Chippendale v Chief Executive, Department of Lands [1996] QLC 82

LAND COURT BRISBANE 7 JUNE 1996 In the matter of appeals against valuations Valuation of Land Act 1944 Valuation Roll No.: 53465 Local Government: Albert (V95-74) Ronald and Myrtle E Chippendale v. Chief Executive, Department of Lands Valuation Roll No.: 53861 Local Government: Albert (V95-98) Ronald Chippendale v Chief Executive, Department of Lands (Hearing at Coolangatta) D E C I S I O N These appeals arise under the Valuation of Land Act 1944. The matter first in time, V95-74, comprises an appeal against the valuation of the Chief Executive on a parcel of land in the amount of $190,000 made as at 30 June 1993. The second appeal, V95-98, relates to a valuation placed on another parcel of land by the Chief Executive as at 1 January 1995 in the amount of $275,000. Each appeal is made on one ground only and that is that the use of each parcel of land satisfies the definition of "farming" in s.17(2) of the Valuation of Land Act and therefore gains the protection provided by s.17(1). The relevant parts of s.17 provide:- "17(1) In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made. (2) In subsection (1)- `farming' means- (a)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 [1996] QLC 82 -- 1 of 7 -- 2 (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." In the event that either appeal is successful, it was agreed between the parties that the land comprising appeal V95-74 would be valued at $41,000 whilst the land the subject of appeal V95-98 would be $107,000. The only witness called was Mr. Ronald Chippendale, one of the owners of the lands the subject of these appeals. Mr. Chippendale gave oral evidence and also tendered an affidavit which provided a concise summary of much of the evidence given orally. The land in V95-98 (described as Lot 2 on RP 186871, Lot 1 on RP 32002 and Lot 2 on RP 50154) was purchased by Mr. Chippendale from his father in 1945. Mr. Chippendale had been born on the farm and worked on it after leaving school and until the commencement of his Army service. Some 20 years ago Mr. Chippendale and his wife purchased an adjoining property which is V95-74 (described as Lot 1 on RP 147369 and Lots 2 and 3 on RP 31992) to provide further land for grazing, the total area now comprising approximately 73 ha. In his affidavit Mr. Chippendale said that the area totalled 83 ha, however evidence from the Chief Executive in the form of computer printouts showed the combined area to be 73 ha. Nothing turns on this difference. Since the purchase of the second block of land, both blocks have been managed as a single unit. The history of the usages of these lots and other evidence relating to them which I will now set out, applies to the lots managed as a joint property. Before descending into this evidence however, it will useful if I refer to the as yet unreported decision of the Land Appeal Court in Alan Raymond Thomason v Chief Executive, Department of Lands (delivered 3 March 1995) which provides the legal template against which the evidence must be tested. In Thomason it was said that if land is to be valued under s.17(1) on the basis that the land is "exclusively used .... for purposes of farming" each of the following questions must be answered in the affirmative: "1. Is the land used for the purposes of: (a)the business or industry of a type specified (namely, 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 an activity of a type specified (namely, the cultivation of soils the gathering in of crops or the rearing of livestock)? 2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land? -- 2 of 7 -- 3 3.Does the use of the land for the purposes of that business or industry have: (a)a significant and substantial commercial purpose; or (b)a significant and substantial commercial character? 4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on: (a)a continuous basis; or (b)a repetitive basis?" Up until 1977, the joint property had been used for dairying and banana growing, with dairying ceasing that year and the banana farming carrying on until around 1981. Mr. Chippendale said that dairying and bananas proved a "profitable mix" on the property and that as a result he and his wife were able to make a reasonable living and raise five children. The so-called "profitable mix" was apparently at a somewhat modest level, as there was also evidence which emerged from reference to a journal maintained by Mrs. Chippendale which revealed figures described in examination-in-chief as indicating "a fairly minimal income from a fully operating commercial farm." Some time after the cessation of banana growing, (but exactly when is not clear on the evidence), the Chippendales decided to commence raising beef cattle. They started by purchasing 30 cattle which they bred up to 139 head in 1991-92 and 150 head in 1994-1995. Mr. Chippendale explained that by breeding rather than purchasing cattle, the appellants would be able to develop a herd with limited capital outlay and would have the added advantage of developing the quality of stock that they wish to produce. Mr. Chippendale tendered the following schedule:- YEAR CATTLE GROSS COSTS OF GROSS FARM STOCK ON SOLD PROCEEDS SALES PROFIT EXPENSES ON HAND $ $ $ $ 30th June 91/92 40 5032 4893 139 11930 139 92/93 27 8480 3332 5148 11074 129 93/94 46 7153 3740 3413 8243 124 94/95 58 7331 2617 4714 9750 150 In considering the information contained on this schedule, I note that in the case of V95-74 the date of valuation is 30 June 1993 and the date of issue of that valuation was 27 June 1994, whilst in V95-98 the date of valuation was 1 January 1995 and the date of issue was 3 April 1995. Authority for the adoption of such dates is found in Walker v. The Valuer-General (1978) 5 QLCR 128 at 131: " As it is relevant to my consideration of the evidence I should at this stage mention that my jurisdiction as to the use to which the subject lands are put is confined to the period commencing with the date as at which the value has to be found (31st March 1975) and -- 3 of 7 -- 4 finishing on the date as at which the Notice of valuation issued (28th October 1976). If a business of primary production commenced later than 28th October 1976 its effect, if any, on the unimproved value of the land is properly a matter for an application for revaluation in terms of section 13 of the Valuation of Land Act." This reasoning was endorsed by the Land Appeal Court on appeal. ((1978) 5 QLCR 47 at 349). I am therefore required in exercising the jurisdiction of the Court to consider only that evidence which applies to the periods set out above, for each appeal. Mr. Chippendale estimated the carrying capacity of the joint blocks at 100 to 120 head, presumably on the basis of a mixed herd being carried through a series of average seasons. He has agistment available nearby to take overflow of stock depending upon the state of the pastures on the subject land, and at the later relevant date had 58 head agisted. Of the total herd in 1995 about 55 or 56 were heifers, that is under 18 months of age and not yet producing. On the basis of this evidence, I have no difficulty in concluding that in answer to the first question proposed in Thomason that the land is used for the business of grazing of cattle. For three of the four years set out in the above schedule, the subject property has suffered drought conditions. According to Mr. Chippendale, this has substantially increased costs, whilst at the same time causing stock to lose condition and therefore productivity is impacted upon. Consequently profitability is affected, although I note that in the figures supplied gross proceeds and gross profit are generally trending upwards, and the costs of sales are trending down, as are farm expenses. The schedule also reveals, however, that there is no real sign of a net profit emerging. In addition, the data on the schedule raises a number of questions in my mind which are not answered in the evidence. For example, it is not totally clear what is included under the heading "farm expenses". There was some evidence that this may have included capital expenses such as the purchase of equipment. I am uncertain as to whether the figures include depreciation but think they probably do as it was mentioned in evidence that the figures have been taken from taxation returns for the four relevant years. In considering the gross proceeds on sale of the stock I note that average prices range as follows: 1991-1992 $125.80; 1992-1993 $314.07; 1993-1994 $155.50 and 1994-1995 $126.39. During evidence-in-chief Mr. Chippendale indicated that stock sold were three to four-month-old calves however, presumably some cull cattle are also included in the "cattle sold" column, but I am uncertain what the composition of the sold stock was and whether the prices were appropriate. It is also unclear to me why such young stock are sold off and not stock which would achieve a higher price in the beef market, when at the same time the carrying capacity of the subject land had been over reached for each of the four years in question. The questions that I raise are relevant to the Thomason question 3 regarding whether the use of the land for beef cattle grazing purposes has a significant and substantial commercial purpose or character. This is a question to which I will return later, however, for the moment I can say that the use of the land for grazing purposes does represent the dominant use of the land on the basis of the evidence supplied. Mr. Chippendale is 75 years of age and works on the subject land seven days a week. His son occasionally helps on Saturdays and together they tend to most of the management and -- 4 of 7 -- 5 work requirements associated with raising the livestock on the subject lands. Mr. Chippendale is skilled in most aspects of cattle husbandry and has little requirement for other outside assistance. Quite clearly in response to Thomason question 4 the appellants are engaged in the use of the land for grazing purposes on a continuous and repetitive basis. I now consider the question of whether this is carried out for the purpose of profit, another element needed to be satisfied in question 4. In his affidavit, Mr. Chippendale wrote "It can be noted that I make a profit from the actual sale of the cattle (which I attribute to the fact that I now breed all my own stock) but that when one takes into account the expenses associated with the property, I make a small loss. By continuing to improve the quality of our stock and hopefully with the benefit of better markets, I believe it would be possible to break even or even make a small profit." He also mentioned that he and his wife's income is supplemented by some small investments. He suggested that the property could become more profitable if some form of mixed farming could be undertaken, however, the capital costs involved in doing this and the extra labour required would substantially erode such profits. I take this to mean that, given his advanced years, Mr. Chippendale would need to employ others to undertake tasks which would be too arduous for him. This issue of profitability was taken up in oral evidence where Mr. Chippendale said in answer to a question from Mr. Grennan, who appeared for the Chief Executive, that he was hoping to make a profit and that given the effort that he put into the property, that if a profit didn't emerge then something had "gone very very wrong". In Thomason, the Land Appeal Court wrote with respect to this fourth question that in the context of s.17, "The word `purpose' seems to have a subjective character in the sense that it refers to the intention of the persons engaged in the business or industry." Whilst on the evidence before me the appellants would appear to have more of a hope that profit will emerge than a clear and justifiable intention to make a profit, I am happy in view what Mr. Chippendale said, to conclude that the threshold of this test has been met. That is, the business of grazing is engaged in for the purpose of profit on a continuous or repetitive basis. I return now to Thomason question 3 and in this regard express some concern about what I have just written concerning the evidence on future profitability and how that impacts upon the question of whether the use of the land has a significant and substantial commercial purpose or character. In Thomason, the Land Appeal Court said concerning this question: "... there must be evidence that: (a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or (b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit." The evidence that the subject lands only ever made a modest profit, as a dairy and banana farm and, that during its use for that business, was able to support and raise a family of five children, is not relevant to my conclusion as to whether the land is used for the purposes of farming at each relevant date in these appeals. -- 5 of 7 -- 6 The difficulty I have is forming a view that the enterprise currently being carried out on the subject lands will ever make a profit, a doubt apparently shared by the appellants. Whilst the financial data supplied in the schedule included above indicates that the financial trend is going in the right direction even though impacted upon by drought and poor prices for the product, it is not clear to me under what circumstances commercial reward will emerge. What type of stock and what sale price structure, assuming good or average seasons, will be needed for the enterprise to become a success? While there is evidence that the appellants are breeding their herd up, I am uncertain about the type of enterprise actually involved; that is, what else does the business plan involve apart from simply improving the quality of the stock and selling off young calves? Mr. Chippendale said at one stage "the point is there that our property is not running adult cows where you make extra money. It's from little three to four month old calves so the profit is not great there." Herd numbers have been above the carrying capacity for at least four years, yet sales are not producing enough income to generate a profit. I do not doubt that a property with a carrying capacity of 120 head can be shown as being used for a significant and substantial commercial purpose or character, but the evidence before me does not demonstrate this. In forming this conclusion I am guided by what the majority said in Chief Executive Department of Lands v KW Whackett (unreported Land Appeal Court judgment delivered 3 March 1995): " In our view neither the objective character nor the subjective purpose of the grazing enterprise can be said to be significantly and substantially commercial. We emphasise, however, that we arrive at this conclusion on the facts presented in this case. There is insufficient evidence to find in favour of the owners. No books of account or trading figures of any kind were presented. Before us both parties relied on the verbal evidence of Mr Whackett in the Court below that these lands carry 70 head of mixed cattle on a year to year basis, that for the three years to 1992 they sold approximately 25 head of cattle per year and that he estimated their average recent gross return at $5,000 per annum. He also stated that the maximum carrying capacity is 70 head of cattle and it would be necessary to run more cattle to make any profit. No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming. We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant or substantial commercial purpose or character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts' business activities are presented in more detail, the matter could again be considered, with quite different results." I have also studied what Ambrose J wrote in His Honour's minority judgment in Whackett to which Mr. Baumann for the appellants directed me in argument, however, I feel bound to follow the majority in considering the question as to what standard and type of evidence might be adequate to provide an affirmative answer to this third Thomason question. -- 6 of 7 -- 7 The important point is that the majority decided that there must be direct and substantial evidence in support of an affirmative conclusion. There is a legal burden of proof that always rests with the appellant in a matter such as this as was explained by the High Court in Brisbane City Council v The Valuer General (1978) 5 QLCR 283. The majority in Whackett has indicated what is needed to discharge that burden. I express some discomfort with the conclusion that I have drawn, not because it appears to be wrong in law, but because I would have thought that the appellants constituted the type of land owner that the policy underlying s.17 would be designed to protect; or, at least, that the use to which the land was being put was to be protected. Peculiarly, a land owner, whose land is put to a less intensive use than the Chippendales' land is, would gain the protection of s.17 if such lesser use was being made by, for an example, an adjoining owner who happened to use the land as an adjunct to the farming activity carried out on his own land. See, for example, Higbie v the Valuer-General (Land Appeal Court, unreported, 3 March 1995). On another tack: when one looks at the residential aspect of s.17, one may readily find an example of land which is ripe for redevelopment and is held by a recognised developer, yet would be protected and valued as residential land pursuant to s.17 if, for example, an old house on the land was rented out for $100 a week. Each of these outcomes results from an application of s.17 of the Valuation of Land Act as it is currently expressed. I seriously question whether the section, as presently drawn, properly expresses the policy intent of Parliament. In this matter however, I am bound by the words contained in s.17 and the Land Appeal Court's decisions on it, particularly Whackett and Thomason, and accordingly find that the appellants have failed to discharge the burden of proof placed upon them. The appeals are dismissed and the valuations of the Chief Executive are affirmed. RP SCOTT MEMBER OF THE LAND COURT -- 7 of 7 --