BK and P Wilson Pty Ltd v Chief Executive, Department of Lands [1996] QLC 130

LAND COURT BRISBANE 27 SEPTEMBER 1996 Re: Appeal Against Annual Valuation Valuation of Land Act 1944 Shire of Kingaroy (AV95-218) BK and P Wilson Pty Ltd v. Chief Executive, Department of Lands (now Department of Natural Resources) (Hearing at Kingaroy) D E C I S I O N The respondent is a trustee company for a family trust for the Wilson family and as such is the owner of land described as Lot 15 on Registered Plan 203276, Parish of Wooroolin, County of Fitzroy, containing an area of 14.456 ha. As at 1 January 1995 under the provisions of the Valuation of Land Act 1944 (“the Act”) the respondent determined the unimproved value of that land at $45,000. An objection by the owner against that valuation was disallowed and an appeal to the Land Court was lodged against the respondent’s decision upon that objection, advising that the appellant’s estimate of unimproved value was $25,000. The evidence revealed that this estimate was based on the valuations applied to farming country and to Consumer Price Index increases. It was not derived from a comparison with sales of comparable land. The grounds of appeal are essentially that the land is zoned “Rural A”, is used for primary production activities and should therefore be valued as land used for “farming” under the provisions of s.17 of the Act, rather than as a rural residential property. At the hearing of the appeal, Mr BK Wilson, a director of the appellant company, appeared and gave evidence on its behalf. The respondent was represented by Senior Valuer, Mr M Hoare, while Mr AG Clift, a registered valuer employed by the Department of Natural Resources, gave evidence on behalf of the respondent. The subject land is situated on Millers Road, approximately 10 km north-north-west of the Kingaroy Post Office. Access is by bitumen strip road, except for the last 250 metres, which is of formed decomposed granite. Electricity and telephone services are connected to the property, but no other services are available. The land is zoned “Rural A” under the Town Planning Scheme for the Shire of Kingaroy. It therefore has no subdivisional potential as the minimum size for blocks with that zoning is 65 ha. Mr Clift provided a detailed description of the land, together with a sketch plan, showing the location of improvements and the types of country. Mr Wilson did not disagree with either the description or the sketch plan. Mr Clift’s report read as follows: “ The land consists of an elevated property of mixed topography varying from easier generally southerly sloping country adjacent to Millers Road and the [1996] QLC 130 -- 1 of 5 -- 2 eastern end of the property through to moderate to steep slopes (part with a steep stony escarpment) in the centre western part of the subject to a moderate sloping broken nature in the south-western corner. Soils are generally shallow ‘snuffy’ red loams with some gravelly to rocky areas. Original vegetation most likely comprised softwood scrub with some forest (spotted gum) influence. Part of the property had been developed to natural and improved pasture with scattered timber with the balance being dense timber... Wattle and lantana regrowth occur especially on the developed areas. A dam on the property leaks and requires lining due to porous soils. Underground supplies have not been successfully located. Water supplies for stock and domestic purposes are obtained from rainwater supplies. The property has excellent rural and distant town views to the south. A 20 metre wide easement for powerline purposes runs through the centre of the property in a north-south direction.” Mr Clift’s report went on to explain that the property was improved with a dwelling and associated structures used by the Wilson family for residential purposes. The balance of the developed land was used for grazing purposes, with the property running up to 15 head of cattle and one or two horses. Mr Clift considered that the highest and best use of the land was as a large rural residential property. He concluded that it did not qualify for a concessional valuation under the provisions of the Act as land used for purposes of “farming”. The essence of Mr Wilson’s case was that the appellant company had purchased the land about 12 years ago with the intention of improving it to farm it to earn additional income for the family trust. He explained that the land was the remaining “unwanted” land from a rural residential subdivision. It was, as he put it, the worst part of the whole area. When purchased the land would run virtually nothing. After having expended much money and effort on fencing, clearing scrub and poisoning lantana, the Wilsons had increased their small herd to 14 head. They built the house and have been living there for about six years. They had cultivated and planted an area of about 20 acres (8 ha) to seed kikuyu grass for future seed collection and sale. Their 10-year plan was to convert to a stud of approximately 10 stud breeders. Although a few cattle have been sold, Mr Wilson conceded that little income had been made from grazing and none at all for the last five years, because of the adverse seasons and cattle prices. No income had been obtained from the sale of kikuyu seed. They had not yet commenced their planned stud as that was a longer-term project. Mr Clift valued the subject land as a large rural residential property. He relied on the sales of four parcels of land with the same highest and best use to support his valuation. He did not consider that it qualified for a concessional valuation as land used for purposes of “farming” as defined by s.17 of the Act. On the other hand, Mr Wilson was firmly of the opinion that the property was used for “farming” purposes and as such qualified for a concessional valuation. Before proceeding further, it is necessary to consider the provisions of the Act and the statutory requirements upon the respondent in making the unimproved value of the subject land. -- 2 of 5 -- 3 The relevant provisions of the Act require the Chief Executive to determine the unimproved value of the land at its unimproved market value, ie at the sum as at which the land might be expect to sell, assuming that the improvements on the land did not exist. That requirement has been interpreted to mean the land must be valued as if it was unimproved, but that all other lands, infrastructure and services are as they existed at the date of valuation. It has been well established that the unimproved value is best ascertained by comparison with sales of unimproved or lightly improved land. (See Clough v. Valuer-General (1981) 8 QLCR 70 and Grahn v. Valuer-General (1992) 14 QLCR 327). There are, however, several exceptions to the requirement that land must be valued at its unimproved market value. Section 17 of the Act provides that where land is exclusively used for purposes of “farming”, any enhancement in the value of that land because of its potential use for any other purpose shall be disregarded. In other words, such land must be valued as farming land and not at a higher value because it could potentially be used for another purpose. Such land must be valued by comparison with sales of land, the highest and best use of which is for farming purposes. (See the explanation in APM Forests v. The Valuer-General (1975) 2 QLCR 30). “Farming” is defined in s.17(2) as follows: “ 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.” The leading authorities on s.17 of the Act are the judgments of the Land Appeal Court delivered on 3 March 1994, in Whackett v. Chief Executive, Department of Lands and Thomason v. Chief Executive, Department of Lands, which are not yet reported. These judgments make it clear that in order to qualify land for a concessional valuation under s.17 of the Act, it is necessary to satisfy each of the requirements in ss.(2) of that section. There is no doubt that the subject land (at least in part) is used for grazing purposes and that the majority of the area of the land is used for that purpose. However, Mr Clift was of the opinion that the dominant use of the land was for residential purposes. In my view, it is not necessary to decide that point because the subject land failed to meet the requirements of paragraphs (c) and (d). Mr Wilson conceded that no real income had been made from the primary production activities which they had undertaken on the land. Therefore, it cannot be said that the grazing or other primary production activities had a significant and -- 3 of 5 -- 4 substantial commercial purpose or character, or that they were engaged in for the purpose of profit on a continuous or repetitive basis. It matters not what the intention of the appellant company may be. It has been well established that intention to use the land for farming purposes in the future does not satisfy the requirements of s.17. In MacAdam v. The Valuer-General in an unreported decision delivered on 18 April 1981, the Land Appeal Court said of s.11(1)(vii) of the Act (the predecessor of s.17): “We stress that intentions, hopes and aspirations, however sincere, are not sufficient to constitute a business of primary production. They must be supported and affirmed by substantial and positive actions of a type and magnitude which are approaching or may be reasonably certain to reach commercial viability.” Mr Wilson contended that as the subject land was zoned “Rural A”, it should not be valued for residential purposes, as the intent of that zone is “to provide for the conservation of the prime agricultural land of the Shire”. However, the provisions of s.17 are concerned with actual use of the land, rather than its zoning. The zoning is relevant to its highest and best use, but not to its eligibility for valuation under s.17. Therefore, I find that Mr Clift was correct in not valuing the subject land under the concessional provisions of s.17 of the Act. It remains to consider whether the subject land has been valued at its unimproved market value. Mr Clift considered the highest and best use of the land to be as a large rural residential property and he supported its valuation by reference to sales with a similar highest and best use. In this respect I note that lands zoned “Rural A” may be used for purposes of dwelling houses. Therefore, the highest and best use which Mr Clift attributed to the subject land is not incompatible with its zoning. The four sales ranged in area from 1.443 ha to 8.248 ha and sold between August 1993 and December 1994 for sale prices which ranged from $39,000 to $60,000 and to which the respondent had applied unimproved values of between $30,500 and $55,800. After making allowances for the differences between the sales and the subject property, Mr Clift was of the opinion that the sales supported the unimproved value applied by the respondent to the subject land. Mr Wilson rejected those sales as not comparable to the subject land, principally because they were purchased for the purpose of the owners residing on the properties and not using them for purposes of farming. However, in view of my findings above that the subject land does not satisfy the requirements of s.17 of the Act, it follows that it must be valued as its highest and best use on the basis of relevant sales evidence. After considering the evidence in this regard, I have come to the conclusion that the sales referred to by Mr Clift support the unimproved value of $45,000 applied by the respondent to the subject land. Therefore, the appeal must be dismissed. -- 4 of 5 -- 5 Accordingly, the appeal is dismissed and the unimproved value of the subject land determined by the respondent is affirmed at Forty-five Thousand Dollars ($45,000). JJ TRICKETT PRESIDENT OF THE LAND COURT -- 5 of 5 --