Bahnisch v Chief Executive, Department of Natural Resources [1997] QLC 113

LAND COURT BRISBANE 25 July 1997 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No: 955-3021 Local Government: Broadsound Shire (AV96-376). Ronald W and Lorna L Bahnisch v. Chief Executive, Department of Natural Resources (Hearing at Rockhampton) D E C I S I O N Background: This matter relates to a property described as "Ridgeland" Preferential Pastoral Holding 4974, being Lot 4974 on Plan PH1462 in the Parish of Collaroy. The key issues relate to the comparison of comparable sales, relativity, carrying capacity and impact of disabilities. The subject is located in the headwaters of the Connors River on the western slopes of the Connors Range, and is about 135 kms south of Mackay. Access is difficult and involves about 36 kms of formed earth and gravel road, which is subject to erosion and flooding. There are also steep grades in places which provide some restriction on cattle trains gaining access to the property. The subject has an area of 15,600 hectares, of which approximately 7,400 hectares (48%) comprises steeply sloping mountain range broken by narrow creek beds and is timbered with ironbark, bloodwood, bulloak, zamia, grass tree, and is generally unused. The balance of the subject comprises about 4,700 hectares (30%) of gum, Moreton Bay ash, ironbark and bloodwood, easy sloping ridges and creek flats; and about 3,500 hectares (22%) of fair to poor quality sloping ridges and narrow creeks. About 7,700 hectares is fenced off to prevent cattle being poisoned from zamia and red lantana. The most fertile country is on the creek flats which, since the deluge of Cyclone Charlie in 1981, and a further cyclone in 1991, have now been severely infested with [1997] QLC 113 -- 1 of 10 -- 2 parthenium weed. The appellants purchased the lease to "Ridgeland" in 1983. Giant ratstail grass has also become a problem in recent years, and red lantana is prevalent along the watercourses. Water supplies consist of natural supplies in the Connors River, Murray and Collaroy Creeks, and some non-permanent water in Parker, Horse, Oaky and Bull Creeks. There is also a bore, a well, and a dam. The land is zoned "Rural A" under the Town Plan for the Shire of Broadsound of 2 June 1984, and effective as at the date of valuation at 1 January 1996. The current grazing of beef cattle is considered to be its highest and best use. The Chief Executive, Department of Natural Resources, on 12 February 1996, issued a valuation at $530,000. Following an objection, the Chief Executive on 1 August 1996, confirmed the valuation at $530,000. The appellants have now appealed to the Court claiming the correct valuation should more properly be $295,000. Mr RW Bahnisch appeared and gave evidence for the appellants; and Mr John Thomas, Senior Valuer, appeared for the respondent, calling evidence from Mr Owen Leslie Eisenmenger, the Departmental registered valuer responsible for the determination of the valuation. Evidence: Mr Bahnisch gave evidence that, while he agreed in general terms with the Chief Executive's description of the nature of the subject, he believed the impact of the major disabilities of the subject had been underestimated. He agreed with Mr Thomas that sales of directly comparable properties in the near vicinity of the subject in the eastern range area of the Broadsound Shire have been very few. It is also accepted by both parties that in order to assess the market it was necessary to compare the subject with sales in other parts of the Shire. However, Mr Bahnisch contends that in so comparing such sales of different type of country, it is important to note the considerable differences in land type and capacity. In respect of the disabilities of the subject, Mr Bahnisch drew attention to the problems of approximately 48% of the area being unusable for cattle grazing because of its terrain and the growth of poisonous plants such as zamia and red lantana. It had been necessary to fence off this area in order to prevent cattle wandering into it and being poisoned. Not only did this restrict the carrying capacity of the subject, but there were also additional costs incurred from the necessity to round up marauding wild bulls which broke through the fence and the resulting fencing repairs. The unusable 48% of the land was not only useless for grazing purposes, but was also a detriment to the remaining 52% of the useable land. Deaths of some of the -- 2 of 10 -- 3 appellants' cattle also occurred through these broken fences as cattle wandered into the zamia country. Mr Bahnisch also claimed that the subject also suffered from problems of isolation and poor services, as a result of lack of direct access to major centres, and poor roads. This is a particular problem for children with lack of bus services to schools. The subject is located 135 kms from any major town which is Mackay. While not far directly inland from the coast, the only road which goes to St Lawrence is poor, and St Lawrence is a very small centre. Because of its location near the coastal Connors Range, the subject is impacted by fierce bush fires which are a major destructive problem. Mr Eisenmenger did not challenge any of these disabilities, but argued that the impact of the disabilities had been allowed for in the valuation. Mr Bahnisch also argued that the infestation by parthenium of the better land along the river flats had been badly underestimated in the valuation. He had engaged a man for three months each year for six years in an effort to eradicate the parthenium infestation. With each flood following the major rains he had gradually lost the battle, and as a consequence, has had to considerably reduce the number of cattle now grazing those lands. The parthenium now almost totally covers the river flats, and formerly the appellants had run up to 2,600 cattle, including 1,000 breeders. The previous owners had run even more cattle. Now they have been restricted to 500 breeders because of the parthenium, and supplant those numbers with the buying and selling of weaner steers as a buffer against the dry weather. Strategic fences have also been needed to restrict the cattle from spreading the parthenium, and also to spell the areas. The flooding following the cyclones was particularly bad on the subject as, because of the Connors Range influence, the heavy rains often deluged the area for extended periods up to 10 days at a time. Mr Bahnisch conceded that while the floods caused problems with spreading the parthenium, the ready access to good water was an advantage to the subject. When they acquired the subject in 1983, the river flats had been extremely fertile and had a huge carrying capacity with no phosphate deficiency. Another matter which Mr Bahnisch claims should be considered is the potential for the future construction of the Gin's Leap Dam currently proposed in a report by the Water Industry Task Force to supplement the Rockhampton Water Supply. That dam site is on the subject. He conceded that such proposals had been made previously, and so far there was no formal notice of any intention to proceed with the dam. However, he contends that such uncertainty would influence any potential purchaser of the subject, and therefore would tend to impact the value of the land. He -- 3 of 10 -- 4 acknowledged that the potential for a dam indicated big alluvial flats, and while his flats were not that large, they were in effect severely limited in carrying capacity because of the parthenium. In support of his valuation Mr Eisenmenger provided the following sales: •Sale 1 - ("Rookwood" - Lot 9 on Plan KL119). This sale is located fronting the bitumen sealed Mt Flora-Dingo Road, about 150 kms south of Nebo, and about 200 kms south-west of Mackay, and about 220 kms north of Rockhampton. It is also only about 50 kms from Dysart, which has a high school, shopping centres and other community services. The sale is good river country having about a 13 km frontage to the Isaac River and comprises coolabah scrub country. The soils are good but it is subject to problems associated with flooding and access. "Rookwood" was formerly known as "Bombambi", and it has electricity, telephone, television, mail services and school bus available. Access is available to cattle sale yards at Nebo and Mackay, and abattoirs at Mackay and Rockhampton. "Rookwood" comprises about 29% mixed brigalow, blackbutt, yellowwood and scrub; about 12% of flooded mixed brigalow scrub and coolabah (the flooded land is badly infested with parthenium); about 52% of mixed box, ironbark, bloodwood and Moreton Bay ash forest on mainly red sandy soils. About 7% is hard forest ridge and tableland with rosewood and lancewood. There is permanent natural water in waterholes in the south-east which can be reticulated. Artificial water is also available from dams and spears. The sale is seen as superior in respect of services and access because of the better roads to the sale. All of the sale is seen as useable, which is overall seen as superior to the subject. The sale sold in September 1994 for $2.5 million which, after allowing for improvements, was analysed at $1,146,000, or $65.20 per hectare. The sale has an area of 17,567 hectares. •Sale 2 - ("Norwich Park" - Lot 1 on Plan CNS 292 and Lot 2 on Plan CNS 195). This sale is located fronting the dual-lane bitumen sealed Dysart-Middlemount Road about 12 kms south of Dysart, and about 100 kms east of Clermont, and 260 kms south-west of Mackay. The sale comprises about 6% brigalow yellowwood scrub; about 33% quality forest of box, ironbark with the odd brigalow patches to bloodwood on open black soils; about 16% of sandy box, ironbark and Moreton Bay ash forest; about 20% of poor wattle forest with some ironbark, lancewood and rosewood; and 25% unavailable table land because of an escarpment. Sale 2 has parthenium infestation but not as severe as Sale 1 or the subject. -- 4 of 10 -- 5 There is no permanent natural water, but artificial water supplies are obtained from spears in Scott Creek and dams. There is a mine water pipeline through the eastern part with outlets for stock supply. The sale adjoins the Norwich Park coalmine on the eastern boundary and is traversed by the rail line to the mine and the Middlemount-Dysart Road. Electricity, telephone, mail services are available, and schools and other community services are available in Dysart. Cattle saleyards are located in Clermont, Mackay and Rockhampton and abattoirs in Mackay and Rockhampton. The sale is seen as superior to the subject in respect of services and access, with better bitumen sealed roads. The sale is superior country in that only 25% is of little value. Access to water on the sale is inferior to the subject. Overall the sale is superior. The sale sold in July 1994, for $900,000, which after allowing for improvements, provided an analysed value of $347,000, or $55 per hectare. The sale has an area of 6,317 hectares. Mr Bahnisch gave evidence that he had personal discussions with the head stockman for Mr Darby Godwin, the former owner of "Norwich Park", who advised that the "Norwich Park" area ran cattle very well. Mr Bahnisch also admitted that much of the good quality land on "Norwich Park" may well have been taken for the mine site. However, while the current "Norwich Park" area does not appear especially good from inspection, the history suggests that parts are good for cattle grazing. In respect of "Rookwood", both parties agree that about 40% is good scrub country which is good for cattle fattening and breeding. This would support the purchase price of $2.5 million. Mr Bahnisch also argues that "the strip of country from Dysart through to Barmount and down the floodplains has some of the best phosphate levels of any land in Queensland". To support this claim he provided a report from Mr George Lambert, Senior Extension Agronomist with the Department of Primary Industries in Mackay, who had earlier mapped the soils of the area. Mr Lambert's report was a factual statement of the vegetation, soil types, pasture species, and development options, and was provided as part of a timber clearing application to develop the nearby "Gibberland" property by the appellants. The report indicates that the grazing rate for improved, fertilised pasture in that area was about 1 adult beast per 0.8 hectares. It was Mr Bahnisch's conclusion from his discussions with Mr Lambert that about 10,000 hectares of "Rookwood" grazing land has phosphate levels in excess of 40 parts per million, which provides excellent grass quality for cattle grazing. By comparison, Mr Bahnisch argued that on the subject land, exclusive of the -- 5 of 10 -- 6 48% which is unusable, the cattle need to be fed salt and calcium to counteract deprived appetite and botulism. Mr Bahnisch argues that because of these very high levels of phosphate at 40 parts per million, which is about twice the rate found in brigalow country, the "Rookwood" property is vastly superior to the subject. Mr Bahnisch noted that "Rookwood" is freehold land while Sale 2 and the subject are leasehold. He also conceded that there might be some yellowwood poisoning on Sale 1 but he is not aware of poisoning problems similar to those that occur on the subject. Mr Bahnisch also made passing reference to another sale at "Leichhardt Park" but no details were provided to assist the Court further. In summary Mr Thomas argued that the disabilities of the subject were acknowledged, and that more than adequate allowance has been made for them in the valuation. He noted that the applied rate per hectare was less than half of the unit rate of Sale 1. He also noted that Section 14(1) of the Valuation of Land Act requires that leasehold properties be valued as in a freehold state, having regard to any restrictive conditions. There were no such conditions relating to the subject and it had been valued accordingly similar to freehold land. Mr Bahnisch summarised by noting that only 52% of the subject was in fact useable, and a comparison of relativities of useable land, suggests that the subject has been over-valued. He also noted that the area of Sale 2 was smaller (6317 hectares) which would normally attract a higher unit value. He also pointed out that the subject had no good brigalow areas which are valuable areas, and both Sales 1 and 2 have good brigalow country. Decision: In considering the nature of the land I note that the parties agree on the proportion of land of the subject which is virtually useless for grazing purposes. Both agree that only 52% of the subject is available for grazing. Both parties also agree that 100% of Sale 1 is useful for grazing, and only 75% of Sale 2 is useful for grazing. The parties also agree on the severity of parthenium infestation on the subject, and Mr Bahnisch's statement of his need to accordingly reduce the carrying capacity of the useable land on the subject was not challenged by Mr Thomas. Both parties agree that, due to a paucity of sales of comparable properties in the near vicinity of the subject, it was necessary to seek sales of near-comparable properties elsewhere in the Shire. For this reason, any comparison of sales must make due allowance for the areas of dissimilarity between any sales and the subject. Accepting that restriction Mr Bahnisch has not discredited the sales adopted by Mr Eisenmenger, only his method of analysis of those sales and how the unit areas were applied to the subject. -- 6 of 10 -- 7 In the matter of a possible dam site being developed on the subject, I note Mr Bahnisch's concerns in respect of any uncertainty that might raise in the mind of a potential purchaser, but as there is no record of any concrete proposal to proceed, I am unable to find much assistance in a possible proposal which may or may not proceed. In the matter of isolation and lack of services between those available to the subject and those to the sales, I believe this is a key issue affecting the relativities between the properties. The severity of bush fires, and the impact of flooding are also matters to be considered in adopting relativities. Other factors to be weighed are the relative productivity of the "Rookwood" land compared to the subject, the availability of good water, and the level of access to properties for delivery of cattle to markets. In comparing the sales I note that "Rookwood" is seen as superior to the subject in respect of access, useability, services, productivity and carrying capacity. Mr Eisenmenger claims "Rookwood" is superior to the subject, while Mr Bahnisch claims it is vastly superior. Mr Eisenmenger has seen "Rookwood" as "probably the best comparison on an area terms", because the total areas of the two properties are similar. He also conceded that more than 90% of "Rookwood" is useable while only 52% of the subject is useable. Overall "Norwich Park" is also seen as superior to the subject, but less so than "Rookwood". From the evidence I believe I would lean more to the difference between "Rookwood" and the subject as defined by Mr Bahnisch. The sale price of $2.5 million indicates that the new owner saw considerable advantage in the attributes of "Rookwood". If Mr Bahnisch's estimate of his appreciation of the market value of the subject is correct at about $900,000, then "Rookwood" is more than 2½ times the sale value of the subject. The 40% of "Rookwood" available for fattening and breeding supports that comparison. This then leads to the method of determining the relative value of the subject. Mr Eisenmenger has sought to apply a unit rate per hectare which allows for the difference between the properties. He has applied unit values for the in globo areas of: •"Rookwood" - $65.20 per hectare •"Norwich Park" - $55.00 per hectare •Subject - $34.00 per hectare I am aware that it has been established by the Land Appeal Court in King Ranch Pastoral Company Pty Ltd v. The Valuer-General (1968) (LAC) 255, at p.258: -- 7 of 10 -- 8 "In requiring the Valuer-General to value land on a fee-simple basis, the Acts do not lay down rules whereby fee-simple values shall be ascertained. If valuers have the knowledge and experience to enable them to value leasehold land on a freehold basis without the assistance of sales of freehold or leasehold land, there is no reason apparent to us why they should not draw on that knowledge and experience, even though acquired in Shires outside the Shire in which the land to be valued is situated. " I have therefore no reason to doubt Mr Eisenmenger's estimate of the unit rate he applied to the subject for the in globo area. I am also aware that in applying such a rate to the in globo area of the subject, he has followed a practice supported by the courts as a practical method of valuing unimproved land. For instance, when considering a valuation adopting separate valuations of soil types on a property in Luton v. The Valuer-General 23 LGRA (1971), Else-Mitchell J. said at p. 187: "I am disposed, as I have already indicated, to regard it as imputing too high a degree of sophistication to the hypothetical purchaser of unimproved land in the situation of most of the areas which fall to be valued in these appeals. Rather I think should the several sales be applied on an in globo basis at a round figure per acre wherever that course is reasonably possible. " It is also noted that the unit rates from the sales have been used to establish a basis for the overall shire. Their modification to accommodate the very large part (48%) of unusable land of the subject would support some flexibility. While the determination of valuation is an inexact science, and depends considerably on the practical skills of the practitioner, any conclusion should also, in hindsight, be seen as reasonable. Where different classes of land are involved in a single property, it is appropriate to consider the relevant unit rates for each of those classes of land. As noted in "Land Valuation and Compensation", 3rd Edition, by Rost & Collins page 341: "When valuing a property which has two or more distinct classes of land, each having different levels of productivity, the valuer should seek to apply to each of such class an appropriate unit value derived from sales consisting solely or mainly of one class of land. " Rost & Collins also noted at p.343 that the effect of the combined classes on overall productivity and net income should be considered, both adversely and beneficially. In the current case the impact of the agreed unuseable land has an adverse effect upon the productivity and net income of Mr Bahnisch. In seeking to compare the relative unit rates for the sales and the subject, it is noted that if useable areas are analysed, the unit rates disclose: -- 8 of 10 -- 9 Property In Globo Area Useable Area "Rookwood" $65.20 $65.20 (100%) "Norwich Park" $55.00 $73.23 (75%) Subject $34.00 $65.35 (52%) Clearly there is some anomaly in any comparison which suggests that, although the subject is seen as inferior productive land to both sales, in effect it has been valued at a higher unit rate for those areas which can effectively be used. Under circumstances where only a relatively small percentage of the subject is unuseable, the in globo method of applying unit rates would be appropriate. However, where about half of the subject is unuseable the inappropriateness of the in globo approach is highlighted. Take for instance if 90% of the subject was unuseable, then any in globo unit rate would bear little relationship to surrounding rates for comparable lands. I appreciate that in setting the lower rate at $34 per hectare for the subject, Mr Eisenmenger has sought to allow for the disabilities discussed and agreed. However, I find little further evidence to support the rate of $34. Why not $40 or perhaps $30 per hectare? It would appear that in applying $34 per hectare he has sought to allow for the difference in characteristics of the properties, as well as the different areas of useable land available for grazing purposes. Such a process I find does not assist me, and I believe one method of checking the valuation would be to value the comparable useable land at supportable rates per hectare, and then make some provision for the areas which are agreed unsuitable on each site. In determining a unit rate per useable area of land, I note that "Rookwood" ($65.20) and "Norwich Park" ($55) are both seen as superior. While "Norwich Park" has an inferior water supply, its smaller area at 6,317 hectares would suggest a higher unit rate. On balance, a figure of $52.50 per hectare would seem appropriate for the useable areas of the subject. On this basis the value of the useable land at 52%, or 8,200 hectares x $52.50/ha = $430,500, say $430,000. This then leaves the additional amount that should be provided for the balance of 48% of the subject which is unusable. If I were to adopt the current value determined by Mr Eisenmenger ($530,000), the balance would be worth $100,000. However, from the evidence of Mr Bahnisch I believe the unusable land is worth very little, if anything. In fact he has argued that the unusable area is really a detriment to his grazing business because of the constant need to maintain the fencing and to manage the intrusion of wild cattle. On balance, I believe it adds no significant value to the overall value of the subject. In the matter of whether the subject is leasehold and not freehold, I turn to the legislation for direction. Section 14 states: -- 9 of 10 -- 10 "14(1) For the purpose of deciding the unimproved value of land that is not granted in fee simple, the land is taken to be land granted in fee simple. (2) For the purpose of deciding the unimproved value - (a)of land held from the Crown for an estate of leasehold upon a tenure which is subject to any restriction, limitation, or other onerous covenant or condition; the unimproved value or, as the case requires, the enhancement in the unimproved value of that land shall be ascertained without regard to that restriction, limitation, or, as the case may be, other covenant or condition. " I accept therefore Mr Thomas's advice that the subject was valued as if it were freehold. Summary: The onus of proof under the Valuation of Land Act rests with the appellant under Section 33 which states: "33. Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered. " On the evidence I believe the facts have been agreed by the parties, and the only point of disagreement is in the method of determining the relativity between the subject and the sales. While I accept that Mr Eisenmenger has possibly adopted a lower unit rate based upon his overall knowledge of the shire, the evidence before the Court does not allow me to conclude that matter. I believe the appellant also has some problems in understanding that unit rate for the in globo area, but could understand the logic of the method I have outlined. I believe the appellants have partly proved their case and the relative value of the current valuation is out of line with the sales evidence. Conclusion: After having considered the whole of the evidence, the appeal is partly allowed, the Chief Executive's valuation is set aside, and the unimproved value of Lot 4974 on Plan PH1462 is determined at Four hundred and thirty thousand dollars ($430,000). (NG Divett) Member of the Land Court -- 10 of 10 --