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Queensland Judgments
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Hoch v Hoch

 

[2020] QSC 365

SUPREME COURT OF QUEENSLAND

CITATION:

Hoch v Hoch [2020] QSC 365

PARTIES:

IAN RICHARD HOCH

(applicant)

v

ANDREW GRANT HOCH

(respondent)

FILE NO/S:

BS No 11084 of 2016

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

4 December 2020

DELIVERED AT:

Brisbane

HEARING DATE:

17 and 19 November 2020

JUDGE:

Bradley J

ORDER:

The Order of the Court is that:

  1. Pursuant to s 38(5) of the Property Law Act 1974 (Qld) (the “Act”), the scheme of partition of Lot 2 on Crown Plan BE87, Title Reference 51065102 (the “Land”) prepared by Joanne Emily Dunn and Benjamin James John Waters as trustees of the interests of Ian Richard Hoch (the “applicant) and Andrew Grant Hoch (the “respondent”) in the Land is varied so that the Land is to be partitioned in accordance with proposed Lots 11 and 12 (and proposed Easement A in Lot 12) on the survey plan prepared by VSB Surveys Pty Ltd.
  2. Pursuant to s 43(1) of the Act, in respect of the receipt by the respondent of more than his proportionate share of the Land under the scheme of partition (as varied by this Order), the respondent is liable to account to the applicant for $63,145.
  3. Pursuant to s 42 of the Act, the respondent is entitled to an allowance of $9,517 and the applicant is liable to pay that allowance to the respondent.

CATCHWORDS:

REAL PROPERTY – PARTITION OF LAND – STATUTORY TRUST FOR SALE OR PARTITION – OTHER MATTERS – where real property owned by the applicant and respondent as tenants in common in equal shares is vested in trustees on the statutory trust for partition – where the trustees have prepared a scheme of partition and served notice of the scheme on the applicant and respondent – where the scheme of partition was prepared in accordance with a “hypothetical valuation exercise” that assumed the property was “fully developed and consistent with respect to land clearing, pasture development, waters and fencing” – where under the scheme of partition, the applicant would receive a lot worth $2 million and the respondent would receive a lot worth $3 million – where the applicant has applied for a variation of the scheme of partition – whether the scheme of partition produces, as nearly as possible, an equal division of the property

REAL PROPERTY – PARTITION OF LAND – STATUTORY TRUST FOR SALE OR PARTITION – IMPROVEMENTS – where the applicant has applied to vary a scheme of partition in respect of real property he and the respondent own as tenants in common in equal shares – where the applicant and respondent each claim to have increased the value of the property through improvements and repairs – whether the applicant and/or the respondent is entitled to an allowance to reflect the value of the improvements and repairs they claim they have made

Property Law Act 1974 (Qld), s 38, s 42, s 43

Brickwood v Young (1905) 2 CLR 387, cited
Forgeard v Shanahan (1994) 35 NSWLR 206, applied
Leigh v Dickeson [1884] 15 QBD 60, considered
McMahon v Public Curator (Qld) [1952] St R Qd 197, cited
Segal v Barel (2013) 84 NSWLR 193, cited

COUNSEL:

D A Skennar QC, with M Brooks, for the applicant

L Copley for the respondent

SOLICITORS:

Australian Property Lawyers for the applicant

Thynne + Macartney for the respondent

  1. [1]
    This is a decision on an application to vary a scheme for the partition of a grazing property in central Queensland known as “Kerand” (the property).[1]  It is about 32 kilometres north-east of the town of Alpha and about 440 kilometres west of Rockhampton.  The fee simple in the land is owned by two brothers, the applicant Ian Richard Hoch and the respondent Andrew Grant Hoch, as tenants in common in equal shares.
  2. [2]
    Ian Hoch seeks the variation.  Andrew Hoch opposes it.  He submits that if the scheme is varied, it should not be as Ian Hoch proposes and that he should be entitled to an allowance for improvements he has made to the property.

The property

  1. [3]
    The property is a vinculum lot, bisected by the ten chain road corridor of Craven Road along an old stock route.  Its western boundary runs along the Belyando River.  The course of Bottle Tree Creek lies across the property from about the mid-point of the eastern boundary, crossing Craven Road before flowing across the northern boundary about 1.6 km to the west of the road corridor.  Bottle Tree Creek is fed by Saltbush Creek and another (unnamed) creek.  Each tributary runs north across the property to join the main creek course at different point before it crosses the road corridor.
  2. [4]
    The boundaries, water courses and paddocks formed by secure, stock-proof fencing are indicated in annexure 6 of the Webster Cavanagh report,[2] reproduced below.

Judgment-Image

Brief history of title to “Kerand”

  1. [5]
    By tradition, the lands in this area are in the custody of the Wangan or Jagalingou people.  From 1863 until 1897, the property was part of Beaufort Station, a group of nine pastoral runs in the Belyando Valley leased by Arthur Palmer, who served as Premier of Queensland from 1870 to 1874.
  2. [6]
    After the Second World War, the State decided the former Beaufort Station would be among the large land holdings to be divided and offered to returned servicemen.  A survey plan of the property (Portion 2 on Crown Plan BE87 in the Parish of Karlsbad, County of Belyando) was registered by the Survey Office on 14 October 1955.  It was 18,760 acres or about 7,592 ha in area.
  3. [7]
    On 4 October 1956, the land was declared open for selection and Alan Hoch was successful in the land ballot for returned soldiers and allocated the property.
  4. [8]
    On 6 December 1962, the Crown executed Grazing Homestead Lease No 37/3385 conveying a leasehold interest to Alan Hoch.  The lease was for an initial term of 28 years.  The earlier allocation of the interest to Alan Hoch was indicated by the 1 January 1957 commencement date for the lease.  This leasehold interest was subject to a number of conditions, including a requirement of personal residence and occupation and an obligation to construct a residence on the land and to fence and maintain the land during the term of the lease.
  5. [9]
    On 6 January 1968, Alan Hoch transferred an interest in the lease to his wife Isabell Edith Hoch.  From that date they were registered proprietors of the leasehold interest as tenants in common in equal shares.  Alan and Isabell Hoch were the parents of Ian and Andrew Hoch, the parties to this proceeding.  They raised five children, including the present parties.
  6. [10]
    On 15 May 1984, Alan and Isabell Hoch’s tenure was converted from a Grazing Homestead Lease to a Grazing Homestead Perpetual Lease.  It is common ground between the parties that this step extinguished any native title over the land.
  7. [11]
    On 24 July 1986, Alan and Isabell Hoch registered releases of the mortgages over the title[3] and transferred interests in the property to Ian Hoch and Andrew Hoch, so that the leasehold tenure was held by Alan, Isabell, Ian and Andrew Hoch in equal shares.
  8. [12]
    On 3 December 1993, Alan Hoch died.  His interest in the property passed to Isabell, Andrew and Ian Hoch as his personal representatives.
  9. [13]
    By his will Alan Hoch left his ¼ interest in the lease to Ian Hoch.  On 5 September 1994, this transmission by death was registered.  From that date the lease was held by Ian, Isabell, and Andrew Hoch as tenants in common in interests of ½, ¼ and ¼ respectively.
  10. [14]
    On 17 March 1997, Isabell Hoch gifted her ¼ interest in the lease to Andrew Hoch.  On 26 March 1997, this transfer was registered.  From that date Ian and Andrew Hoch held the lease as tenants in common in equal shares.
  11. [15]
    The proceeds from the sale of the cattle in the estate of Alan Hoch were applied to pay the rates and Crown rent on the property for the period from about 1993 until about 1997.  Isabell Hoch then paid the rates and Crown rents until 2001.  There was some negotiation between Andrew and Ian Hoch about the payment of various property related expenses, including the rates and Crown rent, between 2001 and 2005.  Since about September 2015, they have paid rates and rents in equal shares.
  12. [16]
    Isabell Hoch lived in the homestead until her retirement from the property in about 1997.  She moved to live in a house in Rockhampton with her other son.  Isabell died on 10 April 2018.
  13. [17]
    It is common ground that Ian Hoch and Andrew Hoch never intended to jointly run a business on the property, as their parents had done.  They have conducted their respective grazing businesses independently of each other.  Generally, over that period Ian Hoch has conducted his grazing business on the eastern portion of the property and Andrew Hoch has done likewise on the western portion.  Between 2005 and 2012, Ian Hoch used one of the five holding paddocks on the western side.
  14. [18]
    On 10 November 2016, Ian and Andrew Hoch surrendered their leasehold interest in the land under the Grazing Homestead Perpetual Lease and were granted a freehold estate in the fee simple, paying the purchase price of $297,206.84 in equal shares.  They remained tenants in common in equal shares in this new tenure, until orders made in this proceeding intervened.

The court proceeding

  1. [19]
    On 26 October 2016, Andrew Hoch applied to the court for the appointment of trustees to partition the property pursuant to s 38(1) of the Property Law Act 1974 (Qld) (the Act).  By then the process for granting freehold title was underway.
  2. [20]
    On 16 December 2016, the court appointed Stefan Dopking and Joanne Emily Dunn, two chartered accountants from the firm FTI Consulting, as trustees of the interests of Ian Hoch and Andrew Hoch in the property, and vested the property in the trustees on the statutory trust for partition, subject to the terms of the court’s order and to the trustees’ duties under the Trusts Act 1973 (Qld).
  3. [21]
    One of the terms of the order was that, pursuant to s 38(5) of the Act, the trustees were to prepare a scheme of partition and serve it on each of the parties.  Section 38(5) of the Act provides:

When such trustees for partition have prepared a scheme of partition they shall serve notice in writing of the scheme on all the co-owners of full age, and any of such co-owners dissatisfied with the scheme may, within 1 month after service upon the co-owner of such notice, apply to the court for a variation of the same.”

  1. [22]
    On 3 October 2017, the court made an order permitting Mr Dopking to retire as trustee, appointing Benjamin James John Waters as trustee in his place, and vesting the property in Mr Waters to be held by him and Ms Dunn on the same terms as it had been held by Mr Dopking and Ms Dunn under the 3 December 2016 order.

The relevant legal principles

  1. [23]
    The practice of courts ordering partition of tenancies is of about 500 years’ standing.  In 1539 and 1540, the Statutes of Partition[4] provided for a joint tenant or tenant in common of any estate to bring an action by writ of partition in the common law courts seeking orders compelling the joint tenants or tenants in common to partition the estate between them.  The Court of Chancery quickly developed a similar jurisdiction.
  2. [24]
    As noted above, the power of this court to appoint trustees for partition is now found in s 38(1) of the Act.  The appointed trustees must prepare “a scheme of partition”.
  3. [25]
    The Act does not define “partition”.  It has the meaning acquired under the common law.[5]  A scheme of partition is one for termination of the existing co-ownership, the division of the property belonging to co-owners, and the allotment of full title of the divided property among them, so each may occupy and use a part to the exclusion of the other(s) and so put an end to community of ownership between them.  The trustees’ scheme meets this general description.
  4. [26]
    The court has express powers, pursuant to s 42 of the Act, to “determine any question of fact arising (including questions of title) in the proceedings or give directions as to how such questions shall be determined” and to direct that such inquiries be made and such accounts be taken as may in the circumstances be necessary for the purpose of ascertaining and adjusting the rights of the parties”.
  5. [27]
    As these ancillary powers indicate, there are other matters that may arise for determination in respect of a scheme for partition.
  6. [28]
    There may be practical difficulties in partitioning a property to create new lots.  Physical features of the land, structures and improvements on the land and traversing public infrastructure may prevent an entirely just and proportionate division of the land according to each co-owner’s interest, so that a financial adjustment may be necessary.[6]  This basic requirement of equity finds statutory expression in s 43(1) of the Act.
  7. [29]
    The payment an enriched co-owner must make to his or her fellow is sometimes referred to as equality money.  In Segal v Barel,[7] Barrett JA expressed the matter in this way:

“The concept is a simple one.  If, as here, there are two co-owners holding in equal shares, any partition should see them receive parts of equal value.  For any one of many reasons, it may be impossible to achieve that precise result.  The owner who receives the part of smaller value may then be regarded as having given part of his or her half-share to the recipient of the part of greater value.  Monetary adjustment by way of “equality money” – sometimes called “equality of partition” or “owelty of partition” – will be required in such a case.”

  1. [30]
    There is another type of adjusting question.  In Leigh v Dickeson,[8] Cotton LJ explained that:

“no remedy exists for money expended in repairs by one tenant in common, so long as the property is enjoyed in common; but in a suit for a partition it is usual to have an inquiry as to those expenses of which nothing could be recovered so long as the parties enjoyed their property in common; when it is desired to put an end to that state of things, it is then necessary to consider what has been expended in improvements or repairs: the property held in common has been increased in value by the improvements and repairs; and whether the property is divided or sold by the decree of the Court, one party cannot take the increase in value, without making an allowance for what has been expended in order to obtain that increased value … There is, therefore, a mode by which money expended by one tenant in common for repairs can be recovered, but the procedure is confined to suits for partition.”

  1. [31]
    His Lordship’s comments were obiter dictum, as North J identified in Re Jones; Farrington v Forrester.[9]  However, they have been widely and consistently accepted as correct.  In Brickwood v Young,[10] Griffith CJ treated them as such in a decision on division of funds in court that were the proceeds of the resumption land held by tenants in common.
  2. [32]
    Griffith CJ also considered the nature of a co-tenant’s rights:

“I cannot regard the equitable right of a tenant in common to compensation as against his co-tenants as merely personal to the individual tenant who effects the improvements.  The principle appears to be that the making of permanent improvements by one tenant in common in sole occupation gives rise to an equity attaching to the land, analogous to an equitable charge created by the owners for the time being, but enforceable only in the event of partition or a distribution of the value of the land amongst the tenants in common.  There can be no reason why such a charge should not run with the land in favour of purchasers from the person originally entitled to it.  It is clearly a right incidental to the possession of the land, and cannot be asserted until that possession is disturbed.”[11]

  1. [33]
    Cotton LJ’s reasoning was also followed by Macrossan CJ in McMahon v Public Curator (Qld),[12] where his Honour, after considering North J’s view of the practice, concluded:

“It is clear, I think from this, that the amount to which a co-owner making improvements may be entitled against another co-owner in taking the accounts in a partition action, is limited to the actual cost of the improvements, and if the present value of the increment to the property is less than the actual cost of the improvements, he is further limited to that present value.”

  1. [34]
    In an equitable suit for partition, the courts appear to have applied a characteristically flexible approach where one tenant had occupied the whole of the property to the exclusion of the other or others.  When such an occupier claimed to be reimbursed the cost or value of improvements effected to the property, equity required a deduction to be made on account of the tenant’s exclusive occupation.  This was in the form of a notional occupation fee or rent.  In Chatterton v Chatterton,[13] Jacobs J quoted a passage in Story’s Equitable Jurisprudence (14th ed, 1918) that included the following:

“So where one tenant in common, supposing himself to be legally entitled to the whole premises, has erected valuable buildings, he will be entitled to an equitable partition of the premises, so as to give him the benefit of his improvements; or if that cannot be done, he will be entitled to a compensation for those improvements.  Equity will incidentally settle an account between [tenants in common], and charge one who occupies to the exclusion of the rest with occupation rent.”

  1. [35]
    In Re Pavlou,[14] Millett J said:

“On a partition suit or an order for sale adjustments could be made between the co-owners, the guiding principle being that neither party could take the benefit of an increase in the value of the property without making an allowance for what had been expended by the other in order to obtain it … The guiding principle of the Court of Equity is that the proportions in which the entirety should be divided between former co-owners must have regard to any increase in its value which has been brought about by means of expenditure by one of them.”

  1. [36]
    In Forgeard v Shanahan,[15] Mahoney and Meagher JJA considered and applied the common law principles about partition between co-owners to the division of the proceeds of a sale by statutory trustees appointed under s 66G of the Conveyancing Act 1919 (NSW), the statutory equivalent of s 38 of the Act in New South Wales.
  2. [37]
    Meagher JA, with whom Mahoney JA agreed, summarised the rights one co-owner has against another in sixteen points.  Amongst them were the following:

“1. Since both joint tenants and tenants in common have joint possession of the land in which they have the estate, it was a settled rule of law that the possession of any one of them was the possession of the other of them … nor did the bare receipt of all the rents and profits by one operate as an ouster of the other.

  1. It follows that, where one co-owner is in occupation and the other not, but there has been no actual ouster or exclusion by the former of the latter, the law treats the latter simply as someone who has chosen not to exercise his legal right to occupy the land.

  1. … Turning to the liability of a co-owner in occupation to pay an occupation fee, the position at law is fairly clear.  He was not liable unless he excluded his co-owner …  Indeed, the whole bias of the law against making a co-owner in occupation liable to account is precisely based on the rationale that if such a liability were to exist a co-owner could, by abstaining from entering into occupation, turn his co-owner into an involuntary bailiff.  As far as equity is concerned, an occupation fee will be exacted in at least two circumstances: first, in a partition suit (or related litigation): if there has been an exclusion, the tenant in occupation will be charged with an occupation fee; this is an example of equity following the law; and secondly, if the owner in occupation claims an allowance in respect of improvements effected by him, equity will permit such an allowance only on terms that he is accountable for an occupation fee – this is an example of he who comes to equity having to do equity.
  1. … There is, of course, ample authority that an occupying party may be charged with an occupation rent if he has ousted the other party or if he is seeking an allowance for improvements; but there is no authority which goes beyond that. …
  1. If a co-owner in occupation effects improvements on the co-owned property he may claim an allowance for any improvements in value effected by him.  Such an allowance may be claimed in an action for partition.  The allowance is not reimbursement of the amount expended, but an allowance in respect of the amount by which the value of the property has been increased, not exceeding the amount expended, the ‘value’ to be ascertained at the commencement of the action … Thus, in summary, a tenant who effects repairs, is entitled to an allowance for the lesser of the value of the enhancement of the property and the cost of effecting the repairs.

  1. What is meant by [improvements] is something more than mere repairs and maintenance, for which no allowance can be made.

  1. All the above principles are applied in partition actions, and cannot be relied on elsewhere, except in administration actions; and in other cases where there is a fund in court, for example because of a resumption. …
  1. Apart from questions of improvements and occupation fees, which arise from the relationship of co-owners, it will also often happen that co-owners are joint debtors (for example, on a mortgage, or because rates are levied on the property).  If one co-owner pays such a debt in full he is entitled to require the other co-owner to contribute a rateable amount; at least that is prima facie the position.  In this regard the parties’ rights arise from the equitable doctrine of contribution, not from the law of property …”.[16]
  1. [38]
    Meagher JA further summarised the position in respect of the particular appeal before the court:

“In the case where one party is claiming an allowance for improvements and the other is seeking to charge an occupation fee, both claims can arise in partition actions (and related actions), and only in such actions.  Each claim is a potential incident of a partition action.  In this context, ‘no rent if no improvements’ makes good sense.  The discharging of joint debts stands in a different position.  An adjustment occasioned by such a discharge is not necessarily made in a partition action: it could be made in an action for contribution, which could be brought quite independently of a partition action (or its equivalent).”[17]

  1. [39]
    His Honour upheld the trial judge’s decision to allow the defendant to recover one half of the mortgage repayments, water rates and council rates she had paid, on the basis they were payments in discharge of joint debts.  His Honour also upheld the primary judge’s decision not to make any allowance for amounts spent by the defendant on insurance or pest control on the basis that:

“They cannot be classified either as payments for improvements or payments of debts jointly owning.  At most they are payments towards the maintenance of the property, and as such no allowance should be made in respect of them.”[18]

  1. [40]
    As no allowance for improvements was claimed, no counterbalancing sum was allowed for occupation rent.  While following the considered obiter dicta of Griffith CJ in Brickwood v Young, Meagher JA explained why that approach was “justifiable in principle”:

“To begin with, to allow an occupation fee in excess of the value of improvements would, to the extent of the excess, infringe the principle of public policy referred to in par 8 supra.  Again, since the equity to claim an occupation fee is always spoken of as a ‘passive’ equity or a ‘defensive’ equity, that is, one which can only be relied on to repel a claim for improvements, there is much to be said for treating it as exhausted once it has repelled such a claim.”[19]

  1. [41]
    In Cardinaels-Hooper v Tierney,[20] Cohen J cited Forgeard v Shanahan and an earlier decision, Luke v Luke,[21] as authority for the following conclusion:

“The principles are well established.  Each co-owner has a right of occupation, and the fact that one exercises that right and the others do not, does not mean that the occupying co-owner is liable to pay an occupation fee.  That fee, or rent, will be payable, however, if the occupying owner has excluded from possession the other owner or owners or if the occupying owner is seeking an allowance for improvements carried out during that period of occupation.”

The scheme

  1. [42]
    On 20 October 2017, Ms Dunn wrote to Tim Cavanagh, a registered valuer of the firm Webster Cavanagh, advising him that the trustees had given an undertaking to send Mr Cavanagh a further set of instructions.  No earlier instructions are in evidence.  However, it is apparent from this communication that Mr Cavanagh had previously provided a “quote” for the valuation of the property.
  2. [43]
    At 10:02 am on 18 April 2018, Ms Dunn again wrote to Mr Cavanagh with the following further instructions to consider two options for the partition of Kerand:

“Option 1: Identify a line of partition that will, upon partitioning of the whole of ‘Kerand’, give to each of Andrew and Ian Hoch a property of equal value to the other, as far as practical considerations, such as the physical features of the land, will allow.  You should also set out any conclusions you have reached about the effect (if any) that any acts, omissions or other contributions on the part of Andrew and/or Ian has had on the value of ‘Kerand’.  You should report upon the extent (in dollar terms) of the effect on the value of ‘Kerand’ that has been brought about by any such acts, omissions or other contributions by Andrew or Ian.

Option 2: Identify a line of partition that will, upon partitioning of the whole of ‘Kerand’, give to each of Andrew and Ian Hoch properties of different value to the other, but takes into account any conclusions you have reached about any effect that acts, omissions or other contributions on the part of Andrew or Ian has had on the value of ‘Kerand’, such that any difference in the value of the properties is, in your opinion, attributable to those acts, omissions or other contributions on the part of Andrew and/or Ian.”

  1. [44]
    The trustee’s email added:

“Your report, of course, should set out fully the basis of your conclusions, including a summary of any calculations of the values and effect on value of actions (or inactions) or contributions, for each of Options 1 and 2 above.”

  1. [45]
    On 18 April 2018, Mr Cavanagh produced a report in which he identified two options for the partition of the property.  The report was dated 1 April 2018.  It is common ground that the trustees have based the scheme they subsequently proposed on the second of Ms Cavanagh’s options (Option 2).  Option 2 is described in Mr Cavanagh’s report.  It would subdivide the property into new Lots 1 and 2.
  2. [46]
    On 7 August 2018, Murray & Associates, surveyors and town planners, prepared a plan of development for the proposed subdivision.  This was incorporated in a planning report dated August 2018, prepared by Murray & Associates on behalf of the trustees.

Judgment-Image

  1. [47]
    On 22 August 2018, the planning report was submitted to the Barcaldine Regional Council as a development application.  On 23 October 2018, the Council approved the development application in full with conditions.
  2. [48]
    On 6 November 2018, the trustees proposed a scheme for the partition of the property into two lots in accordance with the Murray & Associates plan of development as approved by the Council.  The scheme would partition the property into Lot 1 of about 4,114 ha at the eastern end of the property and Lot 2 of about 3478 ha at the western end of the property.  Lot 1 would connect to the Craven Road by a corridor about 88 metres wide and 659 metres long.  Lot 2 would have the whole of the frontage to the west side of Craven Road and all but 88 metres of the eastern road frontage.

The proposed variation

  1. [49]
    On 6 December 2018, Ian Hoch applied to the court to vary the scheme.
  2. [50]
    Ian Hoch asks the court to vary the trustees’ scheme so that the property would be partitioned in accordance with a survey plan prepared by VSB Surveys Pty Ltd (Option B).  Option B is a plan of proposed Lots 11 and 12 (and a proposed Easement A in Lot 12) that would cancel Lot 2 on Crown Plan BE87.  The survey plan showing Option B is Annexure 6 in a valuation report by Chris Dyer and Will McLay, certified practising valuers of the firm Herron Todd White prepared on or after 20 January 2019.

Judgment-Image

  1. [51]
    If the scheme were varied in accordance with Option B, the property would be partitioned into Lot 11 of about 4,586 ha at the eastern end of the property and Lot 12 of about 3006 ha at the western end of the property.
  2. [52]
    Lot 11 (the eastern block) would connect to Craven Road by a corridor of land about 70 metres wide and 341 metres long.  Unlike the corridor in Option 2, the Option B connection would include most of the existing road track that links Ian Hoch’s houses to Craven Road.  It would also include the land where the graves of Alan and Isabell Hoch are located.
  3. [53]
    Option B includes an Easement A.  This would give the owner of Lot 11 a right of access to the area (about 29 metres by 178 metres) on which the wooden cattle yards used by Ian Hoch are located.

Use and improvement of the property by Alan and Isabell Hoch

  1. [54]
    From about 1957, Alan Hoch operated a beef cattle grazing enterprise on the property.  This became a partnership enterprise between Alan and Isabell Hoch, perhaps in the late 1960’s.
  2. [55]
    There is no issue in this proceeding that Alan Hoch complied with the lease conditions.  Parts of the land were cleared of existing vegetation, fencing was erected, water infrastructure was built and Kerand homestead was constructed off the western side of Craven Road.
  3. [56]
    Alan and Isabell Hoch undertook significant land clearing on the western side of the property in the areas known as the Bullock Paddock, the River Paddock, the Road Paddock, the Horse Paddock and the Bull Paddock.  This clearing included blade-ploughing the Bullock Paddock, and cutter-barring and pulling scrub elsewhere.[22]  They cleared only a small part of the land on the eastern side of the property.  Likely this was because the land was less convenient to clear or to improve as pasture and more suitable for cattle breeding.
  4. [57]
    In a report of November 2015, Patrick Lyons, a registered valuer of the firm Taylor Byrne, classified the cleared and uncleared parts of the property.  His evidence is summarised in the following table.

Classification

Area (Hectares)

Carrying capacity (ha/head)[23]

Carrying capacity (total)[24]

Blade-ploughed scrub maintained

240

3.0

80

Pulled scrub maintained

1,415

3.2

442

Cutter-barred scrub not maintained

270

6.0

45

Pulled scrub not maintained

150

8.0

19

Remnant brigalow

675

8.0

84

Creek and river flats uncleared

1,450

4.2

345

Broken brigalow plains

320

4.4

73

Softer mixed country uncleared

1,200

6.0

200

Mixed fair forest uncleared

1,500

6.0

250

Inferior forest

371

10.0

37

Total

7,591

 

1,575

  1. [58]
    According to Mr Lyons, 2,075 hectares of the property (27.33%) has been cleared in some way.  He concluded that, “The majority of the remainder of Kerand is suitable for development but can no longer be cleared under current vegetation management legislation.”  This remainder is about 5,516 hectares (72.67%).
  2. [59]
    Grant Paterson, an environmental scientist, undertook a thorough examination of the regional ecosystem mapping data (current and pre-clearing), satellite imagery and aerial photography (2001, 1991 and 1980) covering the property and the surrounding lots.  In his opinion, about 33.92% of the property had been cleared and about 66.08% was covered by remnant vegetation.
  3. [60]
    Chris Dyer, a registered valuer with Herron Todd White, estimated that about 2,845 ha (37%) of the property had been developed by clearing, comprising 2,302 ha of developed brigalow scrub, 94 ha of developed Belyando River flood plains, 28 ha of box forest, and 421 ha of brigalow scrub previously cleared, not retreated and now regarded as remnant vegetation.
  4. [61]
    Whether the total area cleared is as assessed by Mr Lyons, Mr Paterson or Mr Dyer, I am satisfied that the land clearing activity by Alan and Isabell Hoch prior to 1993 accounted for practically all of the cleared area, including those Mr Lyons classified as having been blade-ploughed, scrub pulled or cutter-barred.
  5. [62]
    In his report, Mr Lyons described the topography, soil type and vegetation on the property in this way.

“Kerand comprises a mix of country which runs from Belyando River frontage country on the western side running to a mix of good scrub country broken by open to semi open brigalow plain which is predominantly towards the western side running to good creek flats on Saltbush and Bottle Tree Creeks surrounded by mixed forest with a scrub influence and scrub patches in parts towards the western side.

It can be described in more detail as follows:-

 About 450 hectares of Belyando River flats which is generally inclined to clay pan. Predominantly timbered with open to scattered bauhinia, brigalow, dead finnish, sandalwood, box with flooded coolibah to the channels.

 About 1,000 hectares of mainly open to semi open creek flats to Bottle Tree and Saltbush Creeks and their tributaries inclined to clay pan in parts and predominantly timbered with brigalow, bauhinia, box, blackbutt and sandalwood.

 About 2,750 hectares of predominantly good brigalow, blackbutt, bauhinia scrub country which is melonholey in parts running to more loamy country with prickly pine, dead finnish, box, sandalwood and beefwood.

 About 320 hectares of broken brigalow plain to thicker patches of stunted brigalow. Melonholey in parts.

 About 1,200 hectares of softer mixed country on reddish loams with open patches timbered with ironbark and bloodwood to mixed dead finnish, box, sandalwood, cypress pine, scattered bottle tree, brigalow, bauhinia, gum and various other species.

 About 1,500 hectares of mixed forest running from hard eroded red soil country sparsely timbered with silverleaf ironbark to undulating mountain coolibah, box, silverleaf ironbark and patches of cypress pine with scattered patches of brigalow to areas of sparsely timbered claypan type country in the south east corner.

 About 371 hectares of inferior open forest timbered with desert oak, silverleaf ironbark and gum to cypress pine in parts.”

  1. [63]
    Alan and Isabell Hoch used eastern parts of the property principally for cattle breeding and western parts for fattening cattle.  The eastern side has substantial areas covered by mixed remnant forest and remnant woodland on substantial slopes descending to Saltbush Creek and Bottle Tree Creek.  It was divided into about four large areas.  The western side has the long frontage to the Belyando River.  Much of it is comparatively flat and within the flood plain area for the river.  It is where the homestead, cattle yards, smaller holding paddocks and sheds for plant and equipment were erected.
  2. [64]
    By about 1967, wooden stockyards and road access had been constructed off the eastern side of Craven Road.
  3. [65]
    In about 1967 or 1968, they cleared part of the West Bottle Tree area to the east of the Craven Road corridor.  Occupying about 1000 ha, the area consists of three paddocks that run from the eastern side of Craven Road for about 4.5 km along the northern boundary of the property.  The largest is West Bottle Tree Paddock.  The others are the big holding paddock and the small holding paddock.
  4. [66]
    There is a small to moderate semi-permanent natural water hole along the course of Bottle Tree Creek in the middle of West Bottle Tree Paddock.  It is the primary source of water.  The paddock is approximately 50% cleared.  Alan and Isabell Hoch used Bottle Tree Paddock to fatten cattle.  Like some of the areas on the western side of Craven Road, Bottle Tree Paddock has areas of alluvial black cracking soil that make it suitable for that use.  In the various reports before the court it is classified as flooded coolabah brigalow scrub plains, and as mixed alluvial forest (remnant and non-remnant), mixed scrub (non-remnant) and mixed forest (remnant).
  5. [67]
    The creek course runs roughly along the fence line between the big holding paddock and the small holding paddock.  Neither has been cleared.  Some old thinning of vegetation is evident in the big holding paddock.  The big holding paddock has one small semi-permanent natural water hole.  As their names suggest, they have been used as holding paddocks.
  6. [68]
    During this time, both Ian and Andrew Hoch worked on the property, it appears in their parents’ grazing business.  The cattle on the property were those owned by Alan and Isabell Hoch.  Andrew Hoch owned cattle, perhaps in partnership with his wife, but agisted them elsewhere.

Improvements by Ian Hoch

  1. [69]
    Ian Hoch and his family have lived on the property since about 1983.  At first they lived in the Kerand homestead, while Ian built a house on the eastern side of Craven Road.
  2. [70]
    From about 1983, Ian has conducted a beef cattle grazing business predominantly on the part of the property east of Craven Road.  Between about 2005 and 2011, he used the large holding paddock in the West Bottle Tree area.  In the second half of 2014 or early 2015, Ian Hoch mustered Andrew Hoch’s cattle out of the West Bottle Tree Paddock, where they had been grazing.[25]  About a month later, Ian Hoch ran his cattle in that area and has continued to do so since that time.  Andrew Hoch has not used the area since that time.
  3. [71]
    In about 1985, Ian Hoch installed a communications tower on the eastern side of the property.  It serviced the house and business.
  4. [72]
    Prior to 1991, Ian purchased and relocated a number of small buildings to the eastern side of the property, close to the house he had built.  These have been used to accommodate machinery and pesticide supplies.  During this period, he purchased and installed 18 solar panels adjacent to the house, supplying electric power to it.
  5. [73]
    In 1991, the house Ian built on the eastern side burned down.  He and his family went to live in the Kerand homestead on the western side of Craven Road, with his parents.  At the time, the whole property was affected by drought.  Ian used building materials, which he accumulated for rebuilding the house, to build a machinery shed near the homestead.  It remains an improvement on the western side of the property.
  6. [74]
    By about 1993, Ian Hoch had rebuilt the house on the eastern side of the property, and he and his family returned to live there.  The house, which Ian Hoch had rebuilt on the eastern side of the property, burned down again.  In 2000, he purchased and relocated two former railway cottages onto the property, also on the eastern side, near the site of the burned house.  Since then, Ian and his family have lived in those houses.
  7. [75]
    Ian Hoch has not undertaken any land clearing on the property.  The areas Mr Lyons classified as cleared but not maintained are mainly on the eastern side of the property which have been used by Ian Hoch to conduct his grazing business.  So is the 421 ha of previously pulled brigalow scrub now regarded as remnant vegetation.
  8. [76]
    In his evidence, Ian Hoch accepted that vegetation will regrow on cleared land.  He explained that, in the past, clearing of vegetation on the property has “compounded the problems” by increasing the number of young trees.  As he described it, after the original clearing, “regrowth will come up in a wall” and “effectively, locks out grass at that point”.  He observed that, when left alone, competition between the regrowing vegetation results in a “natural thinning” as saplings kill off each other.  He also noted that periodic droughts have reduced the level of vegetation cover on the property.
  9. [77]
    The land cleared by Alan and Isabell Hoch on the eastern parts of the property, subsequently used by Ian Hoch, were predominantly scrub pulled.  The blade-ploughed area is on the western part, subsequently used by Andrew Hoch.  Stuart McArthur, an agronomist, provided the following general comments about the different consequences of the two land clearing methods:

“If the cleared timber is bladeploughed correctly there is little in the way of regrowth of timber [or] shrubs.  The normal practice would be to stack and burn the cleared residue.  Sowing pasture seed such as Buffel grass can be undertaken at bladeploughing time or later.  There is virtually no reduction in carrying capacity from regrowth using this timber management system.

However, if the timber is pulled using a chain between two bulldozers then stacked and burnt, substantial regrowth does occur that requires periodic treatment by either re-pulling or bladeploughing.  As a result of the regrowth there is a reduction in the carrying capacity and this reduction is used to initiate new regrowth management.  As I have stated previously, any increase in tree or shrub cover has a negative impact on the carrying capacity of a particular parcel of land.”

  1. [78]
    Over the 24-year period from 1983 to 2017, Ian Hoch used herbicide to spray the property for noxious weeds.  Until about 1997, he treated the whole of the property.  Since then, he has used the herbicide on the eastern side of the property.
  2. [79]
    Between 1993 and 2000, Ian Hoch hired a loader to clean and repair the dams on the eastern side of the property when they became “silted up”.  Over a twenty-year period, from about 1997 to 2017, he purchased and installed about 15 kilometres of poly pipe to move water around the eastern side of the property.  Since 2015, Ian Hoch has installed two additional water troughs in the West Bottle Tree area.
  3. [80]
    Between about 2010 and 2012, Ian Hoch purchased steel poles and wire to maintain and improve the fence lines between paddocks and around the perimeter of the eastern side of the property.

Improvements by Andrew Hoch

  1. [81]
    Before 1993, Andrew Hoch and his family had lived in a house in Shakespeare Street, Alpha, which Alan and Isabell Hoch had gifted him.  Andrew Hoch stayed overnight at the Kerand homestead one or two nights a week while working there.
  2. [82]
    After Alan Hoch’s death, Andrew Hoch and his family came to live in the Kerand homestead with Isabell.  He worked on the property and managed the agistment and sale of the cattle left as part of Alan Hoch’s estate, as well as his own cattle and cattle belonging to other family members, which he agisted on the property.
  3. [83]
    From about 1993 until the present, Andrew Hoch has made use of the part of the property west of the Craven Road corridor.  Up to about 2014, he also used the West Bottle Tree area.  Prior to 2014, Andrew Hoch had installed a water trough in the small holding paddock.
  4. [84]
    Since 1997, Andrew Hoch has maintained some of the previously cleared areas of the property.  He has removed trees from the West Bottle Tree paddock on three occasions between 1997 and 2013.  On one occasion he did so in the South Bottle Tree paddock, which had usually been used by Ian Hoch.  On each occasion, Andrew Hoch undertook the clearing without Ian Hoch’s consent and contrary to his expressed wishes.  I am satisfied that the areas Mr Lyons classified as “maintained” are those Andrew Hoch has maintained.
  5. [85]
    In affidavits read at the hearing, Andrew Hoch swore he had cleared and continued to clear land on the western side of the property.  However, when cross-examined, he confirmed that since 1993 he had cleared no more than 50 acres (about 20 hectares) of the property, and perhaps less.

The evidence about the proposed scheme

  1. [86]
    Mr Cavanagh is the originator of Option 2 on which the proposed scheme is based.  His report appears to have been the basis for the proposed Lots 1 and 2.  The instructions the trustees gave to Mr Cavanagh about Option 2 are set out at [43] above.  His explanation of what he did to create Option 2 is follows:

“Under Option 2, I have identified a proposed line of partition by adopting a hypothetical valuation exercise.  The exercise assumes the whole of ‘Kerand’ is fully developed and consistent with respect to land clearing, pasture development, waters and fencing.  This assumption allows the land to be apportioned into equal parts by value based upon the underlying land type and free of any issues surrounding improvements which have or have not been made to the land.”

  1. [87]
    Mr Cavanagh “valued” the whole of the property “assuming it were fully developed” at $6,300,000 as at 1 April 2018.
  2. [88]
    The court had the benefit of expert evidence from three registered valuers:  Mr Lyons, Mr Cavanagh and Mr Dyer.[26]  Each provided an opinion about the current market value of the property and its fixed improvements based on freehold tenure.[27]
  3. [89]
    Subject to the qualifications and conditions set out in their respective reports, the opinions of the valuers are summarised in the table below.

Date

Valuer

Freehold value[28]

13 November 2015

Mr Lyons

$4,175,000

1 April 2018

Mr Cavanagh

$5,000,000

20 January 2019

Mr Dyer

$5,350,000

  1. [90]
    At the hearing, no valuer disputed another’s assessment of value as being correct on the relevant valuation date and conditions.
  2. [91]
    Mr Dyer and Mr Lyons conferred shortly before the hearing.  Neither Mr Dyer nor Mr Lyons attributed the changes in value between the various valuation dates to any particular activity or improvement on the property.
  3. [92]
    Mr Cavanagh also valued each of the proposed Lots 1 and 2 in Option 2.  He assessed the value of Lot 1 as $2 million and Lot 2 as $3 million, each on 1 April 2018.
  4. [93]
    Neither Mr Lyons nor Mr Dyer raised any issue about the values assessed by Mr Cavanagh for the proposed Lots 1 and 2.
  5. [94]
    This decision proceeds on the basis that the assessed values for the property and of the proposed Lots at their relevant valuation dates are common ground and that the progressive increases in value of the property across the three valuation dates are due to a general increase in the market value of such land over time.  The annual rate of increase is about 8%.

Should the proposed scheme be varied?

  1. [95]
    No issue arises about the title of each party.  Each is a co-tenant with the other in equal shares.  Their joint tenancy extends to the entire freehold tenure in the fee simple.  It follows that the property should be partitioned, so far as is practicable, to create two new lots of equal value.
  2. [96]
    Relying on Mr Cavanagh’s hypothetical valuation, a submission was advanced on behalf of Andrew Hoch to the effect that Ian Hoch’s interest in the property ought to be reduced to take account of an increase in the property value that Ian Hoch could have realised by clearing all possible areas of the eastern side of the property before legal restrictions on land clearing came into force.
  3. [97]
    Mr Copley, who appeared for Andrew Hoch, was not able to identify any legal principle or authority that would support such a submission.  Leaving aside wastage or breach of duty that adversely affects the value of property, a co-owner is under no obligation to develop land and is not penalised for failing to do so.  In a proceeding for partition, another co-owner who improves a property is sufficiently protected by the right to claim an allowance for half the increase in value caused by their own improvement (or half the cost of the improvement if it is a lesser amount).
  4. [98]
    The court is dealing with a scheme for the partition of existing property, not hypothetical property.  The applicable principles do not permit the court to pretend that the property is in a different state of development and assess whether a scheme should be varied on that hypothetical basis.  It is common ground that the uncleared areas and those that are now regarded as remnant vegetation cannot lawfully be cleared.
  5. [99]
    Mr Copley submitted that the scheme involved an exercise of discretion by the trustees, so that the court should not lightly interfere with the trustees’ decision.  That may well be correct.  It would certainly be inappropriate for the court to make trivial variations to the trustees’ scheme or to alter it to little practical effect.  No such variation is at issue here.  The language of Millet J in In re Pavlou,[29] noted at [35] above, might be read as authorising a partition that itself accommodates allowances for improvements.  There might be instances where such a departure from the usual manner in which partition proceedings deal with parties’ rights is required or justified.  The present case does not call for it. 
  6. [100]
    The scheme proposed by the trustees produces a markedly unequal division of the property between the equal co-owners.  Ian Hoch would be entitled to Lot 1 valued at $2 million and Andrew Hoch would be entitled to Lot 2 valued at $3 million.[30]  The $1 million difference is 20% of the market value of the whole property.  Another way of considering the proposal is that Andrew Hoch’s Lot would be worth 50% more than Ian Hoch’s Lot.
  7. [101]
    Kerand may not be a manor of ancient demesne, but it is a free tenure and as near to absolute ownership as our system of tenure will allow.[31] Although as a tenant in common Ian Hoch did not own the freehold estate and was unable alone to deal with “the land” without the cooperation of his co-owner,[32] he held an equal interest with his brother in the whole of the freehold estate.
  8. [102]
    Implementation of the proposed scheme would deprive Ian Hoch of a substantial portion of his interest in the ownership and tenure in the property.  Although the remedy of equality money exists to compensate a co-owner, it does not authorise the trustees to deliberately create a significantly unequal partition.
  9. [103]
    The proposed scheme is plainly contrary to the principles noted above.  It should be varied to produce, as nearly as is practicable, an equal division of the property, by value, between Ian Hoch and Andrew Hoch.

The variation to the scheme

  1. [104]
    For Andrew Hoch, it was submitted any variation should be in accordance with Option A in Mr Dyer’s report.  The proposed Lots 1 and 2 in Option A closely approximate proposed Lots 1 and 2 in the unsatisfactory Option 2.  Mr Dyer assessed their respective values at $3,230,000 and $2,120,000 as at 20 January 2019.  For the same reasons Lots 1 and 2 in the trustees’ proposed scheme must be rejected, so must Lots 1 and 2 in Option A.  They would result in a markedly unequal division of the property between the equal co-owners.
  2. [105]
    The variation sought by Ian Hoch is a partition in accordance with the proposed Lots 11 and 12 in Option B.  Mr Dyer valued each of those proposed Lots.  He assessed the value of Lot 11 as $2,600,000 and Lot 12 as $2,750,000 on 20 January 2019.
  3. [106]
    The variation sought by Ian Hoch is also not equal.  However, the inequality is a much more modest amount of $150,000 as at 20 January 2019.  This is about 2.8% of the market value of the property.  So divided, Andrew Hoch’s Lot would be worth about 5.77% more than Ian Hoch’s Lot.  If adjusted to take account of an approximately 8% per annum increase in the value of the property between 26 October 2016, when the proceeding commenced, and the date of Mr Dyer’s valuation, the difference is about $126,290.
  4. [107]
    Taking into account the configuration of the property, the Craven Road corridor and the location of the dwellings, fencing, water sources and infrastructure and the wooden cattle yards used by Ian Hoch, I am satisfied the variation sought by Ian Hoch would result in a partition that, as nearly as possible, is an equal division of the property.  This remaining inequality may be addressed by an order for an equality payment from Andrew Hoch to Ian Hoch.  The payment should be determined as at the date the partition proceeding commenced. Halving the difference in the values of the Lots as at that date, the equality payment should be $63,145.

Whether any allowance is due

  1. [108]
    Each party has occupied and used parts of the property over the whole of their co-ownership.  No question of occupation rent arises.
  2. [109]
    Each of the parties claimed to have increased the value of the property by spending his own funds on improvements and repairs.  The general history of those improvements is set out above.  An account of these matters could be ordered.  However, a deal of evidence was adduced at the trial about the works done, the amounts expended and the effects on value.  The parties have already incurred more than $200,000 in paying the trustees’ fees and expenses.  Their own costs to date would also be considerable.  The resolution of the competing allowance claims by the court would avoid any further delay and additional expense.[33]  It is the preferable course.
  3. [110]
    Consistently with the principles as identified by Meagher JA in Forgeard v Shanahan,[34] the cost and value of any improvements to be the subject any allowance should be those at the commencement of the proceeding.  This prevents a co-owner from seeking to advance a claim for an allowance by effecting improvements to a property after the partition proceeding is commenced.

Ian Hoch’s improvements

  1. [111]
    Ian Hoch confirmed that he made improvements to the property identified in a letter from his solicitors dated 13 June 2017.  These improvements are summarised in the following table.

Improvement

Cost

Two ex-railway cottages (purchase, relocation)

$50,000

Small service buildings

$20,000

18 solar panels

$20,000

Communications tower

$3,000

Dam maintenance and improvement

$15,000

Water tanks and troughs

$16,000

Solar water pumps and panels

$16,000

15 km of poly pipe

$60,000

Fence maintenance

$20,000

Pest control

$70,000

Rebuilt wooden cattle yards, mustering enclosures with water

$30,000

Total

$320,000

  1. [112]
    With the exception of the sums for pest control and the rebuilding of the cattle yards and enclosures, Ian Hoch’s estimates are for material costs only.  The cattle yard figure includes an amount for his own labour.  The pest control figure is for his labour and materials over the 24 years to 2017.
  2. [113]
    Ian Hoch said he estimated the cost of improvements “conservatively”.  Initially, he said he “tallied them up” from records he had at home.  When cross-examined, he said generally he had not kept records of the expenses incurred more than about five years ago.  It follows that he was unlikely to have had access to any written record of expenses before about 2011 at the time he gave instructions to his solicitor to write the 13 June 2017 letter.  I therefore approach Ian Hoch’s estimated cost figures with some caution.
  3. [114]
    In Mr Cavanagh’s opinion $75,000 had been added to the value of the property by the structures located on the part of the eastern side.  These included the two ex-railway cottages, the nearby service buildings, and the wooden cattle yards.  He made no separate assessment for the solar power panels or the communications tower and likely regarded them as part of the value of the cottages and service buildings.  He did not deal with water supply and delivery or with fencing as distinct items for this purpose; instead, he included those in his valuation of the land.  He made no separate assessment of the effect on value of any pest control.
  4. [115]
    It appears Mr Lyons was instructed that the only improvement effected by Ian Hoch was the solar powered pump from the bore tank and three kilometres of poly pipe to a 28,000 litre poly tank.  He estimated this cost $16,000, which is the amount Ian Hoch estimated the solar water pumps and panels alone cost.[35]  Mr Lyons’ opinion is that these improvements added value of $10,000 to the property.
  5. [116]
    Mr Lyons was erroneously instructed that the ex-railway cottages were pre-1993 improvements to the property.[36]  He provided no estimate of their cost and no assessment of their “added value”.  He was also instructed that the wooden cattle yards had had “No maintenance in recent years” and so made assessment of the cost or value of Ian Hoch’s work on them.
  6. [117]
    It is common ground that Ian Hoch also constructed the machinery shed on the western side of the property, using materials he had acquired to rebuild the house on the eastern side after the second fire.  Mr Lyons identified the machinery shed as a structural improvement on the western side of the property and described it as being in “Good condition”.  He assessed neither its cost of construction nor the value it added to the property.  Mr Cavanagh described it and assessed its condition as “Good/Fair”.  He included it in the $225,000 value he attributed to structures on the western side of the property.  However, there is no evidence before the court of the cost of or the value added to the property by the machinery shed.
  7. [118]
    In summary, the court has evidence of the estimated cost and value added to the property by only the ex-railway cottages, small service buildings, solar panels, communications tower, wooden cattle yards and the solar powered pump from bore tank and three kilometres of poly pipe to a 28,000 litre poly tank, water tanks and troughs.
  8. [119]
    In each case the added value is less than the estimated cost of the improvements.  In accordance with the principles noted above, any allowance due to Ian Hoch for these improvements would be limited to half the added value or $42,500.

Andrew Hoch’s improvements

  1. [120]
    For Andrew Hoch, no tabulation was provided of the items the subject of his allowance claim with the evidence of their cost and value.  In order to make sense of the distinct sources of evidence, it is necessary to deal with a number of distinct documents and the scant factual evidence.
  2. [121]
    The improvements claimed by Andrew Hoch were set out in a document entitled “Evans & Hearn Report – Expenses & Improvements” (the E&H Schedule).  The total of the amounts given for all of the items in the E&H Schedule is $345,709.12.
  3. [122]
    Andrew Hoch and Bronwyn Hoch each gave some evidence in relation to the document.
  4. [123]
    Bronwyn Hoch explained that the E&H Schedule had been prepared by the accounting firm “sometime in the past”.  She told the court she was not responsible for the preparation of the document.  Ms Hoch swore an affidavit, a copy of which was tendered at the hearing.  The exhibits to her affidavit comprised more than 1,600 pages of documents, including income tax returns, all apparently for a partnership between Andrew Hoch and Bronwyn Hoch.  Of the 37 items in the E&H Schedule, 29 have a reference to a page in the exhibit.
  5. [124]
    Ms Hoch accepted she was “not specifically” familiar with the financial information in the exhibit.  When questioned, Ms Hoch was able to explain four of the 37 items in the E&H Schedule:
    1. (a)
      “26.11.2013 New Dam $31,557.27”, which was the cost of one of the twin dams installed by the partnership;
    2. (b)
      “31.03.2012 Solar system $9,514.98”, which was a solar power system installed on the roof of the Kerand homestead at that cost to the partnership;
    3. (c)
      “14.10.05 Vet crush $4,090.00”, which was part of the construction of the new steel yards paid by the partnership; and
    4. (d)
      “12.04.2002 Cold room $3,600.00” the partnership installed at the homestead.
  6. [125]
    Andrew Hoch was unable to give evidence of the cost of items in the E&H Schedule.  When cross-examined about them, Andrew Hoch responded, “That’s nothing to do with me.”  He attributed the figures (and some apparently recent changes in them) to his “tax agent”.  I understood this to be a reference to the accounting firm.
  7. [126]
    In his affidavit, Andrew Hoch explained that he arranged for the accountants to deal directly with Mr Cavanagh on the question of the cost of improvements to the property, so that Mr Cavanagh could prepare his own report.  He identified a document dated 23 October 2017 prepared by Evans & Hearn for Mr Cavanagh’s use.  The document informed Mr Cavanagh that Andrew Hoch was claiming to have spent $959,571.51 on improvements to the property.  As Andrew Hoch is not claiming that sum in this proceeding, the importance of the 2017 document is somewhat diminished.
  8. [127]
    No witness from the accounting firm Evans & Hearn gave any evidence.
  9. [128]
    In his report, Mr Cavanagh identified the following structures on “West Kerand”: the main dwelling (the homestead) with its ancillary improvements (25,000 litres of rainwater storage, basic landscaping, and a septic and grey water system); workshop; garage; machinery shed; new yards; and old wooden yards.[37]  He did not assign any amount to the individual items, or to any renovation of them, but assessed the additional value attributable to all the structures on “West Kerand” at $225,000.
  10. [129]
    Mr Lyons was instructed to determine the “value” of the improvements and substantial repairs on the property funded by Andrew Hoch since 1993.  He expressed the amount expended for each item of improvement as an “Estimated Expenditure” and assigned an “Added Value” for each.  Mr Lyons’ determination was based on “information provided” and “an estimated cost based partially on advice from Andrew Hoch and partially from known improvement costs held on file”.  To some extent, acceptance of his assessment would appear to be dependent upon Andrew Hoch proving the underlying factual assumptions.
  11. [130]
    The information provided to Mr Lyons is set out in a letter from Andrew, Bronwyn and Mitchell Hoch dated 25 June 2015.[38]  That information is contrary to the estimated expenditure figures Mr Lyons included in his report.  The following table summarises the improvements the subject of Mr Lyons’ report. 

Item[39]

A, B & M Hoch cost estimate

Lyons cost estimate

Lyons added value

Land development maintenance, including tree clearing and herbicide

$100,000

$210,750

$210,750

House, including re-stumping, re-roofing and a new kitchen

$50,000

$50,000

$35,000

New Yards (steel cattle yards)

$100,000

$130,000

$80,000

Coxy’s Dam

$8,000

$8,000

$4,000

Dick’s Tank and turkey nest

$5,000

$26,000

$13,000

House Tank and silt tank

$5,000

$3,000

$1,500

White Dam and silt tank

$5,000

$5,000

$1,000

Bullock Paddock Dam

$5,000

$11,000

$4,000

Twin Dams (two large permanent dams)

$50,000

$95,000

$70,000

Bottle Tree Dam (to small-moderate semi-permanent natural waterhole)

$1,000

$1,000

$500

Fencing, fence ends and grids

$30,000

$37,500

$25,000

Total

$359,000

$577,250

$444,750

Adopted by Mr Lyons

 

$575,000

$445,000

  1. [131]
    In seeking to explain how he estimated the cost of the improvements, Mr Lyons said on a regular basis he was “required to make assessments of the replacement cost of buildings and also any essential repairs that might be required on a property”.  He clarified that his estimate of “expenditure” was based on the full replacement cost in 2015, using external contractors to mobilise to the property and perform all the work.  Such an expenditure measure has no material role to play in the formulation of an allowance for improvements to the property on partition.
  2. [132]
    Where the cost information Andrew, Bronwyn and Mitchell Hoch gave to Mr Lyons in their letter is lower than the cost claimed by Andrew Hoch in the E&H Schedule, unless some other evidence demonstrates the E&H Schedule to be correct, I will regard the earlier letter to operate as an admission against interest by Andrew Hoch that the cost was of the lower order.
  3. [133]
    Mr Lyons’ estimated expenditure figures raise concern about the reliability of his opinion on the value added by these improvements.  This concern is somewhat moderated by the fact that, where that his added value exceeds the cost incurred by Andrew Hoch, it is irrelevant for present purposes.  It can serve as a check that those costs did not exceed any resulting enhancement to the value of the property.

Land development and maintenance

  1. [134]
    The single largest element in Mr Lyons’ estimated expenditure and added value is $210,750 (included in each total) for “Land Development Maintenance”.  This was more than twice the cost Andrew, Bronwyn and Mitchell Hoch had told him was incurred.  Their instructions broadly accord with the figures in the E&H Schedule for “Re-growth control”, which are extracted below.

Date

Item

Amount

28.10.1995

Re-growth control

$3,000

31.03.1996

Re-growth control

$4,000

1997/98

Re-growth control

$4,853

1998/99

Re-growth control

$10,500

31.10.2000

Re-growth control

$9,030

31.03.2003

Re-growth control

$1,980

16.06.2005

Re-growth control

$7,735

26.10.2009

Re-growth control – Hire of plant & equipment

$1,800

2011/12

Re-growth control

$14,800

20.06.2017

Re-growth control

$35,600

 

Total

$93,298

  1. [135]
    Mr Lyons explained his approach to the topic in this way:

“Overall there is about 130 hectares of maintained, bladeplough country and 1,275 hectares of pulled and maintained scrub on this section of Kerand.

The country has been well maintained and carries minimal growth.  Advice from Andrew Hoch are [sic] that the cleared areas have been maintained in good order through intensive management including fire, stickraking and repulling in parts.  Based on contract rates to maintain the country from 1993 to the present time, which would under ordinary management include repulling at least twice plus fire management and selective stick raking, I would anticipate expenditure of at least $150 per hectare or $210,750.

I have applied this cost in full as an added value, as the current market value of the property would have significantly deteriorated had these works not have been undertaken.”

  1. [136]
    As noted above, Mr Lyons estimated the expenditure of Andrew Hoch on land development and maintenance as if all such work were done by contractors in 2015.  He declined to adopt the figures for expenditure that were given to him.  The direct relationship of Mr Lyons’ assessment of the added value with his “estimate” of expenditure leaves me unpersuaded that his was a reasoned consideration of the value added to the property as a whole by the re-growth control.  I decline to accept his inferred opinion that the capital value of the land was increased by the amount it would have cost to have contracts do all the cleared land maintenance in 2015.
  2. [137]
    Andrew Hoch is claiming a total of $93,289 for re-growth control.  The 20 June 2017 entry in the E&H Schedule ($35,600) appears to have been incurred after he commenced the partition proceeding and while the trustees held the title to the property.  On the principles noted above, it would be excluded from consideration for an allowance.
  3. [138]
    Andrew Hoch gave no evidence of the work involved in each regrowth control item.  As noted above, his oral evidence was that he had cleared no more than 50 ha overall in the past 27 years.  Each of the relevant items in the E&H Schedule is for re-growth control, rather than for clearing of remnant vegetation.  No amount is claimed for clearing of remnant vegetation.
  4. [139]
    There is general evidence, from Mr Lyons, Mr Cavanagh, Mr Dyer and Mr McArthur that the clearing of remnant vegetation on land suitable for grazing increases the value of the land.  It is common ground that such clearing is no longer possible without legal authorisation.  The evidence does not establish that any part of Andrew Hoch’s claimed expenses are for clearing remnant vegetation; rather they are for controlling the regrowth of vegetation on previously cleared land.
  5. [140]
    An allowance for the cost of improvements that increase the value of land as a whole is fundamentally capital in nature.  Ordinary maintenance of the land and structures, required on a regular or periodic basis, is not of that nature.[40]  Expenditure on herbicides and pest control would be an example.  Andrew and Bronwyn Hoch claimed the re-growth amounts as expenses in their partnership tax returns.  This indicates they were treated as ordinary maintenance costs, rather than capital improvements to the property.
  6. [141]
    Given the lack of clarity about the actual works that gave rise to the amounts Andrew Hoch claims for re-growth control, there is insufficient evidence to conclude that the sums claimed should be included in the calculation of any allowance due to him in the partition proceeding.

New Yards

  1. [142]
    The next highest figure in Mr Lyons’ assessment of improvements was for “New Yards” with an “estimated expenditure” of $130,000 and an “added value” of $80,000.
  2. [143]
    The following items claimed in the E&H Schedule appear to relate to the New Yards:

Date

Item

Amount

23.01.2001

Ramp, Gate & Panels

$5,260.00

10.04.2001

Portable panels

$2,518.00

01.04.2002

Ramp, Gate & Panels

$5,260.00

01.04.2002

Portable Panels

$2,518.00

14.10.2005

Vet crush

$4,090.90

2008/09

Contractors – repair yards etc

$12,750.00

 

Total

$32,396.90

  1. [144]
    Mr Lyons’ report records his instructions that the New Yards were constructed between 2008 and 2010.  The only item in the E&H Schedule in this date range is the last noted in the table above.  It is more likely than not that Mr Lyons is mistaken.  Ms Hoch identified the Vet crush item as related to the New Yards and it is dated outside Mr Lyons’ time period.
  2. [145]
    Mr Lyons’ assessment of the value added by the New Yards is $80,000.  This was based on instructions from Andrew, Bronwyn and Mitchell Hoch that $100,000 had been spent.  That figure and Mr Lyons’ value figure far exceed the total sum now claimed, and so neither is determinative of any allowance due to Andrew Hoch.  The appropriate figure for any allowance on this basis is half the total of the E&H Schedule items, namely $16,198.45.

Dams

  1. [146]
    The items in the E&H Schedule that appear to relate to dams are set out in the table below.

Date

Item

Amount

31.11.2001

New Dam

$16,040.00

31.03.2002

Fence around dam

$3,850.00

26.11.2013

New Dam

$31,557.27

2013/2014

Pumps & Tanks

$7,076.00

 

Total

$58,523.27

  1. [147]
    In their letter to Mr Lyons, A, B & M Hoch identified Dick’s Tank and turkey nest, House Tank and silt tank, White Dam and silt tank and Bullock Paddock Dam as “Pre-existing dams, paid for by Alan [Hoch] and present prior to his death.”  They gave Mr Lyons an estimated total cost for these dams of $20,000 and asked him to note “ALL pre-existing dams on Andrews [sic] end had been improved by Andrew since ownership.”  They provided a global figure for “New Dams and Dam Maintenance” of $75,000.[41]
  2. [148]
    In her evidence, Bronwyn Hoch identified the second last of these items in the above table (26.11.2013) as one of the Twin Dams.  I have assumed the other “New Dam” item is the other of the Twin Dams.  It is more likely than not that the 31.03.2002 item for a fence around a dam and the 2013/2014 item for pumps and tanks are also related to the Twin Dams.  On this basis, the total cost of the Twin Dams was $58,523.27.
  3. [149]
    Mr Lyons assessed the value added by the Twin Dams as $70,000, which exceeds their cost.  In accordance with the principles noted above, the cost would form the basis for assessing any allowance due to Andrew Hoch for these improvements.
  4. [150]
    The relevant amount for an allowance would be $29,261.64, being half the cost of the Twin Dams and associated fence, pumps and tanks.
  5. [151]
    The E&H Schedule included the following other water-related items:

Date

Item

Amount

29.11.1995

Turkey Nest

$1,500.00

1995/16

Repairs to Roads, Fences, Dams etc

$6,899.23

11.07.1998

Tank

$600.00

31.10.2000

Repairs to dam

$3,010.00

05.06.2001

Troughs

$600.00

25.10.2002

Tank

$1,425.00

2003/04

Windmill, tank, poly pipe

$17,382.62

30.09.2004

Polypiping & Trough

$2,598.19

28.02.2005

Tank

$1,196.00

18.05.2009

Water Tank

$9,090.91

 

Total

$44,301.95

  1. [152]
    There is no evidence of the value added to the property by any of these items.  I have excluded them from consideration in respect of any allowance due to Andrew Hoch.

Homestead renovations

  1. [153]
    For the post-1993 renovations to the Kerand homestead, so far as Mr Lyons’ report reveals, these comprise restumping in 2002, kitchen renovation in 2014, construction of a downstairs laundry and cold room in 2008, a new 15,000 litre poly rainwater tank and a 9,000 litre poly rainwater tank.  Mr Lyons estimated a cost of $50,000 for all these items and an added value of $35,000 to the property.
  2. [154]
    Ms Hoch identified the solar system in the E&H Schedule as being for the provision of solar power to the homestead.  She also identified the cold room cost.  It is not apparent that any other item in the E&H Schedule relates to the homestead renovation.  It follows the claimed and proved costs are as follows.

Date

Item

Amount

12.04.2002

Cold room

$3,600.00

31.03.2012

Solar system

$9,514.98

 

Total

$13,114.98

  1. [155]
    This is less than the increase in value assessed by Mr Lyons.  Any allowance for these improvements would be half the total sum.

Other items in the E&H Schedule

  1. [156]
    The E&H Schedule includes a further 5 items, set out in the table below.

Date

Item

Amount

01.09.1996

Grid

$2,464.00

01.04.2002

Grid

$2,464.00

2007/2008

Repairs & Maintenance

$30,421.19

2008/2009

Repairs & Maintenance

$38,230.92

2009/2010

Repairs & Maintenance

$30,493.91

 

Total

$104,074.02

  1. [157]
    No evidence was given to explain these other items.  None of the valuers was asked whether he attributed any increase in the value of the property as a whole to any of them.  In the circumstances, the court cannot order the payment of any allowance for any contribution Andrew Hoch made to the overall value of the property by reason of the costs he incurred on any of these items.

Conclusion on allowances

  1. [158]
    Of the $320,000 claimed, the allowance due to Ian Hoch for the value of improvements he effected to the property that increased its value is $42,500, calculated as follows.

Ian Hoch improvement

Cost

Added value

Allowance

Two ex-railway cottages, small service buildings, solar panels, communications tower, wooden cattle yards

$123,000

$75,000

$37,500

Solar powered pump from bore tank and three kilometres of poly pipe to a 28,000 litre poly tank, water tanks and troughs

$92,000

$10,000

$5,000

Total

$215,000

$85,000

$42,500

  1. [159]
    Of the $345,709.12 claimed, the sum due to Andrew Hoch is $52,018, calculated as follows, and rounding the cents to whole dollars.

Andrew Hoch improvement

Cost

Added value

Allowance

New Yards

$29,879

$80,000

$16,198

Twin Dams and related works

$58,523

$70,000

$29,262

Homestead renovations

$13,115

$35,000

$6,557

Total

$101,517

$185,000

$52,017

  1. [160]
    The net position is that Andrew Hoch is due an allowance of $9,517 from Ian Hoch that he is entitled to recover in this proceeding.

Final disposition

  1. [161]
    For the reasons expressed above, orders should be made to the following effect:
    1. (a)
      Pursuant to s 38(5) of the Act, the scheme of partition of the property prepared by the trustees is varied so that the property is to be partitioned in accordance with proposed Lots 11 and 12 (and proposed Easement A in Lot 12) on the survey plan prepared by VSB Surveys Pty Ltd;
    2. (b)
      Pursuant to s 43(1) of the Act, in respect of the receipt by Andrew Hoch of more than his proportionate share of the property under the scheme of partition (as varied by this Order), Andrew Hoch is liable to account to Ian Hoch for $63,145; and
    3. (c)
      Pursuant to s 42 of the Act, Andrew Hoch is entitled to an allowance of $9,517 and Ian Hoch is liable to pay that allowance to Andrew Hoch.
  2. [162]
    I will hear the parties as to any other orders that should be made, including as to costs.

Footnotes

[1]The real property description of the land is Lot 2 on Crown Plan BE87 with Title Reference 51065102.

[2]Valuation Report & Scheme of Partition Assessment by Webster Cavanagh.

[3]These seem to have been registered since 1957 and 1958.

[4]31 Hen 8, c 1 and 32 Hen 8, c 32.

[5]Segal v Barel (2013) 84 NSWLR 193 at 200 [30] (Barrett JA).

[6](2013) 84 NSWLR 193 at 201 [35] (Barrett JA).

[7](2013) 84 NSWLR 193 at 202 [42] (citations omitted).

[8][1884] 15 QBD 60 at 67.

[9][1893] 2 Ch 461 at 478.

[10](1905) 2 CLR 387 at 394–395.

[11](1905) 2 CLR 387 at 396.

[12][1952] St R Qd 197 at 202.

[13](1989) 52 SASR 337 at 341.

[14][1993] 1 WLR 1046 at 1048 (citations omitted).

[15](1994) 35 NSWLR 206.

[16](1994) 35 NSWLR 206 at 221F-224F.

[17](1994) 35 NSWLR 206 at 225F-G.

[18](1994) 35 NSWLR 206 at 225B-C.

[19](1994) 35 NSWLR 206 at 226B.  The “principle of public policy referred to in par 8 supra” appears at 223A-C of Forgeard v Shanahan and is extracted in part at [37] above.

[20](1995) 7 BPR 14,435 at 14,444.

[21](1936) 36 SR (NSW) 310.

[22]Blade-ploughing is a process of cutting roots and stumps off under the ground surface usually using an implement attached to a bulldozer’s ripper frame.  Pulling scrub is clearing land by use of a chain pulled between two traction engine vehicles (e.g. tractors or bulldozers) to knock over trees and scrub growing on the land.  Cutter-barring is a process of cutting roots below the ground surface.  It is similar to blade-ploughing, but may pre-date it. 

[23]Hectares per head of cattle on an adult equivalent basis.

[24]Head of cattle on an adult equivalent basis for the whole of the classified area.

[25]In a letter from Andrew and Mitchell Hoch to Andrew’s solicitors dated 25 June 2015, they wrote that Ian and his partner had taken control of the West Bottle Tree area “Approximately 5 months ago”.  In his affidavit 14 October 2016, Andrew Hoch deposed that this occurred in July 2014.  This date may be based on a letter Ian Hoch delivered to Andrew Hoch at about that time asking him to remove his cattle from the West Bottle Tree area.  The precise date is not material to his decision.

[26]Mr Dyer’s written report was co-authored by Will McLay, another registered valuer.  Mr Dyer was called to give oral evidence about the matters in issue.  McLay was not.  It is convenient to refer to the views expressed in the report as being those of Mr Dyer. 

[27]This final part of the instruction was necessary, in the case of Mr Lyons, because when he was first engaged the property had not yet been converted to freehold.  As noted above, this did not occur until 10 November 2016.

[28]Mr Lyons attributed $175,000 to the increase in the market value of the property, if it were to be converted to freehold tenure.  By the date of each subsequent valuation, this had occurred.

[29][1993] 1 WLR 1046 at 1048.

[30]The valuation date is 1 April 2018.

[31]Littleton’s Tenures, s 11.

[32]Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 656 (Deane, Dawson and Gaudron JJ).

[33]Uniform Civil Procedure Rules 1999 (Qld), r 5.

[34](1994) 35 NSWLR 206 at 223F.

[35]Ian Hoch’s evidence was that he laid 15 km of poly pipe, five times the length considered by Mr Lyons.

[36]It appears he was also instructed they were not fixed or not permanently fixed to the site.  There was no evidence to that effect.

[37]As noted above, Mr Cavanagh identified the cottages, service buildings and Dick’s Yards as being on the eastern side of the property.

[38]This letter was provided to Mr Lyons by Andrew Hoch’s solicitors under cover of a letter dated 21 August 2015, which was exhibited to Mr Lyons’ affidavit with his report.

[39]The description of each item involves some accommodation of the different language used by A, B & M Hoch in their letter and that adopted by Mr Lyons.

[40](1994) 35 NSWLR 206 at 225B-C.

[41]I note, in passing, that Mr Lyons’ “estimated expenditure” on dams totalled $146,000, almost double the figure given to him by A B & M Hoch as the cost of those works.

Close

Editorial Notes

  • Published Case Name:

    Hoch v Hoch

  • Shortened Case Name:

    Hoch v Hoch

  • MNC:

    [2020] QSC 365

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    04 Dec 2020

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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