Bolitho v The Valuer-General [1992] QLC 205 (1992) 14 QLCR 73

LAND COURT, BRISBANE. 16 April, 1992. Re: Appeal against determination of Valuer-General - City of Brisbane Act (s. 44(11)) VC91- 1025, VC91-1026. Simon J Bolitho and Dorothy E Bolitho v The Valuer-General D E C I S I O N The appellants, Mr and Mrs Bolitho, are the owners of Lots 10 and 11 on RP 51353 in Parish of Tingalpa, County of Stanley. The Lots are adjacent to each other and are located at 425 Grieve Road, Rochedale. For differential rating purposes, each Lot has been identified as falling within Category A as defined by the Brisbane City Council (the "Council"). The appellants have appealed to the Land Court against the categorization of each Lot and submit that the subject land should be included in Category C. By agreement of the parties the two appeals were heard together. It may be useful to set out briefly the statutory provisions under which this matter has come to the Land Court. Section 44 of the City of Brisbane Act 1924 empowers the Council to make and levy a general rate on the unimproved value of rateable lands within the City of Brisbane (the "City"). The Council may, in any year, in framing and adopting its Budget for the next ensuing year, categorize the rateable land in the City into two or more categories and may make and levy a differential general rate on the unimproved value of rateable land in each category. The Council may adopt criteria for the purpose of categorizing the rateable land in the City and, where it does so, shall request the Valuer-General to identify the category in which, in the Valuer-General's opinion, each parcel of rateable land is included. The Valuer-General notifies the Council of the category of each such parcel. [1992] QLC 205 -- 1 of 10 -- 2 An owner may object to the Valuer-General against the categorization if the owner considers that as at the date of issue of a rate notice the land should, having regard to the criteria adopted by the Council, have been included in another of the categories listed in the notice. The owner must nominate the category in which, in the owner's opinion, the land should have been included and state the facts and circumstances on which that opinion is based. The Valuer-General may disallow an objection, allow it, or decide that the land to which the objection relates shall, as at the date of issue of the relevant rate notice, be taken to have been included in a category other than the category in which it was then included and other than the category nominated by the objector. Where the owner is dissatisfied with the Valuer-General's decision, the owner may appeal to the Land Court against that decision. The only ground of appeal is that, as at the date of issue of the relevant rate notice, the land should, having regard to the criteria adopted by the Council, have been included in a category other than the category listed in the rate notice or in which the land is taken to have been included by reason of the decision of the Valuer-General. The appellant must nominate the category in which, in the appellant's opinion, the land should have been included and state the facts and circumstances on which he bases that opinion. The history of these matters, considered in light of the statutory provisions just summarised, is as follows. At its Budget meeting of 13 June 1990, the Council resolved that a system of differential general rating be applied to all land in the City for the year ending 30 June 1991, as provided by section 44(7) of the City of Brisbane Act 1924. For the purpose of levying differential general rates on all land, the Council: (a) determined that there shall be six land categories (namely Categories A1, A2, A3, B, C and D) which are specified in the Table printed in a brochure "Differential Rating - a new system of rates assessment" (part of Exhibit 4 in VC91-1025); and (b) adopted the criteria set out in the Table as the criteria for each category. The criteria for each category are specified land use codes which are the "Land Use Codes" published by the Valuer-General's Department dated 1 March 1985. -- 2 of 10 -- 3 Lots 10 and 11 on RP 51353 have each been identified as falling within Category A. As the evidence shows that the unimproved capital value of each Lot exceeds $100,000, each is more accurately described as falling within Category A3. The appellants, having regard to the criteria adopted by the Council and set out in the Table, objected to the Valuer-General against the categorization of each Lot. By notices in respect of each Lot, dated 11 September 1991 (Exhibit 2 in VC91-1025) and 17 September 1991 (Exhibit 2 in VC91-1026) respectively, the Valuer-General notified the appellants that their objections had been considered and disallowed, and the category specified in each rate notice issued on 19 July 1991 was confirmed. I note that each of the Valuer-General's notices is on a form with the heading "Local Government Act 1936-1988 [section 27(1C)(i)] Notice of Decision on Objection against Categorization". The valuer's statement in each case (Exhibit 4) bears the heading "Local Government Act 1936-1987 Section 27 (ID)." The Land Court documents in the two matters, however, describe the appeals to this Court as being made under section 44(11) of the City of Brisbane Act 1924 (as amended). The subject land is located in Brisbane and I am satisfied that these proceedings were brought and fall to be determined under the City of Brisbane Act 1924. The appellants, being dissatisfied with the Valuer-General's decisions, have appealed to the Land Court. Their ground of appeal in each case is that, as at the date of issue of the relevant rate notice, the subject land should, having regard to the criteria adopted by the Council, have been included in Category C as land to which code 86 - Horses applies. The circumstances on which the appellants base their opinion are that the primary use of the bulk of the subject land is for the stabling and pasturing of horses. Assuming that to be the case, no other code referred to in Category C would apply to the land. The relevant facts concerning the subject land are summarised as follows: (a) Lot 10 on RP 51353 has an area of 7.029 hectares. It is zoned non-urban and has an effective unimproved capital value of $225,000. A large homestead (dwelling) is located on the land. The house is currently occupied by tenants who pay the appellants $140.00 per week (or $7,280.00 per year) in rent. The relatively small part of the land on which the -- 3 of 10 -- 4 house stands is fenced off from the remaining part of the Lot. The other and much larger part of the land is used for the care of horses. The occupants of the house are not involved in any way with the agistment or stabling of horses on that land. (b) Lot 11 on RP 51353 has an area of 4.489 hectares. It is zoned non-urban and has an effective unimproved capital value of $240,000. Two dwellings are located on the land. The appellants built a house which they occupy. A small cottage, which was there before the house was built, was retained for use in connection with a riding school and the stabling and keeping of horses. The appellants originally intended that the person using the cottage would be involved in the riding school business. Apparently the Council approved the retention of the cottage on the land in those circumstances. As the riding school is defunct, the cottage is now occupied by tenants who pay the appellants $127.50 per week (or $6,630.00 per year) in rent. The relatively small parts of the land on which the house and the cottage stand are fenced off from the remaining part of the Lot. The other and much larger part of the land is used for the care of horses. The occupants of the cottage are not involved in any way with the agistment or stabling of horses on that land. Mr Bolitho gave evidence that the appellants use the two Lots as one block of land. A boundary fence divides them, but there are many gates in the fence. Some 16 or 17 years ago, the Council gave planning approval in writing to the use of the subject land for a horse riding school and for the agistment and stabling of horses. The riding school enterprise lasted "for a short while", but for financial reasons was discontinued. Mr Bolitho estimates that between 95% and 97% of the subject land is used for the agistment and stabling of horses. The appellants have continued to agist an average of 11 or 12 horses on the subject land. They take various types of horses and have had or currently have racehorses, stockhorses, Arabs, Welsh mountain and Australian stud book ponies, most of which have been shown, and pleasure riding horses. The appellants try to avoid keeping stallions on the subject land but have, from time to time, kept stallions and mares. They also try to avoid foals "because they can be a bit of a problem". Apart from the dwellings referred to above, there are buildings used for the storage of hay, stockfeed and equipment on the subject land, including 2 enclosed stables, and 8 yards. The gross return to the appellants for the use of the subject land for the care of horses is approximately $5,000 to $6,000 per year. -- 4 of 10 -- 5 Mr B.C. Skinner, a valuer with the Lands Department, appeared for the Valuer-General. He submitted that neither Lot 10 nor Lot 11 comes within Category C, but that each should be categorised separately and differently from the other. His written evidence comprised a statement concerning each of the Lots (Exhibit 4 in VC91-1025 and VC91-1026 respectively). His evidence was that Lot 10 on RP 51353 is used for Large Homesite (Dwelling) - code 05 and for Horses - code 86. The land has been placed in Category A because it fits the specific criteria adopted by the Council, as shown on the Table. He submitted that Lot 10 on RP 51353 does not fit the criteria for inclusion in any of the remaining five categories (that is, categories other than Category A3) adopted by the Council. Mr Skinner stated that Lot 11 on RP 51353 is used for two dwellings - code 05 and for Horses - code 86. Despite the fact that the Valuer-General disallowed the appellants' objection and confirmed that all the subject land is properly included in Category A, Mr Skinner submitted that Lot 11 should not be placed in Category A because there are two dwellings on it, one being owner occupied and the other rented. Accordingly, he argued, code 05 does not apply to the land. The other codes in Category A do not apply to Lot 11. He contended that Lot 11 should be placed within either Category B or Category D. In support of a Category B categorization he submitted that the two dwellings should be considered as flats and, accordingly, the land use code should be altered to 0302 (2 flats). The four digit code is based on a primary land use code 03 - Multiple Dwelling (Flats) and a secondary land use code 02 indicating the number of flats. Alternatively, he submitted that, if this Court finds that the two dwellings are not to be regarded as 2 flats, the land use code should be altered to 0000 and Lot 11 should be included in Category D, the category for any land not included in categories A1, A2, A3, B and C. In my view the two dwellings are not flats. Under Section 44(11)(h) of the City of Brisbane Act 1924 the Land Court may affirm the decision of the Valuer-General or determine that the subject land shall, at the date of issue of the relevant rate notice, be taken to have been included in another category. The issue in each case falls to be determined by reference to the criteria adopted by the Council, that is, the land use codes. -- 5 of 10 -- 6 Mr Skinner, stated that the land use codes used in the Table by the Council were initially adopted by the former Department of the Valuer-General for another purpose, namely for classifying lands for valuation purposes. The facts in these cases point to two difficulties which can arise when those criteria are applied to some areas of land. The first difficulty arises when the use to which the land is put does not fall within one of the codes (even though that use may be related or similar to the use of land to which that code applies). In those cases the land must be included in Category D. The consequence of that categorization seems to be that the land is rated at the highest general rate on the unimproved capital value of rateable lands. The second difficulty is that some areas of land may have dual or multiple uses. The system of categorization adopted by the Council provides that land must come within one category only. The Valuer-General or this Court must decide in which Category a parcel of land is most appropriately included. According to the explanation of the "Land Use Codes" published by the Valuer-General's Department dated 1 March 1985, the Land Use Code is a four digit code. The code is divided into a primary field (being the first two digits) and a secondary field (being digits three and four). (a) The Primary Use Code identifies the predominant use. "The criteria for Predominant Use should take account of the economic activity/use. Area is not necessarily the basis for determining the Predominant Use". (b) The Secondary Use Code would be applied where a lesser use is also engaged on the property. The Council seems to have adopted only what are described in the "Land Use Codes" as Primary Use Codes. Consequently the Secondary Use Codes are not relevant for categorization purposes under the City of Brisbane Act 1924. The City of Brisbane Act 1924 does not give any guidance to the Valuer-General in making a determination as to which of the Land Use Codes should apply to an area of land beyond the general provisions in section 44 (7) that: -- 6 of 10 -- 7 (a) where the Council adopts criteria for the purposes of categorizing the rateable land it shall request the Valuer-General to identify "the category" in which, in the Valuer-General's opinion, each parcel of rateable land is included; and (b) where, having regard to the criteria adopted by the Council or the information contained in his records the Valuer-General decides that he cannot identify "the category" in which each parcel is included he shall advise the Council in writing of that decision. In particular, there appears to be no statutory or other principle for determining which is "the category" in those situations where land is potentially capable of being included in more than one category. By comparison, valuers determining the valuation of land apply the principle known as valuation for the highest and best use, as promulgated by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418. Given that the Council has adopted the "Land Use Codes" as published by the Valuer-General, it may be appropriate, in the absence of statutory guidelines, to obtain some assistance on the use of Primary Use Codes from that publication. Accordingly, the question to be answered in respect of each Lot of the subject land is whether the Lot is most appropriately categorized by reference to: (a) code 05 - "Large Homesite (Dwelling)", that is, a parcel of land (similar to a vacant site significantly larger than land of which the highest and best use would be as a residential site) which is used as a single unit residence - in which case the land would be included in Category A3; or (b) code 86 - "Horses", that is, land used for the breeding and/or growing of horses including for stud purposes, including predominantly stables - in which case the land would be included in Category C; or (c) some other code. Generally speaking, the criteria should be applied taking account of the economic activity or use of the land. Area is not necessarily the basis for determining that use. -- 7 of 10 -- 8 There are few decisions of the Land Court which offer guidance in the present cases. The facts in these cases are similar to those in HW Harsley and MY Harsley v The Valuer-General as set out in the decision of the President of the Land Court on 30 April 1991 (VC90-678, not yet reported). The land in that case had been placed in Category A3. The appellants argued that code 83 - Small Crops and Fodder Irrigated - applied to the land and so it should have been included in Category C. The evidence showed that the appellants resided in the home erected on the land and the balance of the land was worked as an irrigated market garden. Money and effort were expended on developing and using the land for growing fruit and vegetables which were sold at a market. The President was satisfied that the appellants were fully utilising the land, except for the small area around the home, in the growing of fruit trees and small crops. He accepted that the appellants both devoted the greatest part of their days to the work on the land and that the income was an essential factor in meeting their daily needs. He allowed the appeal and determined that the land be taken to have been included in Category C. The present cases can be distinguished from the Harsleys' case. The evidence shows that, irrespective of whether the subject land is used for the purposes of the business of primary production, it is not exclusively so used. The total income derived from the rental of premises on Lots 10 and 11 is in the order of $13,910.00 which, Mr Bolitho agreed, is the major income from the subject land. The tenants in the dwellings do not occupy them for any purpose that is incidental to the use of the other parts of the land. Mr Bolitho stated that the appellants try to keep the rents "as low as possible" as they are rented by people who suffer financial hardship from time to time. If that is the case, there is potential for greater revenue from rents of the premises. It is the actual income, however, that is relevant in these cases. The application of an economic use test to the subject land demonstrates that, in each case, the predominant economic benefit which the appellants derive is from rental of residential accommodation. The calculations can be made in the following way. Assuming that the bulk of the subject land is used as a whole for the care and keep of horses then, in the absence of any evidence to the contrary, it is appropriate to divide notionally the amount of income received for that use by reference to the proportion which the area of each Lot bears to the total area of the subject land, -- 8 of 10 -- 9 namely, Lot 10 - 60% and Lot 11 - 40%. The highest income figure nominated by the appellants ($6,000) can be apportioned as Lot 10 - $3,600 and Lot 11 - $2,400. The annual rent of the house on Lot 10 is $7,280 or 67% of the total annual income derived from Lot 10 ($10,880). The annual rent of the cottage on Lot 11 is $6,630 or 73% of the total annual income derived from Lot 11 ($9,030). Those calculations alone suggest that, despite the fact that Mr Bolitho considers himself to be a farmer and the bulk of the subject land is used for the care and keep of horses, each Lot should be categorized in terms of its residential use. Closer analysis of each Lot leads to the same result, but for an additional reason in the case of Lot 11. In the case of Lot 10, two codes apply: code 05 - Large Homesite (Dwelling) and code 86 - Horses. As a choice must be made and, on the evidence in this case, it is appropriately made primarily in economic use terms, code 05 is the relevant criterion. Accordingly, the land is appropriately included in Category A3. In the case of Lot 11, different parts of the land are used for purposes for which one of the following three codes apply: code 05, code 86 and code 02 - Single Unit (Dwelling) (the use of a parcel of land for predominantly residential purposes and a secondary use may apply). Mr Skinner suggested that the presence of two dwellings on the land in present circumstances was not permitted by the non-urban zoning of Lot 11. That matter is not in issue in these proceedings. I note, however, that Section 5.1 of the City of Brisbane Town Plan provides that land included in the Non- Urban Zone is intended to be retained in its semi-rural state. Development within the zone will be limited to broad-acre residential use and to those activities, including agricultural pursuits, which will preserve the rural and recreational atmosphere of the area. All development is intended to remain at a very low density. New allotments will be required to have a minimum area of 4 hectares. The permitted development in the Non-Urban Zone is Agriculture "A: (which includes any husbandry, such as the keeping of livestock, for business or commercial purposes which is carried out in the open), detached house (a dwelling house used or intended for use for residential purposes by a family) and park. Irrespective of any limitations which the zoning may have for any future development of the subject land, the question in this case is what criteria apply to the land for categorization purposes having regard to its present use. Lot 11 is the smaller of the two lots. It contains the family home of -- 9 of 10 -- 10 the appellants and so the economic use test on its own is less likely to determine the categorization. Both code 02 and code 05 are criteria within Category A3, which for present purposes, provides: "Category A3: Land to which Codes ... 02 - Single Unit (Dwelling), ... 05 - Large Homesite (Dwelling) ... and [other] of the Land Use Codes apply where (a) in the case of land other than land to which Code 02 - Single Unit (Dwelling) or 05 - Large Homesite (Dwelling) applies, that land is included under the Town Plan for the City of Brisbane in a residential zone; and (b) the unimproved capital value of that land last determined by the Valuer- General exceeds $100,000." Category A, and each of the other Categories, is expressed in terms which permit but do not require the use of one code only to determine the inclusion of land in that category. While the use of "and" between the penultimate and ultimate code reference in each Category cannot mean that all those codes must apply before land is included within a Category, it does permit more than one code to apply to land within a Category. Had that result not been intended, the disjunctive "or" would have been used. Lot 11 is properly included in Category A3. Accordingly: (a) the appeal in VC91-1025 is dismissed and the decision of the Valuer-General is affirmed; (b) the appeal in VC91-1026 is dismissed and the decision of the Valuer-General is affirmed. (GJ Neate) Member of the Land Court -- 10 of 10 --