ti-tree should be higher than that for heavy forest. Having regard to the whole of the evidence, much of which is conflicting, and doing the best I can in what seems to be always a contentious issue, I find that the appropriate allowance to be made for the cost of timber treatment of the heavy sclerophyll forest country from virgin state to the cultivation stage for each of the basic sale analyses is $4,250 per hectare. (CH Carter) Member of the Land Court -- 8 of 8 --