Cooke & Anor v Minister for Land [1990] QLC 116

Re: Determination of unimproved value and value of commercial timber on GHPL 37\3759 Springsure District - conversion of tenure purposes - Lessees - BJ. and D.M. Cooke DECISION V LAND COURT, BRISBANE. 14th December, 1990. The Crown seeks an unimproved value of $712,800 ($44/ha) for the land comprised in and a value of $40,106 for the commercial timber the property of the Crown on GHPL 37/3759, Springsure District for the purpose of the conversion of the lease to freeholding tenure. GHPL 37 /3759 is more particularly described as Lot 9 on Plan CLD 17, Parish of Beauchamp and contains an area of 16,200 hectares. This is a cattle grazing property known as "Beauchamp" and is situated 121 kilometres southwest of Springsure. The relevant date for the determination of the unimproved value is 23rd June, 1986 and for the determination of the value of the commercial timber the property of the Crown the date of the hearing of the matter in Emerald viz 15th November, 1990. The Lessees called in evidence John Christopher Compton, a registered valuer in the employ of Herron Todd White Valuers. Mr Compton values the land in the sum of $567,000 at the rate of $35 per hectare. He describes the access to "Beauchamp" as being poor by the Tambo Development Road. There are 12 [1990] QLC 116 -- 1 of 13 -- - Page 2 - kilometres of sealed road from Springsure then 115 kilometres of formed earth and partly gravelled construction. The road is cut by flooding in the Claude and Nogoa Rivers. Mr Compton describes the country on "Beauchamp" as being principally scrub grazing on the upper catchment of the Nogoa River varying from good quality sloping good quality blac~ to red soil brigalow with softwood on the northern end through undulating brigalow\softwood mudstone ridges to heavier melonholey black clay brigalow and softwood scrub. Much of the scrub has erodible soils. There are areas of box and softwood ridge, shaded black soils plains and ironbark, box and pine forest throughout the scrub country, principally behind the river frontage. A large area of virgin scrub country had been burnt out when it was part of "Mantuan Downs" and carries dense whip stick regrowth. Severance by the wide sandy bed of the upper Nogoa River restricts crossing to three places. The river provides permanent water in the top section and there are permanent springs in Box Creek and Soda Gully. Artificial waters include one bore and 15 dams. A brief resume of the Mr Compton's classification of the country is - Area North of the River 4,900 ha undulating brigalow/softwood scrub broken by scoured and clay pan areas, also box/softwood ridges. 2,800 ha undulating suckery, brigalow/softwood scrub with whip stick regrowth. 3,100 ha inferior forest and scrub soil ridges. 1,400 ha gum, box, silverleaf ironbark forest flats and channels along the Nogoa River, Box Creek and Soda Gully with areas of scrub influence. Area South of the River 3,600 ha undulating pebbly, brigalow/softwood scrub broken by clay pan areas and box/gum frontage to Middle Gully. 400 ha gum, box, silverleaf ironbark flats with scrub influence on the Nogoa River. -- 2 of 13 -- - Page 3 - Mr Compton estimates the present carrying capacity of the "Beauchamp" at 1 beast to 11 hectares (1,500 head) with a potential of 1 beast to 6 hectares (2,700 head) - suitable for fattening. Mr Compton says the valuation considerations are:- 1. The suckery nature of much of the scrub country requiring intensive follow- up treatment 2. The river severance restricting access for vehicles and stock to three crossings to the 4,000 hectare block on the southern side of the river. 3. The remote location, inferior access and restricted services. Mr Compton's valuation is based on classified values as follows:- Area North of the River 4,900 ha grazing scrub@ $45/ha 2,800 ha grazing suckery scrub@ $35/ha 3,100 ha inferior grazing forest & scrub@ $20/ha 1,400 ha forest flats on River and Creek frontages @33/ha f' Area South of the River 3,600 ha scrub grazing with areas of clay pan forest influence @ $36/ha 400 ha river frontage forest flats @ $30 /ha Application 16,200 ha @ $35 /ha $220,500 $98,000 $62,000 $46,200 $129,600 $ 12,000 $568,300 $567,000 The basis for Mr Compton's valuation is his analysis of the sale of "Welcome" on 1st June, 1987 from Mayne to Godwin for $1,425,000. "Welcome" comprises GHPL 37 /3775 Lot 8 on BU61 and SL 47344 - Part NP236. GHPL 37 /3775 contains 6,060 hectares and SL 47344 contain 2,490 hectares making the total area of "Welcome" 8,550 hectares. Mr Compton sets out complete details of his analysis which shows an unimproved value of $38.39 per hectare overall. This unimproved value is apportioned as between the GHPL and the Special Lease as follows - Special Lease 2,490 hectares GHPL 6,060 hectares $ 3,500 $324,692 -- 3 of 13 -- - Page 4 - Mr Compton further apportions the unimproved value of the GHPL portion on "Welcome" as follows:- 3000 ha easy to moderately sloping brigalow/ softwood and softwood grazing scrub at $70/ha 1000 ha moderate to steeply sloping softwood scrub at $60/ha 1,060 ha fair to poor grazing forest ironbark, box, wattle, quinine and myrtle with clumpy scrub influence $20/ha 1,000 ha high forest and scrub ridges onto the National Park at $33.50/ha Average value $53 per hectare. $210,000 $ 60,000 $ 21,200 $ 33 ,500 $324,700 Now the country on "Welcome" GH~L comprises 4,000 hectares of top quality grazing scrub and 2,060 hectares inferior forest to high scrub and forest ridges. The Special Lease is National Park mostly unavailable range and tableland. The property is watered by very good dams with pipelines to tanks, troughs and the homestead. Mr Compton's estimate of carrying capacity on the "Welcome" is 1 beast to 4.5 hectares or 1,350 head and he says it is suitable for fattening. "Welcome" is situated 87 kilometres southwest of Springsure and has poor access and limited services. "Beauchamp" was purchased by the lessees from N.L. and K.M.M. O'Brien on 10th January, 1986 for $1,100,000. Mr Compton naturally knew of the sale but did not rely upon it as a basis of valuation since he is of the opinion that it was an extremely highly priced sale. He points by way of comparison to the sale of a property "Allambie" in July, 1984 for $550,000 - or $34 per hectare. "Allambie" had 544 hectares of cultivation and 2,800 hectares of pulling subject to regrowth. In March, 1985 a property known as "Yandaburra" containing 17,000 hectares was sold -- 4 of 13 -- - Page 5 - for $47 per hectare with basic improvements. It was basically standing scrub - only 2,000 hectares had been pulled and grassed at sale date but it was suckery. Mr Compton says that the sale of "Beauchamp" at $68 per hectare is high by comparison. Even the purchaser told him he paid $300,000 too much for the property. There was only 1550 hectares pulled on "Beauchamp" and it was largely regrown. Mr Comptop comments that the parties to the "Welcome" sale were two of the most experience graziers in the district. The purchaser was an adjoining owner but Mr Compton believes the sale at $172 per hectare for the well improved property was in line with the market. The Crown valuation of the land at $44 per hectare was made originally by Registered Valuer Neil Andrew Bray. Registered Valuer Rodney Graeme Hewitt, a Land Inspector in the employ of the Department of Lands, reinspected "Beauchamp" on 26th October, 1990, and agrees with Mr Bray's description and valuation of it. It was Mr Hewitt who furnished evidence in this matter. He described the country on "Beauchamp" to be an irregularly shaped block consisting of mainly brigalow country intersected by the Nogoa River and areas of forest, burnt out brigalow scrub and washy brigalow. About 9,392 hectares (58%) consists of mainly undulating brigalow, wilga, sandalwood scrub broken by small patches of forest and containing about 1,500 hectares of burnt out and badly suckered scrub, about 4606 hectares (28%) consists of brigalow scrub and associated timber which is subject to wash and erosion, and about 2,202 hectare (14%) consists of open sandy silverleaf ironbark, box and cypress pine forest. Mr Hewitt's assessment of carrying capacity is 1 beast to 15 hectares (1080 head) with a potential of 1 beast to 6.5 hectares (2492 head) and he says the property is suitable for breeding and fattening. It is, of course, to be noted that the Crown's carrying capacity is lower than is Mr Compton's. -- 5 of 13 -- - Page 6 - Now the basis for Mr Hewitt's valuation is the subject sale which he analyses to show him a land value of $44.59 per hectare. Full details of his analysis are in evidence. Mr Hewitt says that the sale was negotiated by Mr R. Scott of Springsure Agencies. The purchasers have lived closer to Springsure and purchased "Beauchamp" with the intention of development. Mr Hewitt believes the sale is a fair market transaction and considers the parties to have been prudent and well . informed of the market at sale date, although he too says that Mr Cooke told he paid more than the property was worth. Mr Hewitt told us that Mr Bray initially analysed the "Beauchamp" sale and he agrees with his analysis of it, notwithstanding that his inspection of the property was not until some 4½ years later. He had access to Mr Bray's notes and spoke to him about the analysis. Mr Hewitt regards the subject sale as "the perfect basis" of valuation. Mr Hewitt says that the companson between the purchase price of "Beauchamp" and that of the sale of "Yandaburra" in 1985 quoted by Mr Compton is not valid since this property resold in 1988 for $100 per hectare area improved, a significant difference from the 1985 price level. The market for land was rising in the intervening period. Mr Hewitt has not inspected "Welcome". ·- Mr Hewitt knows "Allambie" and he says it is not far superior to "Beauchamp". It has no river frontage and has some very hard ridge country. The cultivation country has gone back to pasture. Ross Leonard Healy, the proprietor of a recently formed firm known as Timber Resource Management was called in evidence by the lessees to furnish his valuation of the commercial timber of "Beauchamp". Mr Healy has had 22 years experience in forestry logging and timber assessment including the completion of a 3 year forest training course with the Forestry Department. He was employed for 11 -- 6 of 13 -- - Page 7 - years at the Department of Forestry, 3 years training and 7 years as a forest overseer. This was followed with 11 years assessing and buying logs for a major sawmilling company. Mr Healy values the timber at $8,394.75 based on extraction costs to Springsure and at $2,653.56 based on extraction costs to Emerald. He inspected the timber the day before t~e Court bearing at Emerald and assesses the volume of accessible and viable hardwood on "Beauchamp" to be 819 cubic metres. Species assessed are forest red gum, river red gum and carbeen. Mr Healy sees no potential value in the forest timbers on "Beauchamp". Mr Healy assessed the volume of hardwood millable timber in three sections. He identified 12 small patches of cypress pine at locations marked on a tendered map and considers the trees too small and of such poor quality that they were not worth assessing in detail. In general terms these areas are off or near the Nogoa River and near to Soda Gully and Box Creek. Mr Healy says that there are large resources of good quality pine closer to existing pine mills and this renders this timber valueless. He instances the mill at Baralaba paying only $14 to $16 per cubic metre for cypress mill timber 70 kilometres away by gravel road, and stresses that the cypress at "Beauchamp" is about 120 kilometres from Springsure with over 100 kilometres of gravel road. The second section assessed by Mr Healy consists of hardwood on the frontages to Soda Gully and the Nogoa River. The section of the River which severs "Beauchamp" is covered by a watercourse reserve from the southern boundary of the property to the boundary on the River with Portion 2 parish of Squire. No timber on this section was considered to be .viable. Mr Healy says Soda Gully has only an occasional good quality tree with most trees being unsuitable for milling because of bends and poor quality. To harvest this timber, Mr Healy submits and exce~s1ve -- 7 of 13 -- - Page 8 - amount of roadworks would be required. Mr Healy says Box Creek has no loggable value of timber except at the junction of the Nogoa River where there is 43 cubic metres of hardwood. He says that all other timber on the creek is of very poor quality and is very bendy. Mr Healy does not see the 43 cubic metres as being viable due to its small size and the distance (5.5 km from the bulk of the timber). Now Mr H~aly points out that the Nogoa River watercourse reserve section has a strip 20 metres wide from each bank reserved from freeholding. The timber in this section was not assessed due to the massive flooding in 1990. The river banks have suffered massive erosion to 40 metres out from the former river bank when forestry inspected for their timber assessment. In one section Mr Healy estimates that a 40 metre wide strip has eroded for 800 metres. As a consequence, timber which was once outside the reserved 20 metre strip would now be within 20 metres of the river bank, and presumable unavailable for freeholding or logging. Mr Healy says there are very few trees outside this 20 metre strip and these are not assessed by him as being of commercial value as he feels it would not be viable to log them due to the excessive amount of roadworks required for extraction. Mr Healy acknowledges that there is quite a lot of commercial hardwood along this section of the river but it is now located within the reserve. The principle area upon which hardwood was assessed by Mr Healy is located along the single frontage to the Nogoa River from the boundary of Portion 2, Parish of Squire to the northern boundary of "Beauchamp". Here he says there are several patches of good sized and apparently reasonable quality trees and scattered timber. Mr Healy made a 100% count of the stems in this section. 378 forest red gum and river red gum trees were assessed as suitable for milling. An additional 55 trees were doubtful gum trees and Mr Healy expects that about half could produce logs. The volumes here were discounted by 50%. 65 carbeen trees were assessed to -- 8 of 13 -- - Page 9 - produce logs but the timber is of very doubtful quality with only a very small proportion capable of producing a log. Any carbeen tree with bends, lean, bow, or over 65 centimetres DBHOB would be most unlikely to produce a log in this species because of windshake, water rings or decay. Mr Healy suggests that experienced assessors never count more than the occasional carbeen as a mill log, and suggests that timber cutters are reluctant to cut any other than the very best of carbeen trees. and sawmillers want none of them. Mr Healy again pointed to the flood of 1990 with its affect of the deposition up to 1 metre of loose sand along much of the river bank which would make snigging and hauling of logs very difficult. Mr Healy's volume assessment was made up as follows:- Probable logs - forest red gum and river red gum - 307 trees @ 1.8 m 3 per tree 71 trees @ 2.1 m 3 per tree Doubtful logs - forest red gum and river red gum - 45 trees @ 1.8 m 3 per tree discounted 50% 1o trees @ 2.1 m 3 per tree discounted 50% Carbeen 61 trees@ 1 m 3 per tree 4 trees $ 1 m 3 per tree Total Volume 553 m 3 149 m3 702 m 3 41 m3 11 m 3 52 m 3 61 m 3 4 m3 65 m3 819 m 3 Mr Healy calculates the value of the hardwood on the residual royalty value based on Springsure Depot price dated 1st July, 1990 at $57.95 per cubic metre. Haul cost was calculated using forestry set to earn rate - southern western - total extraction cost was $47.70 per cubic metre to Springsure leaving a royalty value of $10.25 per cubic metre for the 819 cubic metre volume - or $8,394.75. -- 9 of 13 -- - Page 10 - Mr Healy was questioned during the course of his evidence as to whether there was any timber on "Beauchamp" which would be marketable as sleepers. He said he hadn't spoken to any of the sleeper cutters in this area and is not familiar with the sleeper market here. The forestry valuation of the timber in the sum of $40,106 was made by Harold Arthur Kerswell, ~ Forest Ranger with the Department of Forestry stationed at Emerald. He has worked in the Emerald district for 12 years and in other districts for 8 years. The summary of Mr Kerswells' valuation is - Hardwood Mill tim be r Type 100% A Type 100% B Type 100% C Type 100% D Type 100% E Type 100% F Type 100% G 769.930 m 3 gross 6.119 m3 gross 38.598 m3 gross 286.991 m3 gross 292.552 m 3 gross 236.664 m 3 gross 257.121 m3 gross $6,290.08 $ 47.22 $ 275.79 $2,309.07 $2 ,322.79 $1,929.53 r $2,043.65 1,887.975 m3 gross @ $10 . 17 per m3 Cypress mill timber 1555.281 m3 @ $7.03 per m3 Sleepers 5791 pieces Total Nett Value Value to be taken as $40,106. $15,218.13 $10,700.34 $14,187.95 $40,106.42 The Forestry Department value assessment that was made by 100% inspection of all commercial forest hardwood and cypress pine species. Hardwood trees were estimated by species as mill logs and sleepers. Each hardwood tree for mill timber was measured by volume. The number of sleepers estimated was summed and valued at Departmental royalty rates to obtain a total value. Mr Kerswell adopted a depot price for the hardwood millable timber at Springsure at $57.95 per cubic metre. He used an extraction cost of $47.78 per cubic metre and arrives at a stumpage rate of $10.17 per cubic metre, a figure almost -- 10 of 13 -- - Page 11 - identical to that used by Mr Healy. His royalty calculation for the cypress pine mill timber is $5.59 per cubic metre but says the minimum royalty of $7.03 will apply. Mr Kerswell told us that all the cypress pine below 19 ems diameter was not assessed. He says the stands of cypress are reasonably spaced but there is reasonable access for a road, and that local millers would harvest stands of this type. He concedes that access to the eastern side of the Nogoa River is more difficult but. due allowance for accessibility costs has been made. Mr Kerswell has been informed about the 20 metre wide reservation along the Nogoa River. He says this was measured and during assessment no trees were booked inside the reserve. He inspected the timber in July, August and September, 1986 and has not reinspected it since that time. He has been on other properties in the area and confirms that erosion has taken place there as a result of the 1990 flooding. Mr Kerswell says there are four sleeper operators in the Emerald area and told us there is quite a steady demand from railways for sleepers. He believes mobile type sleeper operators would go out to the subject area and there are two mobile operators in the district. I find the determination of the value of the commercial timber a difficult issue. There is so much contrast in the assessors approach to their respective available volumes and their opinions on marketability. I am prepared, on the evidence of Mr Healy, to find that there is now not sufficient hardwood mill timber along the N ogoa River outside the 20 metre wide reservation (each side of the river from the southern boundary to the junction of the river with Portion 2, Parish of Squire) after the flood erosion to warrant harvesting or valuing it. If I am in error in so finding then of course the matter can be put right in another place. There is no evidence of erosion of the River bank from this point to the northern -- 11 of 13 -- - Page 12 - boundary of "Beauchamp". Mr Kerswell's valuation of the millable hardwood then is to be adjusted by including in his volume assessment only the timber assessed on areas A and B - or 776.049 m3 gross. This timber is valued by Mr Kerswell at $6,337, as opposed to Mr Healy's valuation of it at $8,394.75. Although Mr Healy is of the opinion that the cypress is not a viable. stand for marketing, I am satisfied after hearing from Mr Kerswell that it would be marketable over time. Mr Healy suggested that subsequent bush fires may affect the stand and detract from the value of it but that is not a matter for us here. The timber is to be valued as at the date of the hearing of the matter. Mr Kerswell says that only the larger volume trees were booked, and due allowance (10%) was made for defect. I adopt Mr Kerswell's valuation of the rcypress pine. The sleeper timber as valued by Mr Kerswell also appears to be also along the Nogoa River. As with the hardwood mill timber I propose to exclude from his valuation of it the sleepers along the Nogoa River from the southern boundary to the junction of Portion 2, Parish of Squire. This leaves for inclusion only sleepers on areas A and B - or 2873 pieces. After making a 10% defect allowance then 2585 pieces are valued at the rate of $2.45 per piece - or $6,333. After due consideration I adopt an adjusted value of Mr Kerswell as follows - Value of hardwood mill timber Value of cypress pine mill timber Value of sleepers $6,337 $10,700 $ 6.333 $23,370 I now turn to consider the respective valuations of the land. It must be said, all other things being equal, that the sale of a subject property should provide the best basis of valuation. For this reason, I am not prepared to discard the sale of "Beauchamp" notwithstanding that Mr Cooke apparently told both valuers he paid -- 12 of 13 -- - Page 13 - too much for the property. The Court has no good evidence to this effect, and it is to be noted that no such direct evidence was called from Mr Cooke. However, I do take account that the purchase price may have been somewhat high and take a conservative view when applying it to value the subject land. I do not set aside Mr Compton's basis in the sale of "Welcome". The parties were very experienced graziers and notwithstan9ing that it was an adjoining owner sale, it was in Mr Compton's view, and I have judicial knowledge that he is a very experienced valuer in this district, in line with the market. I do not propose to determine classified land values as did Mr Compton. I recognise that the use of classified value provides a useful check on an overall valuation, but overall comparisons are still the best basis. Taking account of all the evidence, Ir find that an unimproved value of $40 per hectare is fair and reasonable for "Beauchamp" as at the relevant date. I now proceed to my formal determination in the matter as follows - value of land comprised in GHPL 37 /3759 Springsure District for the purpose of conversion of tenure is determined in the sum of $648,000 ($40/ha) and the value of the commercial timber the property of the Crown on GHPL 37 /3759 Springsure District is determined in the sum of $23,370. (C.H. Carter) Member of the Tand Court. -- 13 of 13 --