Celotto & Ors v Minister for Lands [1993] QLC 41

LAND COURT, BRISBANE. 12th February, 1993 Re: Determination of Rent Second and Third Rental Periods Special Leases Ingham District SL 24/43821 - SL 24/44420 - SL 24/44430 - SL 24/44427 - SL 24/44428 - SL 24/44431 - SL 24/44434 - SL 24/48630 - Ruggero Celotto, Nardina Celotto, Bruno Celotto, David Celotto and Sharon Elizabeth Celotto. James Stanley Kemp and Suzanne Kemp Richard Thomas Kemp and Ruby Alice Kemp Brian Noel Johnson Raymond Leslie Stallan Bruce Rutherford Ronald James Giddins and Joan Margaret Giddins Joseph William Wilkinson DECISION (Hearing at Ingham) In these cases the Crown is seeking increases in the rents for these special leases, which are situated in the Parishes of Leach and Garrawalt, for the second and third rental periods of the leases, which commenced in each case on 1st July 1991. The lessees have requested that these matters be referred to the Land Court for hearing and determination. Mr A S Antcliff, Assistant Manager, Canegrowers Herbert River, appeared and gave evidence. Mr Antcliff explained that each of the special leases was [1993] QLC 41 -- 1 of 15 -- 2 granted in 1981, except for one which was granted in 1986, to canegrowers who had below a certain level of assigned area on their home farms and who owned no other lands. They were, in effect, granted as additional areas to increase the production of the original cane farms where, in each case, the assigned area and peak were insufficient. The case for the lessees is that the rents asked by the Crown do not reflect the market movements over the last rental period. In support of this submission, Mr Antcliff tendered documents prepared by the Valuer-General showing that in the 1989 general revaluation of the Shire of Hinchinbrook, the value of assigned cane land was reduced by 25% . In the annual valuation in 1990, the value of such land increased by 40%, based on sales in 1988 and early 1989. In the next review of valuations as at March 1992, values of fully peaked assigned cane land remained generally unchanged. These market movements, it was argued, do not warrant the proposed increases in rents for these leases. It was also submitted that the rents do not take into account the fact that the lessees did not receive a peak allocation in respect of increased assignments granted after 1986. Mr Antcliff said that although there had been increases in assignments as provided for in the Sugar Industry Act 1991, there have been no increases in peak to accompany them . Cane grown on assigned land with no peak allocation attracts the Number 2 Pool price and not the higher Number 1 Pool price. Mr Antcliff contended that since there was now a ready availability of assignment with the annual expansion of assigned land provided for in the Sugar Industry Act 1991 , the value of assignment without peak is zero. He further submitted that the proposed rents do not correctly reflect the productive capacity of the land. Evidence in this regard was given by each of the lessees. Mr D R McKinnon, registered valuer employed by the Department of Lands, gave evidence that he had based his recommended rents in this area on evidence of market rents paid privately for cane land in the area. He stated that his enquiries had revealed that market rents in the Ingham area varied from 15% to 20% of gross returns, with the lessee responsible for all costs, including local authority rates. For the purpose of his calculations, Mr McKinnon adopted 15 % of gross returns, which -- 2 of 15 -- 3 he said was a moderate and conservative approach, as this is the percentage applicable in the private rental market in circumstances where there are little or no structural improvements or machinery involved. As a starting point for his calculations, Mr McKinnon carried out investigations to establish what would represent a hypothetical average farm for the Ingham district. He concluded that such a farm would have an assigned area of 60 hectares with farm peak of 4000 tonnes of cane and with average production of 80.54 tonnes per hectare. Working on the basis of 85% crop rotation, Mr McKinnon concluded that the area harvested would be 51 hectares to produce 4000 tonnes of peak. At a gross return of $24 per tonne, the return from the hypothetical average farm is $96,000. Applying the rate of 15%, the annual rent calculates to $14,400, or $240 per hectare. However, Mr McKinnon reasons that in the case of Crown leases, the lessee is leasing the land only, being responsible himself for clearing that land. Mr McKinnon therefore apportions the figure of $240 per hectare on the basis of 70% to the land and 30% to the clearing, having established this proportion through his investigations in the area. This equates to $168 per hectare for the land. However, because of the recession in the sugar industry and the uncertain prospects for the future, he has reduced this by 50%, to arrive at a proposed rent for average quality assigned land in the Ingham district of $85 per hectare. Using productivity figures, Mr McKinnon has then on a proportional basis arrived at the following table of proposed rents - Good quality assigned land Average quality assigned land Poor quality assigned land $95 per hectare per annum $85 per hectare per annum $65 per hectare per annum For unassigned arable land, Mr McKinnon has adopted a scale of proposed rents based on approximately two thirds of the assigned rate. The rationale for Mr McKinnon's method of assessment lies in the method for assessing the rent for cane land special leases which received approval by the -- 3 of 15 -- 4 learned Member of the Land Court, Mr H Carter, in Determination of Rent - Sgecial Leases No. 31193 , 31401 , 31554 and 35475 - Second and Third Periods - In gham District (1983) 9 QLCR 199. I followed Mr Carter's reasoning in accepting the method of assessment in Determination of Rent - Second Rental Period - Special Lease No. 44 / 47383 , Lessee , J F Mcshane, not yet reported, decision delivered 8th May 1992. In that case, I found that despite legislative changes, the principles established by the High Court in Dr ysdale Brothers & Co v. The Federal Commissioner of Land Tax (1931) 46 CLR 308, still apply to the provisions of the Sugar Industry Act 1991. Accordingly, any enhancement in value of assigned lands due to the assignment to a sugar mill is included in the unimproved value of the land, and this should be reflected in the calculations of rent. The extent of the enhancement, however, is a question of fact to be determined upon the evidence in each case. Also in the Mcshane Case, I found that having regard to the state of the industry and the pessimism and uncertainty for its future, an experienced and bona fide person as envisaged by Section 204 5B(c) of the Land Act 1962, would have doubts about paying even 50% of the market rent applicable in normal circumstances. Therefore, I found that 40% of the market rent would be appropriate and by the same reasoning I propose to adopt that percentage in these cases. This would make, in round figures, the rent for average quality assigned land $70 per hectare per annum. For good quality assigned land I propose to adopt $80 per hectare per annum and for poor quality assigned land $50 per hectare per annum. In relation to the arguments advanced by Mr Antcliff, Mr McKinnon explained that the proposed rents were not based on unimproved values but on market rents, so that the unimproved values as determined by the Valuer-General were not relevant. He said that he considered that an assignment added value in each of these cases because it was granted in respect of additional areas to farms which had peaks attached and therefore, in each case, it becomes part of the overall farm with a peak. If an assignment had been granted in respect of a farm which had no peak at all, then he would have looked at the rental assessment differently. -- 4 of 15 -- 5 However, that was not the case with any of the subject leases. I will now deal with the evidence in respect of each of the special leases in some detail. They are situated in Parishes of Leach and Garrawalt, an area which is approximately 40 kilometres north west of Ingham by mainly bitumen sealed road. Each of them was granted for a term of thirty years from 1st July 1981, except for Special Lease 24/48630, (Lessee, Joseph William Wilkinson), which was granted for thirty years from 1st July 1986. All were granted for primary industry (sugar cane growing) purposes. Special Lease No. 24/43821 - Third Rental Period Lessees: Ruggero Celotto, Nardina Celotto, Bruno Celotto, David Celotto and Sharon Elizabeth Celotto. This special lease is in respect of the land described as Lot 157 on Plan CWL 2876 in the Par ish of Leach, containing an area of 6.631 hectares. In this case the Crown is seeking a rent of $41 O per annum and the lessees have advised that their estimate of the rent that should be charged is $240, the same as for the second period of the lease. Mr McKinnon's report describes the land as follows: "About 5.8 hectares (87%) comprises gently undulating coastal forest country falling gently to the south. Balance comprises sloping timbered creek bank falling to the north to Yard Creek which is to the north of the property ... " "Soils range from yellow, brown loamy clays to loams." Mr Ruggero Celotto gave evidence that only about 4.82 hectares are cultivated for cane growing, the rest being broken creek bank. Of the useable area, Mr Celotto estimates that 60% is poor heavy clay soil so that he is only able to get two ratoons before replanting. He estimates that production from this land would be about 20 tonnes per acre, compared with the mill average for the Victoria Mill of about 26 tonnes per acre. The Crown report states that an additional .5 hectares of land had been assessed as arable. Mr Celotto agrees that this land has been cleared to grow seed cane, but it was not assigned and in any case it had to be abandoned because wallabies had eaten it out. In this case Mr McKinnon has assessed the annual rent on the basis of the -- 5 of 15 -- 6 4.82 hectares of assigned land as being slightly worse than average at $80 per hectare. On the revised scale of rents this would equate to approximately $65 per hectare and I propose to adopt that figure. For the unassigned land I have adopted the rate of $40 per hectare. The rent calculation becomes: 4.82 hectares assigned at $65 per hectare 0.5 hectares unassigned arable at $40 per hectare 1.311 hectares non arable and headlands at nil. $313 $ 20 $333 Adopt: $330 Accordingly, the rent to be charged for the third period of Special Lease No. 24/43821 is determined at $330 per annum. Special Lease No. 24/44420 - Third Rental Period Lessees: James Stanley Kemp and Suzanne Kemp This special lease is in respect of the land described as Lot 137 on Plan CWL 3262 in the Parish of Garrawalt, containing an area of 14.33 hectares. In this case the Crown is seeking a rent of $1,000 per annum and the lessees' estimate of the rent that should be charged is $450 per annum, the same as the rent for the second period of the lease. Mr J S Kemp gave evidence that although about 14 hectares of the land is useable, the soil is very abrasive, with a lot of rocks through it. The land is on the side of a hill with a fairly steep slope. It has a low productivity of about 20 or 21 tonnes per acre and Mr Kemp said that he can only get two ratoons before replanting is necessary. He said that this land needs more fertiliser than his home farm and even then he considers its production to be well below average. -- 6 of 15 -- 7 Mr McKinnon's report shows that he assessed the rent on the basis that the subject land has a very coarse soil type. He describes the land as gently undulating coastal forest country with a moderate slope to the south. Having regard to the quality of the land he assessed the 11.83 hectares of assigned land at $75 per hectare, and the unassigned land at $50 per hectare, with the 0.33 hectares of headlands and drains assessed at nil. Mr McKinnon seems to have made an appropriate assessment of the quality of this land and using the adjusted scale which I have adopted, in these cases, I calculate the rent at: 11.83 hectares assigned cane land at $60 per hectare $71 0 2. 17 hectares unassigned arable land at $40 per hectare $ 87 0.33 hectares headlands and drains at nil. $797 Adopt$800 Therefore, the rent to be charged for the third period of Special Lease No . 24/44420 is determined at $800 per annum. Special Lease No. 24/44430 - Third Rental Period Lessees: Richard Thomas Kemp and Ruby Alice Kemp This special lease is in respect of the land described as Lot 181 on Plan CWL 2303 in the Parish of Leach, containing an area of 11.41 hectares. In this case the Crown is seeking a rent of $850 per annum and the lessees' estimate of the rent that should be charged is $350 per annum, the same as the rent for the -- 7 of 15 -- 8 second period of the lease. Mr R T Kemp gave evidence that 11 .3 hectares of the land is assigned and described this land as going from sand ridge which grew good cane down to a wet clay area which grew fairly poor cane. Mr McKinnon describes the land as gently undulating coastal forest country originally timbered with messmate, wattle, bloodwood and some bluegum, with soils ranging from grey brown sandy loam, to grey clay loam and some sands. He regards the subject land as slightly lower than average quality and assesses the assigned area of 11.38 hectares at $75 per hectare, with the balance .3 hectares, which consists of headlands and drains, being assessed at nil. I have no evidence before me which challenges Mr McKinnon's relativity with the other special leases and I therefore propose to maintain it in applying the revised figures. On the reasoning that I have adopted, slightly lower than average assigned land equates to $60 per hectare. ie. 11.38 hectares at $60 per hectare amounts to $683, adopt $680. Accordingly, the rent to be charged for the third period for Special Lease No. 24/44430 is determined at $680 per annum. Special Lease No. 24/44427 - Third Rental Period Lessee: Brian Noel Johnson This special lease is in respect of the land described as Lot 178 on Plan CWL 3263 in the Parish of Leach, containing an area of 10.53 hectares. The Crown is seeking a rent of $650 per annum and the lessee's estimate of the rent that should be charged is $300 per annum, the same as the rent for the second -- 8 of 15 -- 9 period of the lease. Mr B N Johnson gave evidence that after acquiring the land in 1981 progress in development was slow at first as it was one of the wettest blocks in the area. This problem was largely overcome through the construction of drains and earthworks and through the good grace of a neighbour who allowed the water to drain through his property. Mr Johnson said that there are stones through about 60% of the block, and these keep working their way to the surface. The stones vary in size from quite small up to 50 to 60 centimetres in diameter, weighing up to 50 kilograms. These stones and rocks cause problems with harvesting and despite continual stone picking, there are some areas where harvesters will not go. Despite these problems, Mr Johnson admits there are areas of good sand ridge which grow good cane, but the clayey areas grow poor cane. Mr McKinnon describes the land as undulating coastal forest country, falling gently to the south, with stony outcrops. He said that he was aware of the disabilities, particularly the stone, and of the variation in quality of the soil from good brown loams to grey clays. Despite the stone and drainage problems, there are areas of good loams, and he considers a rent of $75 per hectare to be appropriate for the assigned area. On the 4.33 hectares of unassigned arable land he applied $45 per hectare, because of the proximity of Elphinstone Creek, the extent of stone and the absence of better quality soil. This would seem to be appropriate as Mr Johnson said that he does not grow good cane on this unassigned area. In this case Mr McKinnon seems to have made a careful comparison between this land and others in the area and I see no reason to alter his relativity. -- 9 of 15 -- 10 On the adjusted figures the rent is calculated as follows : 6.07 hectares assigned land at $60 per hectare $364 4.33 hectares unassigned arable land at $35 per hectare $151 0.13 hectares drains and headlands at nil. $515 Adopt $510 Therefore, the rent to be charged for the third rental period for Special Lease No. 24/44427 is determined at $510 per annum. Special Lease No. 24/44428 - Third Rental Period Lessee: Raymond Leslie Stallan This special lease is in respect of the land described as Lot 179 on Plan CWL 3263 in the Parish of Leach, containing an area of 19.07 hectares. The Crown is seeking a rent of $1160 per annum and the lessee's estimate of the rent that should be charged is $600 per annum , which is $40 less than the rent for the second period of the lease. Mr R L Stallan gave evidence that after acquiring the land by ballot in 1981 he was granted an assignment of 28 acres with a peak of about 700 tonnes. He has since been granted another 1O acres of assignment. The soil varies from sand ridge to poor, light coloured clay, part of it with drainage problems which necessitated expenditure on earth works and drains. There is an area of approximately 2 hectares which is severed from the balance area by vacant Crown land through which flows a gully for natural drainage. Mr Stallan says that he has as yet not used this area because of it's -- 10 of 15 -- 11 access problems. He said that the subject land was deficient in lime and other minerals and that he found that its production was not up to his original expectations. Mr McKinnon describes the land as gently undulating coastal forest country, bisected by a gully and falling gently to the south, with soils ranging from course brown and grey clay loams to grey loamy clays to clay. Having regard to its shape, the quality of the land and the fact that the assigned area is severed by a road, Mr McKinnon considered that a rate of $70 per hectare was appropriate for the 15.25 hectares of assigned land. Because the 2.08 hectares of unassigned land is severed by the gully and has access problems, Mr McKinnon applied the lowest rate of $45 to it. It seems to me that Mr McKinnon has taken into account the disabilities from which the block suffers and I therefore propose to maintain his relativity. The rate applied to the assigned area is only slightly above that which he attributes to the poor quality assigned cane land. Therefore on the adjusted scale, I consider the rate of $55 per hectare to be appropriate. The rate for the unassigned land equates to that of the poor quality arable land. The rent is calculated as follows: 15.25 hectares assigned land at $55 per hectare $839 2.08 hectares unassigned arable land at $35 per hectare $ 73 1. 74 hectares headlands and drain at nil. $912 Adopt $910 -- 11 of 15 -- 12 Accordingly, the rent to be charged for the third rental period for Special Lease No. 24/44428 is determined at $910 per annum. Special Lease No. 24/44431 - Third Rental Period Lessee: Bruce Rutherford This special lease is in respect of the land described as Lot 182 on Plan CWL 3203 in the Parish of Leach, containing an area of 10.85 hectares. The Crown is seeking an annual rent of $780 for the third period of the lease, the rent for the second period being $320 per annum. Mr Bruce Rutherford gave evidence that the soil on the land varies from good ridges to white clay soil with drainage problems , which will cost a substantial amount of money to rectify . Overall, he does not regard it as a good block and he explained this in terms of its productivity in both good ·and bad years. Mr McKinnon described the land as gently undulating forest country, falling gently to the south and south east, with soils ranging from grey sandy loam to clay loam with some clays. He was aware of the disabilities of the block in applying his rate of $75 per hectare to the 10.43 hectares of assigned land. The balance area of 0.42 hectares consists of headlands and drains to which he attributed nil value. In considering this land at less than average, Mr McKinnon appears to have made the appropriate allowances and I propose to maintain his relativity while adjusting his rate per hectare on the assigned land to $60 per hectare, which equals $625, say $620. Accordingly, the rent for the third period of the lease of Special Lease No. 24/44431 is determined at $620 per annum. -- 12 of 15 -- 13 Special Lease No. 24/44434 - Third Rental Period Lessees: Ronald James Giddins and Joan Margaret Giddins This special lease is in respect of the land described as Lot 185 on Plan CWL 3224 in the Parish of Leach, containing an area of 11.5 hectares. The Crown is seeking an annual rent of $860 for the third period of the lease and the lessees have advised that their estimate of the rent that should be charged is $350 per annum, $10 less than the rent for the second period of the lease. Mr R J Giddins gave evidence that the soils vary from sandy soil on the top part of the block to a swampy area which occupies approximately half the subject land. This swampy area has a serious ponding problem which has been partly alleviated by a drain which runs through the block. Mr Giddins also gave evidence of the production from the land in both good and average years. Mr McKinnon said that he applied $75 per hectare per annum to the assigned area of 11.41 hectares, which he considers takes into account the drainage problem. He agrees with Mr Giddins that approximately half the block is low lying country which is inclined to be swampy. In this case Mr McKinnon appears to have taken account of the variable nature of the soil and the drainage problem suffered by the subject land in adopting his rate of $75 per hectare, as it is somewhat less than the average. In adjusting this rate on the reasoning described earlier, I see no reason to depart from his relativity and adopt $60 per hectare for the assigned area of 11.41 hectares, a total of $685, say $680 per annum. Accordingly, the rent for the third period of the lease for Special Lease No. 24/44434 is determined at $680 per annum. -- 13 of 15 -- 14 Special Lease No. 24/48630 - Second Rental Period Lessee: Joseph William Wilkinson This special lease is in respect of the land described as Lot 120 on Plan CWL 2055 in the Parish of Leach, containing an area of 13.81 hectares. The Crown is seeking a rent of $800 per annum and the lessee's estimate of the rent that should be charged is $470 per annum, the same as the rent for the first period of the lease. In this case Mr Antcliff tendered a written statement prepared by Mr Wilkinson in which he states that an area of 0.85 hectares is severed by a creek (gully) from the balance of the block. Although this area has good soil, access across the creek can present a problem because of the force of water in the gully which drains from other properties. A drain was constructed in the middle of the block to drain a low wet area and the high bank on the southern boundary was cut down to build up the low areas, as was the soil from the drain itself. The balance of the soil is light sandy loam which, with extra fertiliser, produces good cane except in dry years. Mr McKinnon describes the assigned land as gently undulating coastal forest country, while the balance area consists of steep gullies and broken country. He agrees with Mr Wilkinson's statement and says that he has taken the disabilities into account in applying the 11.4 hectares of assigned land at the rate of $70 per hectare, as this is only slightly higher than his rate for poor quality assigned land. To the balance area of 2.41 hectares of headlands and gullies he has attributed no value. In this case Mr McKinnon appears to have carefully assessed the land in -- 14 of 15 -- 15 comparison with others in the area and I propose to accept his relativity and adopt a rent of $55 per hectare on the adjusted scale for the 11.4 hectares, or $630 per annum. Accordingly, the rent to be charged for the second period of the lease for Special Lease No. 24 / 48630 is determined at $630 per hectare. Mr McKinnon appears to have carried out a careful and thorough inspection in each case, accompanied by the lessees on most if not all occassions. He is well aware of the disabilities of each of the farms and has made it clear that he does not consider any of the subject lands to be even of average quality overall. Each of them has particular problems, although each of them does have some good soil. The relationship between the rents of these blocks was not attached and in these circumstances I have adopted Mr McKinnon's relativity in each case, while adjusting the rents to conform with my findings in respect of the various categories. Determination of Rents:- SL 24/43821 SL 24/44420 SL 24/44430 SL 24/44427 SL 24/44428 SL 24/44431 SL 24/44434 SL 24/48630 $330 per annum $800 per annum $680 per annum $510 per annum $910 per annum $620 per annum $680 per annum $630 per annum (J J Trickett) Member of the Land Court. -- 15 of 15 --