Benson & Anor v The Valuer-General [1991] QLC 102

LAND COURT, BRISBANE 13th September, 1991 Re: Appeal against determination of Valuer-General - Caboolture Shire Council. AV91-349 John H. Benson and Holly L. Hudlow V. The Valuer-General DECISION (Hearing at Caboolture) This appeal is against the determination of the Valuer-General of the unimproved value of Lot 4 on RP 181320, parish of Pine, in the sum of $88,000 for the purposes of the Annual Valuation of the Area as at 31st March, 1990. The appellants value the land at $40,000. The Valuer-General has valued the land for its highest and best use for rural residential purposes. The value that he has applied for the purpose is not in dispute. The appellants contend that such valuation is contrary to law and that the land should be valued as land "exclusively used . .. ... for purposes of the business of primary production .... " - Valuation of Land Act - s. 11 (1 )(vii). The appellants were represented by their agent, Mr AR. Thomason. Mr John H. Benson was called to give evidence. His statement of evidence is identical with the statement he tendered to the Land Appeal Court, in the hearing of an appeal against the determination of the Land Court in respect of the valuation of the land for the purposes of the Annual Valuation of the Area as at 31st March, - 1989 (AV90-65) - judgment delivered 28th June, 1991. The matter of the valuation of tbe land for the purposes of the Annual Valuation as at 31st March, 1988, was also tested in the Land Appeal Court (AV89-119). This judgment was delivered on [1991] QLC 102 -- 1 of 11 -- 2 27th August, 1990. In each case the appellants were unsuccessful in their claim that the land should be valued under the provisions of Section 11 (1 )(vii). I am asked to consider this question once again. The facts briefly stated are as follows: The property has an area of 26.24 hectares. Of that area "less than one half an acre has been fenced for the buildings" (Exhibit 3 - subject file). Within that area there is a one bedroom dwelling and a workshed to provide accommodation and cover for machinery and vehicles as required (Exhibit 3 - subject file). The balance of the property is used by an adjoining dairy farmer (Mr Dawes) - II The circumstances are that a neighbouring dairy farmer Mr Dawes, paid the appellants at the relevant time $2,500 per annum for the agistment of 20 adult dairy cows. The appellants are responsible for the growing of grass, the management and maintenance of the improvements including pastures, water and fencing. The appellants live on the property in the one bedroom dwelling, spending the equivalent of about 8 months in each year in residence, the balance overseas. The res1dential improvements on the property occupy only a relatively small area. " (Land Appeal Court AV90-65 - page 2). Mr Benson has a small aviation business in the United States. On page 2 of his statement he says: The maintenance of this block has not been done as tax avoidance scheme and as such, no records of real or imagined expenditure and personal work hours have been kept. " On page 3 of the judgment last mentioned the Court said: II The appellants say that nothing has changed since the previous Land Appeal Court · hearing but they now agree that their activities are not of a sufficient scale to constitute 'a' business in itself. • Having agreed with this proposition the Court followed by saying: We also agree with the submission that the property is used for 'the' business of primary production. We see this predominantly because of the activities of Mr Dawes. Regardless of "the standards of management or the efficiency with which Mr Benson conducts his activities, which indeed on the evidence have improved the carrying capacity to its current twenty head of pregnant dairy cows, we cannot accept that this segment of the primary production cycle is of sufficient scope to demand incidental on~site management as an adjunct to the predominant segment of the cycle, the prod'lilction and sale of milk by a neighbour, with the necessary and adjacent, on-site infrastructure. We see any reasonable interpretation of the '· -- 2 of 11 -- 3 appellants' predominant use of the subject property as being of a rural residential nature and any input into the primary production scheme of things as being incidental to such residential use, satisfying the personal standards of the appellants. It follows that we, as did the Land Appeal Court before i.Js, find that the land involved is not used 'exclusively' for the purposes of the business of primary production, and the property is not entitled to the protection provided by the legislation for exclusive use for the purposes of the business of primary production, and that the valuation is not 'contrary to law'. I might add to this the finding of the Land Appeal Court - AV89-119 - where at pages 3/4 of the judgment it is said: It may well be that the owners regard the agistment arrangement as some form of preservation of the land and as producing other benefits associated with their long term desires for improvement of the land. But it is impossible to hold that the land is exclusively used for the business of primary production. In the end the essential use of the owners at the relevant time was for their own residential purposes, and these were not subsumed to Mr Dawes' business of primary production or to any relevant enterprise of their own that could be identified as a business of primary production. In the end it is a case of dual use. The reasoning we have expressed in the Hitzke case in this respect applies equally here and requires no repetition. The appeal on this point fails. • Mr Thomason takes exception to the finding of the Court (AV90-65) that the appellants' input into the "primary production scheme of things" is incidental to the predominant use of the property for rural residential purposes. In his submission the outcome of the matter is determined by the meaning which should be given to the word "exclusive" in the section. This issue has been canvassed on numerous occasions and a number of authorities have been cited by the Land Appeal Court in support of the 1988 valuation which appear relevant for the purpose of understanding the issue but before dealing with them it can be said that firstly there is no dispute that the business of Mr Dawes is one of primary production arid secondly that the appellants do not conduct a "business of primary production" on the subject land. What is submitted is that in the scheme of the total enterprise of Mr Dawes the fact that the agistment arrangement is not run on commercial lines (no· books of account are kept, etc.) is irrelevant, so also is irrelevant the sum returned for the rights to agist. In essence the submission boils down to this - that -- 3 of 11 -- - 1 ( 4 domestic occupation by an owner does not breach the exclusivity provisions of the section provided that as is submitted in this case, the owner deliberately engages in growing pasture for consumption by livestock. Mr Thomason seeks support in this reasoning from Hansard (December, 1971) when the Honourable the Minister in introducing the Bill to amend the Act by inserting Section 11 (1) (vii) said at p. 2402: The prov1s1on regarding primary production has been inserted to ensure that a primary producer caught up in urban development is not valued on the potential until he ceases using the land for primary production. " The evil which the section was intended to cure, appears to me to have been well stated by Mr Smith, then President of the Land Court, in the Walker case (1978) 5 Q.L.C.R. 347 and found in the judgment of the Land Appeal Court at p. 353 as follows: One of the objects of the Valuation of Lad Act is to achieve relativity in the incidence of rates. It does this by assuming that all land in Queensland is held as fee simple and for purposes of valuation is regarded as if it remained in its unimproved or natural state. The normal principle of valuation requiring that land must be valued for its highest and best use has been judicially held to be generally applicable. Section 11{1)(vii) was introduced as an exception to the general application of this principle. As far as primary producing land is concerned its aim appears to be to give a rating concession to those lands exclusively used for the business of primary production which are in localities where lands in the course of progress have come to have a potential for some other use. The most common example is, perhaps, that of lands in actual use for substantial cultivation or dairying on the outskirts of developing towns. By virtue of their situation these lands would command a market as accommodation or subdivisional land. The section patently protects such lands from the incidence of the higher rate burden which would apply to accommodation or subdivisional land. • Clearly the intention was to protect from the incidence of higher rating the likes of the dairy farmer caught up in and surrounded by urban development whilst he continues to use the farm exclusively for purposes of the business of dairying. The land is then valued as land with no higher potential (for urban subdivision) than as primary production land, notwithstanding that the owner and ,. -- 4 of 11 -- ··: .• :. :: .,r.:;· · - •....:. .. ·. ~ -~· - 5 possibly an employee may reside on the farm. Commonly, as an integral part of the operation of the business, a primary producer will live on ·his property, either full-time or part-time, or he may have an employee living upon it. The fact that he does so will not stand in the way of a finding that the land is exclusively used for the purposes of the business of primary production. (Crawford v. The Valuer-General (1990-V89-460) 27.8.1990 - to be reported - p. 2. In these circumstances domestic occupation by the owner may be taken as incidental to the business of primary production. To move from this example to the other end of the spectrum. Suppose the dairy farmer subdivided one perimeter of the farm into a number of residential sized lots - say 1O x 2 hectare lots - and sold them, with he continuing to carry on dairying on a scale sufficient to meet the requirements of section 11 (1)(vii). Assume homes were constructed on each lot and that each owner took up residence. Suppose further that in each instance the owner sowed pasture over the rear two-thirds of his lot and the farmer agisted all such areas under an arrangement not sufficient in itself in each case to constitute a business, in the hands of each owner, of primary production. On the submission made by Mr Thomason each individual owner would be entitled to have his land valued under the section because each owner is deliberately producing pasture for consumption by livestock. The Walker case among other things settled that the word "business" is meaningful and cannot be ignored. Likewise the Land Appeal Court has said that "exclusively used" has a meaning which cannot be ignored. (See 8owden's case - (1980-81) 7 Q.L.C.R. 138. To take the matter further, some review of other decided cases is of assistance. In 8.8. Smith v. The Valuer-General (1983) 9 Q.L.C.R. 22, the Court was concerned with the valuation of a 7 hectare parcel in -- 5 of 11 -- ( 6 the Shire of Caboolture. The facts are stated on page 24: • Mr Smith is a full-time employee of an oil company. He lives at Strathpine. He visits the property on occasional week-ends only when he might repair some fencing. He runs no stock himself. There are no structural improvements on the property and the only use of the property appears to be that made by the Duncan Brothers. Mr Smith is the father-in-law of one of the Duncan Brothers but this is, in my opinion, not a relevant consideration. • Further down that page it is said that it was common ground that the Duncans' operations were a business of primary production. At page 26, the learned President said: In the subject case there is an admitted permitted use of the land for the purposes of a business of primary production, and the evidence shows that this use is exclusive. Nothing else appears to be necessary in the subject case to satisfy the pre-requisite of the section. • If this reasoning were applied to the example I have quoted at the other end of the spectrum on the assumption that in no case was a home constructed on a lot and agistment given over the whole of each lot, the lands would likely qualify as land exclusively used for purposes of the business of primary production by the adjoining dairy farmer. In Whitt/e's case there is some obiter concerning the subject block itself being of sufficient size and productive quality to satisfy the Walker tests, but this is contrary to the earlier case of Bartholomew (supra at p. 258 (last paragraph)) where it was stated that the aggregation business as a whole was the relevant consideration and not the size of the component parts of the aggregation. Certainly since Johnston's case where a parcel of 7 hectares qualified, I do not think that the individual size of component parcels is a relevant consideration. • (B.B. Smith v. Valuer-General supra pp 25/26) Mr Thomason appears to use this reasoning in the sense that each component owner who is in domestic occupation of his land qualifies under the section notwithstanding that he, himself, is not agisting cattle as a business. In Robinson v. The Valuer-General (1986/87) 11 Q.L.C.R. 148, the owner of an 18.64 hectare parcel who worked in full-time employment as a timber yard foreman resided with his family in a house constructed in one corner of the -- 6 of 11 -- ( 7 property. With the exception of one acre surrounding the house, the grazing rights of the land were rented at $500 per annum to an adjacent dairy farmer for the purpose of running his dry cows. After distinguishing the 8. 8. Smith case on grounds that "no person resided on the land in breach of the 'exclusiveness' required by the statute". The then learned President at p. 149 said: In the subject case, if we look at the use from the viewpoint of Mr Crouch, it cannot be held that the land is being exclusively used for his business of primary production in that the appellant and his family use one acre for residential purposes. Mr Thomason's attempt to equate this use with that of an employee residing on land is simply not factual. Alternatively, if we look at the use of the land from Mr Robinson's point of view and regard him as using it for primary production purposes (agistment) whilst also residing there, I am unable to hold in terms of the criteria laid down by the Land Appeal Court in the Walker case (1978) 5 Q.L.C.R. 347, at p. 354 that the scale of the enterprise (gross income $500 per annum) amounts to a business of primary production. • When handing down judgment in appeal AV89-119, the Land Appeal Court also handed down a judgment in a case where the circumstances were similar - J.V. and D.M. Hitzke v. The Valuer-General (AV89-116) - 27th August, 1990 (to be reported). The cases of Smith supra and Robinson supra were referred to in the judgment. At p. 2 the Court said: It may be taken for the purposes of this appeal that the use of the major part of the land by Mr Dawes was a use for the business of primary production, and that that part of the land was not used for any other purpose. (cf. B.B. Smith v. The Valuer- General (1983} 9 Q.L.C.R. 22,26). It does not necessarily follow however that the land in question, which is the whole parcel, was land exclusively used for the purposes of the business of primary production. • The Court found that in the circumstances of the case it was a plain case of dual use (residential use by the owners on part, and use of the balance for primary production by a third party). In the judgment dealing with the appeal in respect of the subject property (AV89-119), the Court after stating the facts said at p. 4: In the end it is a case of dual use. The reasoning we have expressed in the Hitzke f.g§g in this respect applies equally here and requires no repetition. The appeal on this point fails. • -- 7 of 11 -- 8 If Mr Thomason is correct in the submission he makes, then it follows that these cases (exclu-ding B.B. Smith) have been wrongly decided. What he -- would have the Court do is to return to the beginning (1971) and reshape the wheel by giving a generous interpretation to a statement made in the House on the introduction of the Bill which proposed the insertion of the section in the Act. The statement is interpreted without reference to the purpose as expressed in the legislation itself. This has been settled by the Land Appeal Court in the Walker and Bowden cases supra and the principles have been applied in instances too numerous to name. It is not a question of land being partly used or mainly used for primary production - use and exclusivity in the context of the section (Bowden's case) refer to the whole parcel. Either the land (the whole parcel) is exclusively used for purposes of the business of primary production (whether by the owner or by a third party) or it is not. There appears to me to be no in-between. For example, take a residential allotment in a multi-unit zoning housing a single unit residence occupied by the owner who is a real estate agent by occupation. Assume that the home is used as his office and place of business as well as his residence. In such circumstances it is pointless arguing that the business may be small or that it occupies only one room in the dwelling or that a value should be struck somewhere between actual use and highest and best use. Clearly the principles of Bowden's case apply - see Bure y v. The Valuer-General (1983) 9 Q.L.C.R. 138; John v. The Valuer-General (1988-89) 12 Q.L.C.R. 219. Take further the example I have quoted at the end of the spectrum where the lots are improved and used (owners in domestic occupation) as first put and then ask whether there would be sense in contemplating any valuation of those lots other than their value as residential lots. -- 8 of 11 -- 9 Mr Benson is in domestic occupation of the subject land. He admits that he does not conduct a business of primary production on the land. The primary production business is carried on by Mr Dawes but he does not have exclusive use of the whole parcel. The appeal will be dismissed. I turn then to the question of costs. Mr G.A. Kench, who acted as advocate for the Valuer-General, seeks costs of the appeal in the sum of $170.40, being an estimate of costs incurred by the Department in the preparation of the case and detailed as follows: Valuer - D Lucas - 4 hrs @ $22.30 /hr = Admin. Officer - 3 hrs@ $15.70/hr = Typist - 1 hr@ $10.60/hr = G. Kench - 1 hr @ $23.50 = $ 89.20 $ 47.10 $ 10.60 $ 23.50 $170.40 Costs of the hearing are not included. His submission is made on grounds that the facts and circumstances as put before the Court are the same as presented to the Land Appeal Court (AV90-65). The Land Appeal Court found that the valuation of the Valuer-General was not "contrary to law". The appellants did not test this finding in a higher Court. In these circumstances, Mr Kench is of the opinion that the Department has been put to unnecessary expense in preparing a case to answer an appeal on an issue which has already been decided by an appeal court. Section 22 of the Act says: II Costs of appeal against valuation. Where the value of land as finally determined upon an appeal against the valuation is the value stated by the owner in his notice of appeal against the valuation, or is nearer to that value than to the valuation appealed against, costs shall not be awarded against the owner. Otherwise costs shall not be awarded against the Valuer-General. " ,. -- 9 of 11 -- ( 10 The general principles are found in Bowden's case supra at p. 144 et sec. The particular principle applicable to the matter is stated at p. 147: Easy access to the Land Court to air grievances and have valuations reviewed is, as we have already stressed, most desirable in revenue cases, and such access should be available without fear of costs being awarded to either party except in special cases. " The question thus arises as to whether this case is a special case. The appeal was lodged by Mr Thomason as agent for the appellants. The only ground stated in the Notice of Appeal is that the valuation is contrary to law. It came out during the proceedings that the appellants were not contesting the value applied to the land by the Valuer-General. For their part, the hearing was confined to the tendering of a statement of evidence through Mr Benson which had been put before the Land Appeal Court. Mr Thomason then made submissions on the points I have discussed. In perusing the transcript of the submissions he made before the Land Appeal Court (p. 14), I note that he argued that the Court erred in the Robinson case supra in that there was a third alternative: ...... and look at it collectively, and providing that the owner, who resided in the house there, providing he did all the work then his occupation of that dwelling would be incidental..... • I note also that Mr Thomason appeared as agent for the appellants in B.B. Smith v. The Valuer-General supra; Robinson v. The Valuer-General supra; and Hitzke v. The Valuer-General supra. It appears to me that in substance the hearing has comprised nothing more than a replay of the prior hearing and, ·as such, constitutes an abuse of the process of the Court. ·1 am therefore of the opinion that costs should be allowed which, as stated, have been confined to the time expended by Departmental officers in the preparation of the case. Accordingly the appeal is dismissed and the determination of the -- 10 of 11 -- 11 Valuer-General affirmed. I order that the appellants pay the Department costs in the sum of One hundred and seventy dollars and forty cents ($170.40). (Signed) D. M. White · Member of the Land Court -- 11 of 11 --