Capricorn Coal Management Pty Ltd v Minister for Lands [1993] QLC 90

[1993] QLC 90., LAND COURT, BRISBANE. 30th June, 1993. Re: Determination of rent - second and third rental periods - Special Leases Clermont District SL 12/44687 - SL 12/44697 SL 12/44747 SL 12/47850 - SL 12/47880 SL 12/48082 - SL 12/48104 Lessee: Capricorn Coal Management Pty Ltd (Hearing at Clermont) DECISION The Crown is seeking increases in the annual rents for the second and third rental periods for the abovementioned 66 special leases which commenced on 1st March 1991, 1st May 1991, 1st June 1992 and 1st September 1992. The rental period for special leases 12/44687 - 12/44697 commenced on 1st June, 1992; the rental period fbr the special lease 12/44747 commenced on 1st September, 1992; the rental period for the leases 12/4 7850 - 12/47880 commenced on 1st March 1991; the rental period for special leases 12/48082 - 12/48104 commenced on 1st May, 1991. The lessee company has requested that these matters be referred to the Land Court for hearing and determination and has provided estimates of the annual rent which it considers should be charged for each of these special leases. The 66 special leases are in respect of lands in the town of Middlemount, which is situated approximately 200 kilometres south-west of the city of Mackay and approximately 150 kilometres north-northwest of the town of Emerald. Middlemount is located in the Shire of Broadsound and serves as the township for -- 1 of 25 -- 2 the accommodation of the workforce of the German Creek Mine owned by the lessee. The mine is situated approximately 20 kilometres to the west of the town. All these special leases were granted for periods of 30 years from the date of commencement of each lease. With the exception of Special Lease No. 12/44747 which was granted for business (airfield) purposes, they were granted for residential purposes only. Special leases 12/44687 to 12/44697 commenced on 1st June 1982; Special lease 12/44747 commenced on 1st September 1982; Special leases 12/47850 to 12/47880 commenced on 1st March 1986 and Special Leases 12/48082 to 12/48104 commenced on 1st May 1986. Special leases 12/44687, 12/44688, 12/44690, 12/44691, 12/44692, 12/44693, 12/44694, 12/44695 and 12/44697 are comprised of multiple lots. The other special leases have been issued in respect of single lots. At the commencement of the hearing the parties agreed that since there were so many special leases, they should be divided into 3 groups and that a representative case from each group be heard. These 3 groups consisted of (i) the single allotments, (ii) the multiple allotments and (iii) the airfield. Since there was little or no dispute concerning many of the facts relating to these lands, this seemed an appropriate means of dealing with these matters. Mr Warren Brand, Commercial Manager, Capricorn Coal Management Pty Ltd, appeared for the lessee company. Mr S.F. Penny, Senior Valuer employed by -- 2 of 25 -- 3 the Department of Lands, appeared for the Crown. Mr Brand chose not to call any evidence, relying on submissions challenging the method of valuation employed by the Crown. Mr Brand submitted that the Crown's method of assessing the rentals was inappropriate. He contended that the lessee company had expended approximately $15.8 million developing the town of Middlemount and that this should be taken into account in determining the rentals. If it was not for the lessee company the town of Middlemount would not exist, as Capricorn Coal Management Pty Ltd was responsible for the construction of the town infrastructure and services. The company had been required to make contributions to the Broadsound Shire Council for the creation of Middlemount, both for its initial construction and for on- going maintenance. The level of those contributions has been agreed with the Broadsound Shire Council. The obligations imposed on Capricorn Coal by the Broadsound Shire Council are contained in a document, "Agreement for the Town of Middlemount", which is unexecuted and undated, but which I am told was drawn up in 1980. Mr Brand said that although it is unexecuted, the Agreement has been honoured by Capricorn Coal. Under this agreement, Capricorn Coal became responsible for: • the cost of preparation of the Strategic Plan and Development Control Plan for the town of Middlemount and its environs (clause 3(vi)); • the cost of the annual review of and any alteration to the Development Control Plan (clause 3(vi)); • part of the cost of the town sewerage scheme (clause 4(ii)); • the cost of the initial water supply scheme (clause 5(i)); • the obtaining and maintaining at its own cost headworks and pipeline associated with the supply of water from the Mackenzie River (clause -- 3 of 25 -- 4 5(ii)); • future enlargement at its own costs of the overall water supply scheme if and when the scheme fails to meet the minimum supply criteria specified within the Agreement (clause 5(iii)); • the cost of remedying any defects in and restoring the water supply if interrupted (clauses 5(v) and 5(vi)); • the construction at its own cost of roads, streets, kerbing, channelling and stormwater drainage (clause 6); and • the cost of contributing towards the construction costs of cultural, community and recreational facilities of an appropriate standard (clause 16). Mr Brand said that in addition to honouring all its obligations under that Agreement, the company was making on-going contributions to the services within the town. He said that there had been an exchange of letters and continuing discussions in respect of these matters with the Broadsound Shire Council. He submitted an asset listing from the company's records, showing the works completed in the Town of Middlemount between June 1980 and December 1984, at a total cost of $15,765,868.03. He pointed out that this figure does not include any of the on-going contributions made by the lessee company to the servicing of the town. The initial construction costs included the construction of roads, head works, the town infrastructure and services. The Council required that the roads and services be paid for by the company before agreement was reached on subdivision. Initially, leases for residential sites contained multiple lots which became part of a subdivision, allowing various areas to be dedicated to roads and, if required, other services. -- 4 of 25 -- 5 Mr Brand said that the lessee company received no assistance from either the Broadsound Shire Council or the State Government by way of rating relief or rebates for any of those improvements. He submitted that in determining the rent for these special leases, the Court should give consideration to the fact that the company had constructed and serviced the town and was continuing to make contributions to its services. He contended that the cost of those developments should be deducted from any valuation which was used for the determination of rent. Mr Penny, for the Crown, said that the rents for the special leases had been assessed having no regard to the expenditure on development works by the lessee company. He said that the Crown's approach to the rents was that the company provided for the accommodation of its workforce by constructing the town and carrying on services within the town. He contended that the lessee company had been compensated with nominal rents during the first period of each lease. The initial cost of development and infrastructure was seen as being part of the company's overall initiatives and formed part of its operations. These works were external to the subject lands and, while the rents were assessed on a percentage of the unimproved value in each case, in arriving at such unimproved values no allowance was made for the cost of these works. They were not regarded as works of development within the meaning of Section 242 of the Land Act. Mr O.L. Eisenmenger, registered valuer employed by the Department of Lands, gave evidence in these matters. He explained that the town of Middlemount -- 5 of 25 -- 6 is a rather featureless area and all the allotments are generally of an easy to gently sloping nature. There are no hills or gullies of any consequence which affect the residential layout of the town, which is well planned, with two main residential areas at the eastern and western ends, with the commercial and special purpose uses, such as sporting grounds etc., in the centre of the town. There is an industrial area to the south. The residential areas are designed with curving streets and cul-de- sacs, with main arterial roads leading from the central streets. As there are no hills in Middlemount, there are no outstanding views or elevated blocks. However, there are greenbelts, parks and walkways which are maintained by the lessee company and the Council. The allotments that are adjacent to the greenbelts and parks have had these advantages taken into account in assessing the unimproved value for rental purposes. The areas of the residential blocks vary from 780 square metres to over 2000 square metres and this size difference has also been taken into account. Mr Eisenmenger explained that there was only one sale in the town of Middlemount which he could use as a basis of valuation. This freehold, unimproved allotment of 787 square metres is situated in O'Rourke Terrace and sold on 30th August, 1990, for $9,000. Mr Eisenmenger said that he was well aware that one sale did not form an ideal basis of valuation. He therefore investigated sales in the towns of Tieri and Dysart but was unable to find any other evidence on which he could rely. He explained that there are very few sales of freehold land in the mining towns, as most of them consist of allotments with leasehold tenure held by the mining companies themselves. -- 6 of 25 -- 7 Mr Eisenmenger therefore interviewed both parties to this sale and has satisfied himself that it was an appropriate basis of valuation. In applying the sale to the subject individual sites, Mr Eisenmenger made allowance for the factors discussed above in relation to size and situation and arrived at valuations which varied from $9,600 to over $10,500. The Multip le Lot Special Leases These nine special leases contain from two lots to twenty-two lots and Mr Eisenmenger explained that they were issued as a matter of administrative expediency by the Department to save the time and expense of issuing individual tenures for each allotment. He said that he had made no allowance for multiple ownership, or what has been described as "bulk allowance", in assessing the unimproved value of any of these special leases. He considered that the sum of the individual allotment values was the appropriate way to value the multiple lot leases, as houses have been constructed on all allotments. Under cross examination, Mr Eisenmenger admitted that if these multiple lots were offered for sale, prudent purchasers would expect some discounting for multiple purchases. Mr Brand suggested to him in respect of the representative case, Special Lease No. 12/44687, containing 5 allotments, that a discount of 15% would be appropriate. Mr Eisenmenger agreed that a prudent purchaser would try to negotiate some sort of a discount. -- 7 of 25 -- 8 Sp ecial Lease No. 12 / 44747 for Business (Airfield ) Purposes This special lease contains an area of about 64.04 hectares and is situated some 2 kilometres from Middlemount, with bitumen road access and which is provided with electricity and reticulated water. Constructed on the land is a bitumen airstrip about 1.5 kilometres in length, with taxi-way tarmac and air terminal. The land is zoned Special Purposes and is used as the Middlemount community airport. Mr Eisenmenger explained that he arrived at his recommended rental of $1,800 per annum by applying 3% of the unimproved value of the land which he assessed at $60,000. Mr Eisenmenger had no direct basis for this valuation, as there were no sales of such areas of land in the vicinity of the town of Middlemount and he did not think that the sale of the residential allotment was of any assistance for the valuation of this land. · He likened this special lease to a business enterprise for use by commercial aircraft, although it was not being so used at present. It was a community airstrip and members of the public were able to use it without charge. Mr Eisenmenger referred to a vacant property in the town of Clermont, with an area of 3,040 square metres, that sold on 29th November, 1989, for $50,000. Although it is situated in the commercial area of the town, Mr Eisenmenger thought that it provided some indication of what a businessman would be prepared to pay for the site of a commercial operation. Although he readily acknowledges that this is by no means a suitable basis, Mr Eisenmenger had little else to guide him and is -- 8 of 25 -- 9 of the opinion that a prudent purchaser would be prepared to pay $60,000 for the subject land. He feels that an airstrip is essential for a mining town situated in a relatively remote area of the State. Mr Eisenmenger admitted that there were no commercial flights into the town and that the company may use the airstrip only two or three times a year. When asked what alternative uses could be made of the land, Mr Eisenmenger suggested that it may be used for sporting purposes. However, he admitted that there was other land set aside for such purposes in the town. The rentals for such sporting lands were of no assistance to him, as they were assessed on a concessional membership basis. Mr Brand pointed out that there was a disused airstrip at the German Creek mine, so the company could just as easily re-establish it and not use the Middlemount airstrip. Ad iournment of the Le g al Argument Because neither of the parties was legally represented and because of the issues involved, I suggested that they may prefer to make legal submissions in writing or by way of addresses before me in Brisbane. I have received written submissions from both parties. The Submissions on Behalf of the Lessee Compan y Prior to the 1981 amendments to the Land Act 1962, rents for special leases -- 9 of 25 -- 10 were required to be determined at 3% of the unimproved value of the land as if it was held in fee simple. The 1981 amendments to section 204 deleted the reference to annual rent being fixed as a percentage of unimproved value, inserting the current section 204(5B)(c) which provides that: "The Court shall determine the annual rent at such sum as it considers an experienced and bona fide person would be willing to pay as annual rent for the land comprised in the lease during the rental period in question, having regard to the use to which the land may be put in accordance with the purpose for which the lease was granted and under the terms and conditions of the lease." The solicitors for the lessee company referred to the second reading speech of the Minister at the time of the 1981 amendments and submit that the legislative policy of the amendments is to quarantine the determination of rents for special leases from the context of the unimproved value of freehold land. This is supported, they contend, by the unreported decision of the then President of the Land Court, Mr W F G Smith, in Determination of Rent S.L.36221 - Lessee: Brian A Cheras, delivered 19th December, 1984, where the learned President said: "Rent based on unimproved fee simple value with appropriate regard to any diminution in the value of the lease on account of the conditions of the lease limiting the use of the land by the lessee, etc, is no longer a relevant consideration. " In that case Mr Smith found that he was unable to accept the rents sought by the Crown which were based on a percentage of fee simple unimproved value, as he could not regard them as being amounts which prudent and bona fide persons would be prepared to pay for airstrips (the use in Cheras' case). He regarded them as rents which were mathematically derived from fee simple values. -- 10 of 25 -- 11 In that case Mr Smith was determining the rent for a special lease containing an area of about 16 hectares near Kooringal on Moreton Island, which had been developed as an airstrip upon which the lessee claimed to have spent $100,000, in accordance with the conditions of the lease. There was no gazetted or developed access to the lease, physical access being by means of a sandy track over Crown land. The valuer for the lessee had based his assessment of the rent on the rental determinations by the Court for two special leases used as airstrips at Dunwich and Tangalooma. However, the relevant date for both determinations preceded the 1981 amendments to the Land Act, and Mr Smith held that he was unable to accept them as conforming to the statutory formula applicable to the case before him. There is no doubt that the test applied by Mr Smith is the correct one as required by section 204(5B)(c). However, this provision does give the Court a much wider discretion than was available prior to 1981 . Evidence of the rent that a bona fide and experienced person would be prepared to pay can now be drawn from a much wider range of sources. In Cheras' case Mr Smith found that the rents for other airstrips which were based on a percentage of the unimproved value did not conform to the rent that an experienced and bona fide person would be prepared to pay. However, he did not say that such method can never be used. Indeed, in the absence of rental -- 11 of 25 -- 12 evidence the Court has frequently taken a practical approach and determined the rent for a special lease at a percentage of the unimproved value. For example, see Determination of Rent S.L.11 / 31864 - Lessee: Philli p C. Knuth , 14th December 1988; Determination of Rent S.L.24 / 41456 - Lessee: G G Feather, 8th May 1989. As Mr Smith explained in his decision of 14th December 1988 in Determination of Rent S.L.30 / 40865 - Lessee: Mr E Burns, at page 2: "The adoption of 3% of the unimproved capital value is a convenient and recognised method of arriving at the rent of a special lease. The formula is, however, not exclusive nor is it a mandatory statutory requirement." In appropriate cases, such as in Cheras' case, the Court will reject evidence of a rental based on 3% of the unimproved value in favour of more cogent evidence of a rental which is more closely aligned with what an experienced and bona fide person, as envisaged by section 204(5B)(c), would be prepared to pay. Each case must be treated on its merits and it is not possible or desirable to endeavour to set down a formula for all special leases. The 1981 amendments removed the requirement of applying 3% of the unimproved value on all occasions. However, it did not prohibit its use and it is still part of the Court's armoury of discretions and may be applied when appropriate. The solicitors for the lessee company appear to recognise that there are occasions when this method of determining rent is appropriate. In paragraph 5.3 of their submissions, the solicitors raise the issue that if such method is used, the extent to which allowances should be made for external development costs. They -- 12 of 25 -- 13 argue that the value of developed freehold land increases as a result of two factors, namely (1) the portion of the value at the relevant date which is attributable to improvements on or appertaining to the land and (2) the portion of the value at such date which is attributable to extrinsic circumstances, such as public roads, public services and other causes not brought about by the operations on the land: McGeoch v. Federal Commissioner of Land Tax (1929) 43 C.L.R. 277. Therefore, it is argued that in circumstances such as the present where the lessee has contributed to the external works and infrastructure, the rental value should be determined making allowance for the cost of such works and infrastructure. In support of this approach, the solicitors cited the decision of the then President ,of this Court, Mr Smith, in Determination of Rent Special Lease No.30 / 40865 Mackay District, Lessee: Mr E Burns, 14th December, 1988 (not ' reported). This special lease for business purposes was situated in the town of Moranbah. At page 2 of his decision, Mr Smith said: "All this construction was necessary as Moranbah - the dormitory town for the mine workers - had to be built from bare prairie. The Local Authority appears to have been the subsidised medium through which the Mining company ensured the town's construction. Before a person was granted a lease for commercial purposes, he had to prove to the Land Administration Commission that he had paid the Local Authority a contribution towards these works or had made some satisfactory arrangement with it". Then on page 3, he continued: "... records show that the original lessees of the subject parcel were required to pay $12,304.70 by way of service charges. The Commission has decided that in a moral sense the Crown cannot in -- 13 of 25 -- 14 good conscience apply a rent to an amount deemed to be unimproved capital value inclusive of an amount already prepaid by the lessee as service charges, notwithstanding such service charges are applicable to service items exterior to the leases in question except in relation to clearing and possibly levelling on some allotments .... The Commission's attitude is based on the premises that the original lessee would recoup his service payments from his transferee and so on down the line of transferees and that a person would be willing to pay less rent for a lease to which such a service charge had been, in effect, attached than for one without such an attachment." Mr Smith then went on to say : "Assuming the validity of these premises - and I make no finding in respect thereof - this approach is more defensible and conforms more to the provisions of section 204(5B)(c) than any attempt to apply the concept of unimproved value which precludes consideration of improvements not on the subject land . .. " Burns' case can clearly be distinguished in the present circumstances. First, there is no evidence in Exhibit 3 or elsewhere, that a similar arrangement exists between the lessee company, the Broadsound Shire Council and the Department of Lands; second, the Crown has made no such moral concession in this case; third, Mr Smith was merely accepting the approach adopted by the Crown in that particular case, expressly refraining from ruling on its validity. With regard to the solicitors' general submission, that the part of the unimproved value of the land directly attributable to the infrastructure and services extrinsic to the land itself should be excluded from consideration for rental purposes, I know of no such general proposition. It is true that if the lessee company had not expended the $15.8 million in developing the infrastructure for the town of Middlemount, the land would have little value. However, having done so, in the absence of any evidence to the contrary, its position is no different to that of -- 14 of 25 -- 15 any commercial developer. While the intention of the developer is to profit from the sale of allotments and that of the lessee company is to provide a dormitory township for its workforce, in neither case can the expenditure on infrastructure be taken into account in arriving at the unimproved value of the allotments. The situation in this case is somewhat analogous to that in Tetzner v. Colonial Su g ar Refinin g Co. Ltd [1957] A.C. 50, where the respondent company erected a large sugar mill on land, the unimproved value of which was assessed for the purpose of taxation. The town of Lautoka was a prosperous sugar town, the prosperity depending to a large degree on the existence of this sugar mill. The respondent argued that the definition of unimproved value in the relevant Act required such value be assessed "assuming that the improvements, if any, thereon or appertaining thereto ... had not been made". Therefore it was argued, to make a valuation by comparison with the values of surrounding lands, the values of which were largely due to the mill and other improvements on the company's land, was to tax the company upon values created by the company itself. The Privy Council concluded that the legislation drew a clear distinction between the land and the improvements on or appertaining to the land. Their Lordships held that the physical improvements on the land must be excluded from the valuation. They went on to say at page 56: "The land will then be valued as land void of buildings but situated in the community with the amenities and facilities which have grown up around it. ... The valuer need not shut his eyes to the fact there is a sugar manufacturing industry in existence, though he is not entitled to value the sugar mill and its accessories situated on the subject land." -- 15 of 25 -- 16 By analogy, the unimproved values of the subject parcels are ascertained by excluding the value of the improvements on those lands or appertaining thereto. However, as in Tetzner's case, they must be valued in the community in which they are situated, with the amenities and facilities which have grown up around them. The fact that the lessee company has constructed those amenities and facilities can no more be taken into consideration than was the fact that the sugar mill on C.S.R. land had been responsible for the increase in value of the surrounding land in Tetzner's case. The solicitors' submission that section 224(c) of the Land Act 1962 gives some support for deducting external development costs is not valid. Section 244 does no more than attempt to set out in statutory form the allowances that should be made when analysing the sale of an improved parcel of land to arrive at its unimproved value for the purpose of comparison with the land being valued. Paragraph (c) of that section refers to the added value of improvements on the sale land, not to any external development costs. I was also referred to the decision of Mr Dodds in Determination of Rents etc. Per petual Lease Selections - Taroom District (1974) 1 O.L.C.R. 300, where at p.304 he said that the term "unimproved value" for rental purposes under the Land Act has a somewhat different meaning than for conversion purposes or for the purposes of the Valuation of Land Act. However, this does not assist the lessee company, as in that case Mr Dodds was not dealing with development works external to the land being valued. In my view, his remarks cannot be extended to -- 16 of 25 -- 17 warrant any departure from the general principle that "unimproved value" excludes the value of improvements on or appertaining to the land, but not those works which are outside that land. In the present cases, the sale used by Mr Eisenmenger is obviously the only one which he had available and, although in most circumstances one sale is not a sufficient basis of valuation, it is the only evidence of value. The sale itself was not attacked by Mr Brand and, in the circumstances, I am of the opinion that it is appropriate as the basis of valuation in these cases. The relativity of the rental assessments on the individual allotments remains unchallenged. I find that the assessments of the unimproved values as submitted by Mr Eisenmenger in respect of the individual allotments are fair and reasonable and that the application of 3% of the unimproved value for the purposes of assessing rental is appropriate in these cases. Therefore, the annual rents for the Special Leases set out in Schedule I are determined as set out in that schedule:- SCHEDULE t I SPECIAL LEASE NO. I RENTAL PERIOD/COMMENCING I ANNUAL RENT I 12/44689 Third/1st June, 1992 $370 12/44696 Third/1st June, 1992 $300 12/47850 Second/1st March, 1991 $300 12/47851 Second/1st March, 1991 $300 12/47852 Second/1st March, 1991 $300 12/47853 Second/1st March, 1991 $300 12/47854 Second/1st March, 1991 $300 12/47855 Second/1st March, 1991 $300 12/47856 Second/1st March, 1991 $300 -- 17 of 25 -- 18 12/47857 Second / 1st March, 1991 $290 12/47858 Second/1st March, 1991 $290 12/47859 Second / 1st March, 1991 $290 12/47860 Second/1st March, 1991 $290 12/47861 Second/1st March, 1991 $290 12/47862 Second/1st March, 1991 $290 12/47863 Second/1st March, 1991 $300 12/47864 Second/1st March, 1991 $305 12/47865 Second/1st March, 1991 $310 12/47866 Second/1st March, 1991 $320 12/47867 Second/1st March, 1991 $310 12/ 47868 Second/1st March, 1991 $305 12/47869 Second/1st March, 1991 $300 12/47870 Second/1st March, 1991 $300 12/47871 Second/1st March, 1991 $300 12/47872 Second/1st March, 1991 $300 12/47873 Second/1st March, 1991 $300 12/ 47874 Second/1st March, 1991 $300 12/47875 Second / 1st March, 1991 $300 12/47876 Second/1st March, 1991 $300 12/47877 Second/1st March, 1991 $300 12/47878 Second/1st March, 1991 $300 12/47879 Second/1st March, 1991 $300 12/47880 Second/1st March, 1991 $300 12/48082 Second/1st May, 1991 $305 12/48083 Second/1st May, 1991 $300 12/48084 Second / 1st May, 1991 $290 12/48085 Second/1~ Ma~ 1991 $305 12/48086 Second/1st May, 1991 $305 12/48087 Second / 1st May, 1991 $300 12/48088 Second/1st May, 1991 $300 12/48089 Second / 1st May, 1991 $300 12/48090 Second / 1st May, 1991 $300 -- 18 of 25 -- 19 12/48091 Second/1st May, 1991 $300 12/48092 Second/1st May, 1991 $300 12/48093 Second/1st May, 1991 $300 12/48094 Second/1st May, 1991 $300 12/48095 Second/1st May, 1991 $300 12/48096 Second/1st May, 1991 $300 12 / 48097 Second/1st May, 1991 $310 12/48098 Second/1st May, 1991 $300 12/48099 Second/1st May, 1991 $300 12/48100 Second/1st May, 1991 $300 12/48101 Second/1st May, 1991 $300 12/48102 Second/1st May, 1991 $290 12/48103 Second/1st May, 1991 $300 12/48104 Second/1st May, 1991 $300 The Multip le Lot Special Leases As mentioned previously, Mr Eisenmenger's method of valuation for the multiple lot special leases was to value each individual allotment separately and then total those values, making no allowance for bulk or multiple holding. The principal argument in these cases was whether or not in the particular circumstances of the town of Middlemount, a bulk or multiple holding percentage should be allowed. As discussed elsewhere in this judgment, the provisions of Section 204(5B)(c) of the Land Act 1962, require the concept of market rental to be applied by the Court in determining the rent for special leases. In these cases, however, in the absence of evidence of market rents, the Crown has chosen to adopt 3% of the unimproved value of the land in each case. Having adopted this approach, the law -- 19 of 25 -- 20 applicable to the concept of "unimproved value" is relevant. The provisions of the Land Act dealing with unimproved value are included in Sections 242 and 244. Nothing contained in these sections conflicts with the normal concept of unimproved value as that term is generally defined. The Valuation of Land Act 1944 contains a definition of "unimproved value" which is qualified to some extent by certain exceptions. However, in the case of these lands in Middlemount, both the Land Act and the Valuation of Land Act require that the lands be valued as if the improvements thereon did not exist. Therefore, for the purposes for valuing these lands, the houses built on the various allotments must be notionally removed and the lands considered in their unimproved but subdivided state, and in the community in which they are situated. In Burns Phil p & Co v. The Valuer-General (1974) 1 Q.L.C.R. 161 , the Land Appeal Court considered the approach adopted by the Vatuer-General of valuing a number of allotments held in the one ownership as one valuation and then making an allowance for bulk or multiple holding. At p.165 the Court said - "In the subject instance we find nothing wrong in principle with the method adopted by both valuers namely of arriving at the value of the subject parcel by adding the values of the individual parts for their highest and best use and deducting therefrom an allowance for what is commonly termed "bulk or multiple holding"." In that case the valuer for the appellant had deducted 17 1/2% for bulk allowance based on 2 1/2% for each of the 7 blocks involved in that case. At p.166 the Land Appeal Court went on - -- 20 of 25 -- 21 "It is apparently a practice in the Valuer-General's Department when several parcels are included in one valuation to make an allowance for 'bulk or multiple holding'. Often this is made at the rate of 2 1/2% per allotment or subdivision. As we understand the practice, this is an acknowledgment that larger areas generally command a lesser overall unit value than smaller areas. We see no reason as presently advised to disallow this practice but the quantum thereof is one calling for discretion according to the circumstances of individual cases. The basis of the allowance cannot be a rule of thumb of 2 1/2% for each allotment included in the parcel. Logical and practical considerations require that a maximum limit be applied to the bulk allowance percentage, otherwise increasingly large numbers of allotments would result in inordinately low unimproved values until when 40 allotments are included the absurd position of a nil value would result." The solicitors for the lessee company submit that there would appear to be ample authority for the proposition that a discount should be applied when valuing multiple lots in the one valuation. For example, in McGlynn & Co Pty Ltd v. Municipality of Parkes (1938) 5 The Valuer 308, Roper J. of the New South Wales Land and Valuation Court said at p.309: "Where land is held in quantities larger than the normal holding, a deduction from the value obtained by applying the value of the normal holding is generally proper in valuing the larger holding. Purchasers for .the larger holding are more limited in number than for the normal holdings and if the property is offered in subdivision, then apart from the cost involved in subdividing, it is obviously more difficult to sell a number of allotments than to sell one." They submit that also of relevance on the point are the cases of Carter v. Cobbora Shire Council (1925) 7 L.G.R. 58 at 60; Taylor v. Valuer-General (1928) 9 L.G.R. 52; Merriman v. Valuer-General (1931) 11 L.G.R. 119; Appeals against Determinations of the Valuer-General - City of Gold Coast (1962-63) 29 C.L.L.R. 104 at 143; Nelson & Anor v. The Housing Commission of New South Wales (1964) The Valuer 149; Determination of Capital Value for Rental Purposes - Perpetual -- 21 of 25 -- 22 Suburban Lease No. 1365 NCL - Brisbane District (1971) 38 C.L.L.R. 88; Hazel v. Minister for Lands and Works (1976) 24 The Valuer 504 and 509. The cases make no distinction between vacant and developed land. For example, in Nelson & Anor v. The Housing Commission of New South Wales (1963) 8 LG.A.A. 408, Hardie J. of the N.S.W. Land and Valuation Court allowed a discount because he found that the sale of a number of tenanted cottages in one line would result in a lower purchase price than if the sales were made to a number of individual purchasers over a substantial period of time. (p.411) In these cases there is no legislative prohibition to the adoption of such an approach. Section 204(5B)(c) of the Land Act 1962 does not require that the individual allotments comprising the leased land be considered separately, unlike the proviso to section 14 of the Valuation of Land Act 1944, which would require each of these allotments to be valued as a separate entity if these lands were to be valued under that Act. The solicitors also submitted that a purchaser would have regard to the administrative and legal costs of surrendering the existing lease over the multiple lots and obtaining a re-issue of separate leases for the individual lots, before the individual lots could be separately and legally disposed of. That cost in itself could be sufficient to demand a deduction for bulk. -- 22 of 25 -- 23 In my opinion, there is no reason why this allowance should not be applied in this case, particularly in view of the admission by Mr Eisenmenger that a prudent purchaser in such circumstances would expect a discount for bulk or multiple purchasing. The circumstances in mining towns such as Middlemount are somewhat unusual and not related to the normal real estate market. Hovyever, in my opinion, since the Crown has chosen to adopt the unimproved method of valuation, then in arriving at such unimproved values the lands must be considered as if they were held in fee simple and the principles of the ordinary market place applied to those circumstances. There is evidence that there are very few sales in the mining towns in this area and it can be concluded that there is not a ready market for such properties. Only one sale could be found by Mr Eisenmenger in the town of Middlemount and none was found in nearby towns. In such circumstances, I am of the view that a prudent purchaser intending to purchase multiple allotments in Middlemount would expect a discount for purchasing in bulk. However, I have no evidence before me of what percentage should be applied in these cases. Bearing in mind the warning of the Land Appeal Court in the Burns Philp case, that the quantum is one calling for discretion according to the circumstances of individual cases, I propose to adopt a minimum discount of 10%, and thereafter a discount of 2% per allotment up to a maximum of 30%. I would emphasise that I do so as a matter of expediency, as I have no evidence of discounts. This should not be taken as an indication of what should be applied in -- 23 of 25 -- 24 other circumstances, particularly where there is evidence available. Each case must be dealt with on its merits. Once again, I intend to apply 3% of these unimproved values to arrive at the annual rents payable in respect of these multiple lot ~pecial leases. Accordingly, th~ annual rents for the multiple lot special leases as set out in Schedule II for the third rental periods of the leases are determined as set out in that Schedule. SCHEDULE II SPECIAL TOTAL OF NO . BULK UNIMPROVED ANNUAL LEASE NO . INDIVIDUAL OF ALLOW- VALUE FOR RENT VALUES LOTS ANCE RENTAL PURPOSES 12/44687 $50,000 5 10% $45,000 $1,350 12 / 44688 $144,000 14 28% $103,680 $3,110 12/44690 $51,800 5 10% $46,620 $1,400 12/44691 $176,600 17 MAX 30% $123,620 $3,710 12 / 44692 $161 ,000 16 MAX 30% $112,700 $3,381 12/44693 $20,200 2 10 % $18,180 $ 550 12/44694 $20,400 2 10% $18,360 $ 550 12/44695 $216,700 22 MAX 30% $151 ,690 $4,550 12/44697 $120,300 12 24% $91,428 $2,740 Sp ecial Lease No. 12 / 44747 Airfield In this case I am not prepared to accept the basis adopted by Mr Eisenmenger, as I do not see as how he can derive any assistance from the sale of commercial land in the town of Clermont to value 64.04 hectares at Middlemount. am therefore left with no basis of valuation upon which I can rely. -- 24 of 25 -- 25 In considering this matter, I have come to the conclusion that the lessee company by maintaining the airfield at Middlemount is providing another community service to the township. Although the company does use the airstrip from time to time and the purpose of the lease is for business (airfield), it is difficult to see how the company could turn it into a profit-making business enterprise. It is there for community need and in case of emergencies. In such circumstances I think that it would be appropriate to apply a rent in this case of $1,000 per annum. Therefore, the rent for the third period of the lease of Special Lease No. 12/44747 is determined at $1,000 per annum. J.J. TRICKETT. MEMBER OF THE LAND COURT. -- 25 of 25 --