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  4. State of Queensland v Mowburn Nominees Pty Ltd - [2004] QDC 531

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State of Queensland v Mowburn Nominees Pty Ltd[2004] QDC 531

State of Queensland v Mowburn Nominees Pty Ltd[2004] QDC 531

DISTRICT COURT OF QUEENSLAND

CITATION:

State of Queensland v Mowburn Nominees Pty Ltd [2004] QDC 531

PARTIES:

STATE OF QUEENSLAND

Appellant

v

MOWBURN NOMINEES PTY LTD

Respondent

FILE NO/S:

Appeal 1553/2003;  MAG124920/2002(7)

DIVISION:

 

PROCEEDING:

Appeal

ORIGINATING COURT:

Magistrates Court, Brisbane

DELIVERED ON:

21 December 2004

DELIVERED AT:

Brisbane

HEARING DATE:

5 November 2003 (remitted by Court of Appeal 25 June 2004)

JUDGE:

McGill DCJ

ORDER:

Appeal dismissed with costs.

CATCHWORDS:

VALUATION OF PROPERTY – Evidence as to – chattels – whether current sales indicative of value or market value – approach to valuation issues.

STATUTES – Interpretation – compensation for destruction of property – approach to valuation issues.

Stock Act 1915 s 31(2).

Stock Regulation 1988 ss 47, 48, 49(4).

Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 – considered.

Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516. – applied.

Marshall v Director-General, Department of Transport (2001) 205 CLR 603 – applied.

Spencer v The Commonwealth (1907) 5 CLR 418 – applied.

COUNSEL:

R J Douglas SC and R S Jones for the appellant

J E Gallagher QC and D A Kelly for the respondent

SOLICITORS:

C W Lohe, Crown Solicitor, for the appellant

Thynne & Macartney for the respondent.

  1. [1]
    This is an appeal from a decision of a magistrate who on 30 April 2003 determined an appeal by the respondent pursuant to s 36 of the Stock Act 1915 (“the Act”).  The respondent was the owner of a quantity of stock held on a particular station in the Gulf district of north Queensland.  The chief inspector of stock issued orders under s 30(6) of the Act for the destruction or disposal of that stock, for the purpose of eradication of a disease, namely bovine tuberculosis:  Exhibit 1.  Pursuant to s 31 of the Act the respondent as owner was entitled to compensation in respect of the loss of that stock.  The chief inspector made a decision as to the amount of compensation payable in accordance with the Act and the relevant regulation.  By s 36, a person who is aggrieved by such a decision may appeal to a Magistrates Court against the decision:  subs (2).  The appeal is to be by way of rehearing:  subs (9).  For the purposes of the appeal, the Magistrates Court has the powers and functions of the person whose decision is the subject of appeal:  subs (11).
  1. [2]
    On 30 April 2003, the magistrate allowed the appeal and determined that the compensation payable in accordance with the Act and regulation was a total of $6,495,212.  On 1 August 2003 a consent order was made to vary the decision, to substitute an amount of $6,385,467.  This was to correct an error in the numbers of the stock in issue.[1]  This is not an issue in the appeal:  p.5.
  1. [3]
    The appellant is appealing from that decision to this court pursuant to s 45(1) of the Magistrates Courts Act 1921.  After the appeal was argued before me, I concluded, for reasons that I then gave, that there was no jurisdiction to appeal from such a decision to this court:  [2004] QDC 27, (2004) 25 Qld Lawyer 46.  Subsequently however on 25 June 2004 the Court of Appeal held that there was jurisdiction for an appeal to this court under that section, and remitted the proceeding to this court for rehearing and determination of the appeal:  [2004] QCA 212.  The parties were agreeable to my rehearing the matter, and to rely on the oral arguments submitted previously, which had supplemented four volumes of written material submitted on behalf of the appellant, and two volumes submitted on behalf of the respondent.  That material was returned to me on or by 16 September 2004.
  1. [4]
    The appeal to this court is by way of rehearing: UCPR r 765(1), made applicable by r 785(1).  This of course means rehearing in the usual sense.  It is not a question of what value I would determine on the evidence, but whether the appellant has shown that the decision of the magistrate was wrong.[2] 

Legislation

  1. [5]
    Section 31(2) of the Act provides as follows as to the amount of compensation payable in these circumstances: 

“(2)The amount of compensation (if any) payable to a person under this section –

  1. (a)
    shall be as prescribed by regulation;
  1. (b)
    in respect of the stock – shall not exceed the average market value for that class of stock.”
  1. [6]
    The relevant regulation, the Stock Regulation 1988, contained the prescription as to the amount of compensation so payable in s 49, which provided relevantly in subsection (4):  “The owner of any cattle suspected of being infected with tuberculosis that are destroyed or disposed of after delivery to the Minister under an order under s 30(6) of the Act is entitled to compensation equivalent to the estimated market value of the cattle.”
  1. [7]
    The term “estimated market value” in s 49(4) was defined in s 47 in this way: 

“In this division – “estimated market value”, of stock, means the value of the stock, decided by the chief inspector, as if the stock were –

  1. (a)
    free of disease; and
  1. (b)
    sold and delivered on the holding on which the stock are located when ordered to be destroyed or disposed of.”
  1. [8]
    It is also relevant to have regard to the terms of s 48 of the regulation, headed “Deciding estimated market value”, which provided: 

“In deciding the estimated market value of stock, the chief inspector may consider the following –

  1. (a)
    the stock’s age, sex and breeds;
  1. (b)
    the stock’s body condition and live weight;
  1. (c)
    the place where the stock were destroyed or disposed of;
  1. (d)
    the reasonable transport and selling costs the owner of the stock may have incurred in selling the stock if they had not been destroyed;
  1. (e)
    other matters relevant to the condition or value of the stock when the stock were destroyed or disposed of.”
  1. [9]
    It follows that there are two issues to be decided. The first is the “value” of the stock determined on the assumption that they are free from disease and sold and delivered where they were. The other is the average market value for that class of stock. In my opinion the effect of s 31(2) of the Act is that the respondent is entitled only to the lower of those two figures.

Reasons for the decision of the magistrate

  1. [10]
    The magistrate referred to the order and the relevant provisions of the Act and regulations, and identified the issue on the appeal as, “whether or not the appellant is entitled to a breed on value in relation to the cows.” Reference was made to various authorities, and a finding was made that the respondent had been diligent in trying to improve the line of cattle, and that the disposal of a large section of that line would undo years of work in improving the totality of the herd: p.6. In addition the respondent had plenty of feed available. In those circumstances the respondent would not have wanted to dispose of so much of its herd. Reference was made to an earlier sale which was found to be a forced sale, and the magistrate concluded that that sale should be ignored because on that occasion the respondent was an anxious vendor: p.7.
  1. [11]
    There was then what appears to be the crucial finding on p.7 in these terms: “It is my view that if a sale was to take place of breeder cows, which had taken some time to establish through selective breeding, that a willing but not anxious vendor would expect to obtain more than meat value which is obtained at saleyards. There would be a value to [the respondent] in retaining breeder cows in order to produce further calves. Consequently, I am of the view that [the respondent] is entitled to a breed-on value.”
  1. [12]
    The magistrate then went on to make a finding as to the amount of the value and breed-on value. The magistrate referred to the various valuers, and made a finding as to the “price paid for each cow” of $750; that did not correspond precisely with the evidence of any particular valuer as to the value of the cows,[3] but was only a small amount below the evidence of one expert valuer, Mr Stertridge, who had valued the cows at $762 each, which included $300 in respect of their “breed on” value.
  1. [13]
    The magistrate then went on to value bulls at $1,450 on the basis that the “value should reflect the costs of replacement” (p.9), in accordance with the respondent’s submissions. In relation to calves, he adopted an average of the figures put forward, $115. There was no dispute as to 29 other stock.
  1. [14]
    It will be apparent that the decision focused on the question of value, rather than the average market value for that class of stock. One of the grounds of appeal set out in the notice of appeal was that “the assessment of the stock was manifestly in excess of the average market value of the class of stock the subject of assessment, such value being the upper level for assessment prescribed by s 31 of the Stock Act.”  It was submitted by the appellant that the effect of this restriction was to impose a ceiling on the assessment carried out under the regulations.  Essentially I would agree with that proposition.
  1. [15]
    There were extensive submissions made both in writing and orally as to the meaning and application of the test of “market value,” but that is not the only significant aspect of the limitation in s 31(2)(c).  The actual expression is “average market value of that class of stock.”  That gives rise to issues as to what is the relevant class of stock, and how is an “average” market value to be obtained.  Does this simply mean that the value of all of the stock the subject of the order is to be determined by reference to an average value which is then to be applied indifferently to all of them regardless of the condition of the individual beasts?  Or does it require a consideration of market value over a particular period, or over some particular geographical area, such as, the whole of the State of Queensland?  Unfortunately there are no authorities on the interpretation of this paragraph to provide any guidance, and these questions were really not explored in argument nor, so far as I can tell, at the hearing before the magistrate.  Rather the appellant’s argument relied on the section essentially as emphasising the proposition that all that was payable by way of compensation was market value.  More importantly, it does not appear that any other approach was adopted in the proceeding before the magistrate.  Accordingly, it is unnecessary for me to give further consideration to these issues, since, if there was any error by the magistrate in failing to consider these aspects of the application of the ceiling under s 31(2)(c), this is not a matter which can be raised by the appellant on appeal, because the appellant is bound by the conduct of its case in the proceeding before the magistrate.[4] 

The concept of “market value”

  1. [16]
    This is a subject upon which there is ample exposition in the authorities. The leading case, quoted by the magistrate, is Spencer v The Commonwealth (1907) 5 CLR 418 at 432.  Griffith CJ said at p.432:  “The test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring ‘what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’  It is, no doubt very difficult to answer such a question, and any answer must be to some extent conjectural.”  In the same case Isaacs J said at p.441:  “The plaintiff is to be compensated;  therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him.  To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.”  There can be some element of artificiality about the application of this test, because, in a true open market transaction, one of the parties to the sale is usually under some pressure to act.[5]  This decision was relied on by the appellant, although reference was also made to the further statement in relation to chattels that “when there is a large or considerable number of articles of the same kind which are the subject of daily or frequent sale or purchase, the value of the articles is taken to be their current price …”
  1. [17]
    In Abrahams v Federal Commissioner of Taxation (1944) 70 CLR 23 at 29 Williams J differentiated between the Spencer test for market value and the test under certain English and New Zealand statutes which directed that the value “shall be estimated to be the price which such property would fetch if sold on the open market at the time …”  At p.31 his Honour continued:  “In applying the [Spencer] test, it must be remembered that the value to be ascertained is the value to the seller of the property in its actual condition at the relevant time.  …  There was a marked tendency on the part of the witnesses for the appellant in this case … to estimate what a willing purchaser, having an alternative choice of buying shares in public companies, would have been agreeable to pay for the shares, and then to say that this amount was all that a willing vendor could reasonably expect to obtain for them.  But in Pastoral Finance Association Ltd v The Minister [1914] AC 1,083 at 1,088 Lord Moulton, in delivering the judgment of the Privy Council, said that:  ‘Probably the most practical form in which the matter can be put is that they (that is, the owners of the land) were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.’”[6] 
  1. [18]
    The next authority referred to by the magistrate and the appellant is the relatively recent decision of the High Court in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209.  The judgment of the Chief Justice referred at [15] to the starting point for determination of the value of land as the principle stated in Spencer v The Commonwealth (supra), which his Honour described as common ground.  The Chief Justice said at [79], in relation to the concept of market value:  “In Spencer Griffiths CJ pointed out that, in a context such as the present, “value” means “exchange value”, which presupposes a person willing to give what is being valued in exchange for money and another willing to give money in exchange for what is being valued.  In the case of chattels for which there is an established market, the exercise may be simple.  In other cases it may not be simple.  There may be no readily identifiable market, or the market may be controlled or for some other reason artificial.  There may be room for argument as to the nature of the relevant market.  It is necessary to make the hypothesis of a sale between a willing but not anxious vendor and a willing but not anxious purchaser.  A decision as to what price would be achieved in such a sale involves a factual judgment, and may be made by reference to comparable sales or a capitalisation of profits formula, or, in certain circumstances, by reference to costs of reinstatement or other criteria.”
  1. [19]
    His Honour then went on to deal with the concept of special value, as to which his Honour said at [83]: “Special value to the owner directs attention to the perspective of the vendor. What is insisted upon is that, leaving to one side any claim for damages founded upon the relevant statutory provisions, what is in question is the value of the land or other resumed or acquired asset, not the fixing of compensation for all loss resulting from the resumption or acquisition. The dividing line between those two ideas sometimes becomes blurred by claims for special value based upon what is called ‘disturbance’, or upon wasted (abortive) expenditure upon resumed land. Although such claims have on occasions been accepted as legitimate, in a statutory context such as that which applied to the present case, they can only be justified if they support the conclusion of special value, and not merely some form of loss or damage to the disposed owner.”
  1. [20]
    This is not a case of “special value” in the technical sense, that is value which is essentially specific to the existing owner. That was spoken of in the judgments in Boland as something additional to market value, and there may be a question whether the terms of the Act or the regulation exclude special value from the compensation payable in these circumstances.  None of the evidence relied on by the magistrate, or by the respondent, suggested that special value in the technical sense was relevant here.  Rather this case involves an aspect of value which comes within the Spencer test, a particular attractive quality of the property in question which has some general objective existence, and could be enjoyed by the hypothetical purchaser as well as the vendor, which is properly reflected in market value according to the Spencer test.
  1. [21]
    Callinan J also gave some consideration to general principles of valuation, from [266], where he also referred to the decision in Spencer’s case.  He then referred to other principles which he took to be sound in law, including the concept of “highest and best use”, that is, that a dispossessed landowner should be compensated for the value of his or her land on the basis of its highest and best use.  He spoke from [292] about the concept of special value, said to be a quality of economic significance to the owner which provides an additional value over and above market value because of a capacity to exploit it which is exclusive or almost exclusive to the owner.  Later in his judgment his Honour said at [354]:  “No doubt [Spencer’s] case will cover most situations because, although it assumes a willing vendor (the dispossessed owner) it does not contemplate one who would lightly relinquish a property which had a particular value to him or her for less than that value.” 
  1. [22]
    His Honour also expressed agreement with the statement of Dixon J in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 373-4:  “There is some difference of purpose in valuing property for revenue cases and in compensation cases.  In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax.  While this difference cannot change the test of value, it is not without effect upon a court’s attitude in the application of the test.  In the case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate.”  Gummow J at [111] expressed agreement with this part of the reasons of Callinan J, and in particular the observations by Dixon J.
  1. [23]
    It has also been said that, to avoid impairing property rights, full effect should be given to compensation provisions of this nature, and they should not be subject to limitations or qualifications not expressly set out in the Act: Marshall v Director-General, Department of Transport (2001) 205 CLR 603 at 623.  Because value does not include loss of profits, or compensation for disruption, ordinarily merely to pay market value as compensation leaves the dispossessed owner worse off because of the acquisition.[7]
  1. [24]
    The appellant also referred to the decision in Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516.  That was a case about s 85 of the Property Law Act 1974, and therefore involved the concept of “market value” in a context different from those referred to by Dixon J.  In that case the majority[8] said at pp.520-1:  “The received view is that generally ‘the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring “what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?”’  That approach has been applied as the correct way to find “value”, “market value” and “market selling value” in various other contexts.[9]  The context in which the phrase “market value” is used may indicate that the market in which the value is to be determined is one which has some special features.  That is in one sense what the appellant in effect argues here.  However there is no identifiable mortgagee’s market, a mortgagee sells in the general real estate market.  No doubt, as the appellant says, mortgagees’ sales are often forced sales.  But that is not invariably the case and sales by registered proprietors are also sometimes forced, perhaps often so in the current market.  But we think that the purpose of a phrase such as “market value” is to enable a hypothetical value to be determined disregarding the desire to sell of a particular vendors or classes of vendors.”
  1. [25]
    It was submitted on behalf of the appellant that this and the other authorities referred to establish that a market value for an article, be it land or chattels, is to be determined by reference to what price is being achieved for that article in the open market at the relevant time. But, as the passage from Emerson quoted above pointed out, the current market may reflect sales which are forced sales, and sales of that nature will not be sales which reflect the proper application of the Spencer test.  It recognised that in circumstances where a market is depressed or slow, the only sales may be those made by vendors who are anxious to sell and are therefore forced to take whatever they can get.  In that situation, vendors who are willing but not anxious to sell will simply not sell, because there will be no buyers who would offer a price at which a seller who met the Spencer test would sell.  The crucial aspect of the Spencer test in these circumstances is the requirement that a price be identified which would satisfy a vendor “willing to sell for a fair price but not desirous to sell.”
  1. [26]
    It also follows that, if land has a special value to the owner, an owner would generally not be willing to sell for a price which did not cover that special value. Hence the comment of Callinan J that the application of the Spencer test will generally cover what his Honour regarded as true cases of special value.  The important thing however is not to use this consideration as an excuse for converting the hypothetical vendor from one who was willing to sell at a fair price to one who is reluctant to sell.  That is not the test.
  1. [27]
    It was submitted for the appellant that the point about Emerson was that it was necessary to disregard the fact that the vendor did not want to sell.  That proposition is certainly correct, but the point in Emerson was that it was necessary when determining market value also to take into account that sales by vendors who were particularly keen to sell, termed forced sales, were also sales where which are not indicative of market value according to the Spencer test.
  1. [28]
    There is another Queensland case under s 85 of the Property Law Act 1974 dealing with a chattel, in this case a boat:  Martin v Lewis (Appeal 57/84, Full Court of Queensland, 7 June 1985, unreported).[10]  In that case the vessel was sold for $65,000, and it was submitted on behalf of the appellants that, because that was the best price that was in fact obtained, that must be its market value.  That submission was not adopted by the trial judge, and, although it seems to have been essentially repeated on appeal by Senior Counsel for the appellants,[11] it was evidently rejected on appeal in favour of the evidence of a valuer who assessed a market value of $107,000.  There was no other evidence of market value. 
  1. [29]
    Andrews ACJ, with whom Kelly J agreed, said at p.11: “Valuation is not an exact science even where exactly comparable figures existed, which is rarely the case. It has also been said that a great deal must depend upon the impression made on a judge by witnesses when giving evidence as to value. Some experts, by the way they give their evidence, as much as by what they say, inspire confidence, others provoke misgiving.”
  1. [30]
    The third member of the court, Shepherdson J, delivered separate reasons for arriving at the same conclusion. He referred to other cases involving decisions about valuing chattels, including Re Grazing Selection number 7852 Ipswich District (1970) 37 CLLR 47, where the Land Appeal Court said at pp.49-50:  “The term ‘market value’ connotes an amount of money which could be obtained on the open market at the relevant date by a willing vendor from a willing purchaser in the bargaining processes envisaged by the Spencer case 5 CLR 418.  It is not a matter of what sum of money would be received for the timber if it were sold pursuant to the controlled market conditions of a Crown timber sale.”
  1. [31]
    He also referred to the decision of the English Court of Appeal in Building and Civil Engineering Holidays Scheme Management Ltd v Post Office [1966] 1 QB 247, where the relevant issue for the purposes of an English statute was the market value of some chattels in a package which had been lost, namely holiday credit stamps.  Denning MR said at p.264, in a passage which is very similar to the Spencer test:  “The ‘market value’ here means the price at which the goods could be expected to be bought and sold as between willing seller or willing buyer, even though there may be only one seller or one buyer, and even though one or both may be hypothetical rather than real.  Applying this test I think that the market value of these stamps was their face value.”  His Honour also referred to other passages from that decision before saying at p.9:  “It seems to me that the ratio is that ‘market value’ in respect of chattels for which there is not a general market, ie, a market where buyers and sellers congregate, means the price at which the stamps could be expected to be bought and sold in a legitimate transaction as between willing seller and willing buyer even though there may be only one seller and one buyer and even though one or both may be hypothetical rather than real.  In my view ‘market value’ for the purposes of s 85(1) so far as [it] relates to boats … is the same as that which I have set out in the above ratio.”
  1. [32]
    It was also submitted for the respondent that the significant point in Spencer’s case for present purposes was that the market value in the case of chattels was equated with the current value, so that the current price determined market value even in circumstances where the current price was determined by the vendors who were anxious to sell.  That in my opinion is the argument which was rejected by the majority in Emerson.  It may be that the Chief Justice had in mind something like shares traded on the stock exchange or commodities in a commodity market.  There may be some room for debate today as to whether that approach would apply even in that situation.[12]  But I do not accept that the current price is always appropriate for determining the market value of chattels.  The cases I have referred to in relation to valuing chattels suggest that the Spencer test in its traditional formulation (which was originally a test for the value of land) is treated by the courts as ordinarily applying also to the value of chattels.  In my opinion it is applicable here.

Valuers

  1. [33]
    After the orders were made, arrangements were made to determine the value of the cattle. The department appointed two valuers, and the owner of the stock appointed another. The department appointed Mr Paine and Mr O'Brien, and the respondent appointed Mr Daniels. Both Mr Paine and Mr O'Brien gave evidence on the hearing of the appeal before the magistrate. An affidavit by Mr Daniels was put in evidence (Exhibit 33), but by the time of the appeal he was too ill to give oral evidence.  The respondent relied before the magistrate also on the evidence of valuation of Mr Sturtridge and Mr Keys, who were called and cross-examined.
  1. [34]
    Mr Daniels prepared a valuation on 7 May 2002.  He gave average values, taking into account the condition of the various categories of stock, at $895 per head for the cows, $4,500 per head for the bulls, and $130 per head for the small calves.  He said he was familiar with both the Tuberculosis Freedom Assurance Program (“TFAP”) method of valuation, and what he described as the method adopted by the Department of Primary Industries last year;  his description of the TFAP method is similar to the provisions of the regulation, and indeed he said the DPI method was similar.  He said that the drought and falling prices were in full swing in most areas but noted that the appellant’s properties with which he was familiar were in top condition with, he added, “all stock (exception of some number one and two cows) with big weaners on ‘Van Rook’ are showing signs of weight loss.”  On the previous page he had referred to all of the cattle as being in good condition except for some cows number two which were said to be “20 percent light” and some cows number one said to be “45 percent light”.  I think therefore what he meant to say was that all stock with the exception of those cows were showing no signs of weight loss.  He went on to note that the owner would suffer a substantial loss of income from the destruction of this herd, before giving his valuation.
  1. [35]
    He visited the property again on 25 May 2002, and prepared a further valuation which appears to be undated.[13]  He noted the fact that about 90 to 95 percent of the cows were in calf two months or better, and referred to the number of cattle that he had inspected.  He gave a valuation of $875 per head, said to be less than last year as he was allowing $300 per head for drought and falling markets.  He valued the cattle, as he described it, “on the use, such as breeding.”
  1. [36]
    He said in his affidavit in paragraph 13:  “My valuations do not include a component for future production foregone in respect of the breeding cows in question, but they do recognise a value for the breeding ability and breeding usage of the cattle.  It would be irrational in my view not to take these factors into account in valuing what is essentially a significant component of an established breeding herd.”  He said that sales of breeding cattle were normally negotiated as paddock sales rather than through saleyards and that his assessment was made by reference to actual sales of which he was aware at the time.  He also exhibited to his affidavit various press clippings which he said referred to sales from April 2001 to October 2002 of breeding cows, which he said supported the values he had placed on these cows, although he said that information from press reports was often difficult to use because of the limited information available:  para 15.  He said that in his opinion a willing but not over anxious purchaser of the cattle would take into account the fact that the cows could be expected to produce further calves in the future when setting a price for the cattle:  para 19.  Accordingly they should not be valued purely on a carcase basis.  He had considerable personal familiarity with this herd, and regarded it as having high quality.  He also noted that the sale of such a large number of single brand cattle in northern Australia would be very rare:  para 22.
  1. [37]
    Mr Sturtridge had been a cattle valuer under the TFAP program from 1991 to 2001. He also had other experience in the pastoral industry. He was aware of the requirements of the Act and regulations. He inspected the stock in April 2002 and on 25 April 2002 he prepared a valuation which he forwarded to the respondent.[14]  This concentrated on the value of the cows, which he noted were of excellent quality and condition.  He arrived at a value by determining a meat value based on the current saleyards price plus four years breed on value, on the basis of the value of the calves they were carrying and another three years calving before being culled for age.  This was on the basis that a calf on the ground had always been regarded as worth $100 or more.  This produced a valuation of $862.
  1. [38]
    In paragraph 10 of his statement he set out his test for the “true value of the stock” essentially in terms of the Spencer test:  “This exercise involves an assessment of price to be paid by a willing (but not over anxious) buyer and acceptable to a willing (but not over anxious) seller sold and delivered on the holding of the date of each order.”  He arrived at the average live weight on the basis of his observations during inspection, and determined the meat value as the current saleyard price which he said was 110 cents per kilogram at Charters Towers in the previous week: para 14.  He considered however (para 15) that “it is a mistake to regard this saleyard price for slaughtered cattle as the true value of the cattle in question.  Breeding cattle are never sold for slaughter cattle prices.  A premium is paid for their ability to breed.”  He referred to the herd as upgraded red Brahman cattle,[15] and noted that such a quantity of such cattle would not ordinarily come on the market.  He said the red Brahman breed were more valuable because they are fleshier and heavier:  para 25.  He also said they produced calves up to 12 years of age, and should be valued on that basis.  On 2 May 2002 he visited the station again to view some additional stock which he valued at $900 per head;  see the valuation Exhibit C to his statement.  This valuation included the statement:  “Current market values have nothing to do with the value of these cattle as the owners would keep them to reap the benefit of their full breeding potential.  He also said the bulls were stud quality purebred bulls, more valuable than commercial bulls:  para 33.
  1. [39]
    Mr Sturtridge gave oral evidence. He said that cattle could lose weight as a result of mustering, and between April and July just because of seasonal factors: p.42. Hence cattle which started at 420 kilograms on the hoof might end up lighter later in the year:  p.43.  He said that in the light of material from the respondent’s witnesses, Mr Roberts and Mr Wright, as to the ages of the cows, he would adjust his valuation by reducing the figure of $400 for the breeding potential to $300:  p.44.  That reduced his average value to $762.  He also gave evidence of other valuations he had undertaken where he had applied a similar approach. 
  1. [40]
    Under cross-examination Mr Sturtridge said that the price of cattle is governed very much by supply and demand: p.52. One relevant factor is weather conditions. There is a constant demand for cattle for slaughter. When asked about the significance of the market price payable for cattle, he said that its main role was in getting a meat value for the cattle and that it played very little role after that: p.54. This was in answer to questions about the “price paid in the marketplace for cattle” which I assume was taken by him to be a reference to the cattle market at Charters Towers.[16]  On his approach the fact that the market was poor was relevant to working out the meat value, but not relevantly after that:  p.55. 
  1. [41]
    Mr Sturtridge said that if the cattle were clean and healthy the owner of them would not want to sell them in the open market, although they could be sold in that way: p.56. He said he had regard to one particular sale of cattle previously from this property, but not to others. He did not think it was necessary. He was told about one sale by the owner: p.58.[17]  The one sale he knew about he thought was too long ago:  p.61.  He agreed that “if one was to go to the market with these breeders in mid 2002 the price which would have been paid was substantially less than $900.”  (Page 62).  Mr Sturtridge said in relation to breeder cattle that “the cow is your calf factory … they’re the most valuable asset that you have, and you’re not going to dispose of them unless you’re forced to.”  (Page 67).  But he conceded that if the owner was forced to sell, or choose to sell, breeder cattle, the market would determine the price:  p.68.
  1. [42]
    Mr Keys, a local cattle owner who was continuously selling cattle in 2001 and 2002, also gave evidence of valuation, in a statement by him which became Exhibit 26.  He said that cows were able to be used as breeders up to ten years of age and it was not uncommon for cows to be calving up to 12 years of age and older:  para 8.  He had no evidence of a comparable sale of breeding cows in such numbers, and considered it inappropriate to apply “slaughter values (of which there was ample evidence)” to such cows:  para 9.  He adopted a different methodology, by reference to the productive potential and consequent future revenue of the cows, on the basis that the cows would be sold for slaughter once they ceased to produce calves.  This produced a total sale value for one set of the cows and progeny at just over $3 million, from which he deducted approximately $500,000 for the cost of upkeep of the cows, and $750,000 for the running costs of the progeny.  This produced a net value which when divided by the original number of cows produced a valuation per head of $1,092, in the case of number five cows.  A similar process was performed in relation to the remaining cows;  overall this produced an average value of the cows of $853 per head.
  1. [43]
    It occurs to me that there are some difficulties with this approach to valuation. One is that the amounts do not appear to be discounted to present values, to allow for the fact that the income, and to some extent the costs, would be achieved over a period of years rather than immediately. In addition, it makes assumptions as to the future sale prices of the cattle and the progeny, which in turn depend on the particular prices being paid at a particular time for each of these. Depending on the stability of the market, such an approach might be reasonable, but where supply and aspects of demand can vary so widely depending on things such as weather conditions and the state of the international market, such a calculation really produces more of a potential economic value on the basis of certain assumptions than a direct estimate of market price. The cross-examination also identified some other, relatively minor, matters which were not taken into account in this essentially simplified calculation. The relationship between this sort of calculation and market value in the sense contemplated by the Spencer test will depend on the extent to which considerations of this nature affect the operation of the market in a practical sense. 
  1. [44]
    This sort of theoretical approach to valuation may be of more use in providing some indication of a price ceiling rather than an indication of actual market value, because one would not expect a buyer to pay more than the economic value of the beasts. This however is based on assumptions as to the future returns for cattle and progeny, so that any particular buyer will have in mind a particular economic value depending on that buyer’s expectation of the market in the future for cattle for slaughter and progeny. It does not appear that the magistrate paid much attention to this approach to valuation, saying only that Mr Keys was not a valuer and had adopted an approach to identify “the inherent value of the cows”: p.9.[18] 
  1. [45]
    In oral evidence Mr Keys said that he was familiar with this herd, and that he had seen these cattle in a yard at Cloncurry: p.72. He had not seen them on the station: p.75. He agreed he had never had to value cattle for the purposes of the Stock Act:  p.74.  He conceded under cross-examination that he could not point to a single sale transaction which would support that value:  p.90.  He agreed that at the time most of the eastern part of Australia was in drought and that as a consequence feed was down and properties were being de-stocked:  p.91.  That had a consequence of causing graziers to offload store cattle and breeders which they might otherwise have kept.  He conceded that if the owner had wanted to sell the cattle he might have found it difficult to find someone who would pay that amount:  p.92. 
  1. [46]
    Mr Paine was a livestock agent who had considerable experience in the area of livestock, and was a registered livestock valuer. He had replaced Mr Sturtridge as the cattle valuer under the TFAP program in 2001: p.144. Mr Paine said that due to the failure of the wet season the market for breeder cattle was very limited to say the least, although there was strong demand for live export. He said he inspected the cattle on the property and in yards at various times in May, June and July 2000, and said “I valued each draft according to the best possible market available at that date, taking into consideration the age, sex and breed, body condition and live weight, as per my instructions from the DPI on 1 May 2002.”  Attached to his statement (Exhibit 28(iv)) are a large number of valuation sheets dealing with the various particular drafts of cattle that were valued. 
  1. [47]
    In a supplementary statement made 12 March 2003 (Exhibit 29(iv)) he affirmed that the depressed market for breeder cattle extended to southern Queensland, New South Wales and the Northern Territory.  He did not consider that cattle from north Queensland could be sold as breeders to Victoria.  In that statement he said that his valuation was approximately $380 per head, which was without deducting transport costs, which would have been paid by the vendor and if deducted would have reduced the valuation by about $35 to $40 per head. 
  1. [48]
    He said in evidence that large numbers of cattle, such as were being considered here, would very seldom go through saleyards, unless they went through in smaller lots: p.136. He said that with the failure of the wet season cattle owners “try to reduce the numbers to deplete their herd and … probably take the best market they can at that stage. … This is one of the reasons … that the price is depleted.” (Page 136).  Because of the drought there were very few buyers who wanted to buy breeders:  p.155.  Some people were forced to sell into a bad market, but those who had a choice would be influenced not to sell unless they had to:  p.155.  Mr Paine agreed that a calf as soon as it hit the ground was considered to be worth $100 and the price increases as they get older:  p.138.
  1. [49]
    Under cross-examination Mr Paine said that on 20 June 2001 he had valued some cattle at another property, Miranda Downs, including 75 Brahman cross cows with an average age of five years which he valued at $905:  Exhibit 8.  This was taking into account further breeding value of cows at $80 per head for four years, which gave $320 added to an amount of $1.30 per kilogram for a live weight of 450 kilograms average.  That value was arrived at following discussions with Mr Sturtridge, from whom he was taking over the position at that stage:  p.148.  He said that at the time of making that valuation he honestly believed that it represented the value of the stock:  p.150.  He said however that essentially he was following this approach on the basis of the advice of Mr Sturtridge:  p.160. 
  1. [50]
    After he did that valuation, he received a letter from Mr Glanville of the department, dated 26 June 2001:  Exhibit 16.  In that letter Mr Glanville set out the terms of the definition in s 47, and s 48, of the regulation, and continued:  “I am concerned that the values arrived at do not reflect the prices that would have been realised if the cattle (considered disease free) had been sold and delivered at Miranda Downs on the day you inspected and valued them.  In particular I do not consider it appropriate to determine the price of a breeder cow by adopting a meat value and adding an amount for breeding value based on future calf production.  I do not believe that the chief inspector could adopt this method of valuation when deciding the estimated market value of stock in accordance with the Stock Regulation 1988.  As it may be difficult to determine the prices that would have been realised if the cattle (considered disease free) had been sold and delivered at Miranda Downs on the day you inspected and valued them, due to the lack of a commercial market at Normanton, perhaps you could indicate the prices that would have been realised if the cattle had been sold at the nearest appropriate commercial market and advise the transport and selling costs that would apply to such a sale.”
  1. [51]
    It seems to me that essentially the issue in relation to the matter before the magistrate, and indeed the issue in the appeal, is whether Mr Glanville’s interpretation of the effect of the regulation was correct. Mr Glanville is not a valuer; he is an official of the department. I shall return to the question of the correctness of his analysis later. In any event, in response to that letter Mr Paine undertook a new valuation of the Miranda Downs cattle. The 75 Brahman cross cows which he had valued at $905 each were re-valued at $585 each; this was the figure based on the meat value referred to earlier, with no allowance for breeding potential: Exhibit 8.  He said that that change in the valuation came about because of the instruction from the department:  p.151.
  1. [52]
    Mr Paine knew Mr Daniels for many years and agreed that he was a well respected valuer of cattle: p.158. Mr Paine said that he believed that the valuation of Mr Daniels did not accord with the legislation: p.158. As he put it one point “under my instructions there was no breed on value.” (Page 159).  Mr Paine described the cattle as Brahman cross cattle and said they were not as good as some of the superior breeds referred to in some of the newspaper cuttings attached to the affidavit of Mr Daniels:  p.140.  He said that this material did not substantiate the values of cows in the northern part of Australia:  p.143.  In Mr Paine’s opinion Mr Daniels had not allowed a sufficient discount for the difference in quality when referring to those other sales:  p.161.
  1. [53]
    Mr O'Brien, a livestock agent,[19] inspected the relevant stock in May, June and July 2002 and valued them at various amounts.  He completed a valuation sheet on each occasion.  Copies of these sheets were exhibited to his first witness statement Exhibit 28(vi).  He said in the statement that, “I consider these values to be the best prices for the various classes of cattle available on the day.”  In a further statement dated 12 March 2003, which became Exhibit 29(iv), he said that in the relevant period the market value of cattle, particularly stores and breeders, was significantly affected downwards due to drought in Queensland, New South Wales and the Northern Territory:  para 3.  He said that in his opinion the cattle valued were not red Brahman but Brahman cross.  He said the cattle were not of the same quality as Angus cattle in New South Wales and Victoria in 2001.  In his opinion in north Queensland the market did not recognise the future breeding capacity of cows aged more than seven or eight years.  He did not make any deduction for transport costs which would be $25 per head to Cloncurry and $50 per head to the coast:  para 7. 
  1. [54]
    Mr O'Brien said he did not agree with Mr Daniels’ valuations, because he did not agree with his methodology: p.167. He said that in his valuation he gave seven and eight year old cows a value reflecting their worth as potential breeders, but that older cows he just gave their meatworks value: p.169. But at p.176 he said that in his opinion a seven year old cow or older had no value as a breeder. In his experience buyers would not allow any breed on value for aged cows. He said the market deteriorated after May 2002: p.170. He said that at the time there was very little restocking activity so people were staying away from saleyards: p.193. It was a difficult time to sell any sort of cattle: p.193.
  1. [55]
    Under cross-examination Mr O'Brien acknowledged that he had received a letter dated 29 April 2002 from Mr Glanville (Exhibit 10) which among other things said:  “The basic principle to be followed is that the owner should receive an amount of compensation similar to that which he would receive if [he] were selling the animal disease free on the open market to a willing buyer.  This concept of compensation takes into account as much as possible current market performance for similar animals and does not allow for consideration of future potential value or loss of productivity of the animal or its progeny.”  Mr O'Brien said that he understood this letter as his terms of reference, and that it meant that breed on value, that is a premium for future breeding, was excluded by the legislation:  p.172.  He undertook his valuations in accordance with that approach. 
  1. [56]
    Mr O'Brien expressed the opinion that in his experience a breed on value was not significant in the marketplace: p.173. He said he was looking at what buyers were paying for similar cattle, not necessarily just at saleyards: p.186. He did recognise however that on occasions there could be some anomaly in the market price on a particular day at a saleyard, so that he would not necessarily adopt a saleyard price, if in his opinion it did not represent true market value on that day: p.191. There were some parts of Mr O'Brien’s evidence during cross-examination where I had difficulty in following just what he was saying: for example p.185. I am conscious of the limitations of attempting to assess a witness by reading the transcript, but I would find it unsurprising if the magistrate had not been impressed by Mr O'Brien. The magistrate said Mr O'Brien was faithful to his brief: p.7. There was certainly a conflict between Mr O'Brien and the evidence of Mr Daniels and Mr Sturtridge.

Other evidence

  1. [57]
    Evidence was given by Mr Menegazzo of the respondent that it had purchased over 1,000 better grade Brahman bulls over the last ten years[20] for between $900 and $1,800:  p.26.  He said in his experience it was common for cows up to 10 to 12 years of age to have calves at foot:  para 13.  He gave evidence that the sale of the cattle in 2000 was in response to pressure from the bank (p.25), and there is an answer on p.35 which suggests that it may be that that sale was not on the basis that the stock was necessarily free of disease.  He said that in 2001 and 2002 the property was quarantined, and the only cattle sold were those for the de-stocking program:  p.38.
  1. [58]
    Mr Smith was a vet at Charters Towers who had experience with pregnancy testing on cows. In May and June 2002 he conducted pregnancy testing on a sample of number five cows and older which were de-stocked from the station “Van Rook”: Exhibit 27, para 3.  He estimated that 57 percent of the cows were non-lactating, while the remaining 43 percent were lactating:  para 7.  I suppose they were lactating because they had calves.  He did not test all of the cattle, but tested approximately 500, which produced a pregnancy rate of 94 percent for non-lactating cows and 44 percent for lactating cows:  Exhibit 27.  He said they were in good body condition.  In his opinion it was reasonable to conclude that all the lactating cows were producing progeny:  Exhibit 8.  Overall therefore the pregnancy rate was about 70 percent, and he said that 70-75 percent was typical for that area:  p.99.  He said that in north Queensland the loss between pregnancy and branding was between 7 and 12 percent:  p.100.
  1. [59]
    Mr Glanville gave evidence. He said that this particular property had a long history of tuberculosis infection: Exhibit 28(iii) para 6.  It had reached “clean” status twice previously, but undetected infection had subsequently been found.  Following a further tuberculosis detection, a program was put in place involving the slaughter of all cattle branded in 1995 or earlier and repeated testing on remaining stock over a period of time.  The older cattle were de-stocked as they were most likely to be affected.  He gave evidence about the process of obtaining the valuations, and his approach to assessment of the valuation evidence.  He said in para 11(f) that “the primary criterion is … what the cattle would have realised if sold as disease free cattle on that property on that day.”  He was provided with an analysis of the valuations supplied by Mr Paine and Mr O'Brien.  He also took into account market information recorded in the Queensland Country Life, and the fact that the cattle were seven years of age or older and hence would be regarded as towards the end of their productive life:  para 19.  He adopted an average net value of $403.94 per head for cows, $100 for unweaned calves and $734.50 for aged bulls:  para 18. 
  1. [60]
    Mr Glanville admitted that he had come across examples of valuers using the method of valuation adopted by the respondent’s witnesses: p.120. He regarded that as inappropriate under the regulation: p.121. At p.122 he conceded that breeding potential is taken into account in the market place when someone purchases cattle. There was also a statement in evidence from Mr Webster, who for a time was acting in the role of chief inspector and took some of the formal decisions: Exhibit 28(i).  It does not add anything to Mr Glanville’s evidence, and he did not give oral evidence.
  1. [61]
    Mr Roberts, a principal veterinary officer with the department, was involved in the TFAP program: Exhibit 28(ii).  He collated and analysed the valuation evidence which had been received, and gave advice to Mr Glanville.  His analysis was based heavily on the valuations of Mr Paine and Mr O'Brien.  On his analysis, 31 percent of cattle were older than ten years of age which would be regarded as the cull age for cows with little breeding potential, 47 percent were eight or nine years of age, and 22 percent were seven years of age “with up to five years of breeding potential remaining.”  (Paragraph 12).  Mr Roberts said that the live weight estimates of Mr Sturtridge at 420 kilograms were too high, in the light of the results achieved when the cattle were actually slaughtered, which indicated an average live weight of 377 kilograms:  Exhibit 29(ii) para 4(b).  At p.205 Mr Roberts said in relation to the effect of drought:  “Sellers will be tending to panic and flood the market so that there will be an oversupply.  So the market will be driven down …”
  1. [62]
    The appellant relied on a statement by Mr Wright, a grazier who was involved in the de-stocking program: Exhibit 28(v).  His evidence was directed to statements made by Mr Menegazzo in connection with the inspection of the cattle for valuation purposes.  He said that he examined in total 790 cows from this station of which 68 percent were either pregnant or had recently calved. 
  1. [63]
    A statement from Mr Anderson, a district inspector of stock, became Exhibit 28(vii).  He was involved in keeping track of the numbers and ages of stock covered in the various orders made.  On his calculations the age distribution of the stock removed from this station under the program was 25.3 percent aged seven years, 32.6 percent aged eight years, 10.7 percent aged nine years, 5.7 percent aged ten years, 16.5 percent aged 11 years, 5.4 percent aged 12 years, and 3.8 percent aged above 12 years.  This is a slightly higher proportion of seven year old cows than the 22 percent figure referred to by Mr Roberts in Exhibit 28(ii) para 12.  Mr Anderson said this age distribution suggested minimal culling for age was carried out.  He also said that at least 24 percent of the bull population on the property was not imported or improved, and this would have retarded efforts to improve the herd. 
  1. [64]
    A statement by a scientist with the department, Mr Fordyce, became Exhibit 29(v).  This was in effect a discussion on the effect of age on survival and fertility of cattle in northern Australia, and concluded with the recommendation that cows be culled by ten years of age.  It included a statement that it was common practice for culling to occur at nine to ten years of age.

Grounds of appeal

  1. [65]
    The notice of appeal to this court set out the grounds of appeal as follows:
  1. The learned magistrate erred in his assessment of the value of the stock in that his assessment was not in accordance with the manner prescribed in the Stock Act 1915 or the Stock Regulations 1998 enacted thereunder.
  1. The assessment of the stock was manifestly in excess of the average market value of the class of stock the subject of assessment, such value being the upper level for assessment prescribed by section 31 of the Stock Act.
  1. In arriving at his assessment, the learned magistrate misdirected himself by taking into account facts and matters irrelevant to the assessment of average market value being:
  1. (a)
    that the respondent had been diligent in improving the herd quality and would not want to dispose of such numbers of stock;
  1. (b)
    there would be “value” in the respondent being able to retain the cows assessed;
  1. (c)
    in the premises that the respondent was entitled to a “breed on value”;
  1. (d)
    that such “breed on value” had to be determined as an allowance in addition to the value of the cows, and bulls assessed.
  1. The learned magistrate’s assessment of the value of cows, in the sum of $750 per head on average:
  1. (a)
    was contrary to the weight of the evidence concerning the average market values of such stock on the dates in question;
  1. (b)
    lacked any evidentiary basis.
  1. The learned magistrate’s assessment of the value of the bulls, in the sum of $1,450 per head on average:
  1. (a)
    was contrary to the weight of the evidence and manifestly in excess of the average market value of this class of stock;
  1. (b)
    was based on the cost of replacement, not the average market value as prescribed in the Stock Act.
  1. The learned magistrate erred in placing weight on the value of stock as assessed by valuers called for the respondent when it was clear from their evidence that these values did not reflect the average market value of that class of stock at the requisite date.
  1. The learned magistrate erred in failing to give any or any sufficient weight to the valuation evidence called by the appellant as to the average market value of the stock.

Analysis

  1. [66]
    It is apparent that most of these are concerned with the identification of the correct approach to valuation in accordance with the Act and the regulation, and particularly what was meant by the concepts of value and average market value. The appellant’s outline of argument confirmed that there was no challenge to the finding that the value of the calves was on average $115 per head: para 1.10.  It was submitted that the market value of an article, be it land or chattels, is to be determined by reference to what price is being achieved for that article in the open market at the relevant time:  para 4.11.  That in my opinion is consistent with the approach of the appellant’s valuers to the process of valuation, and indeed consistent with the view of Mr Glanville as to the test specified in the regulation as set out in Exhibits 10 and 16, to which I have referred earlier.
  1. [67]
    In my opinion this approach is contrary to the Spencer test of market value.  It is in substance the approach to valuation which was rejected in Spencer, and by the majority of the Court of Appeal in Emerson (supra).[21]  On p.520 in the joint judgment of the majority their Honours rejected the view that the test for value was to be determined by enquiring what price a man desiring to sell could actually have obtained for it on a given day.  Yet that is in substance the test which Mr Glanville instructed the valuers to apply, and which it seems to me they faithfully did apply.  It is also the test which in substance was being contended for by the appellant before me.  As their Honours said, adopting the words of Sir Samuel Griffith from Spencer at p.432, the real test is:  “What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?”  As their Honours pointed out, sales by mortgagees and other forced sales will not produce such a value, although they may produce a current market price if the current market is dominated by such sales.  On the evidence of practically everybody, that was the situation with the cattle market in the area of this property at the relevant time.  Most of the witnesses gave evidence that the market was depressed because the drought meant that graziers were keen to sell and reluctant to buy, particularly in the case of breeders.  Mr Roberts went so far as to describe the graziers as panicking.  That will produce a current market dominated by the desire to sell of particular vendors or classes of vendors, which the majority in Emerson said is to be disregarded:  p.521.
  1. [68]
    The appellant’s valuers essentially approached the matter on the assumption that the cattle were actually going to be sold at the relevant date, and so the issue was what was the best price that would have been obtained for them had they actually been sold on that day. That in my opinion is clearly not the correct test, as expounded in Spencer and Emerson, and indeed Boland.  It would ignore the requirement that the price be one which would be accepted by a vendor willing to sell for a fair price but not anxious to sell.  All parts of that statement are in my opinion important.  That test necessarily presupposes a vendor who has a choice not to sell if not offered the price at which the vendor, approaching the matter on the basis specified in the Spencer test, choose not to exercise that choice.[22] 
  1. [69]
    I expect that approach has always been adopted in compensation cases because of the injustice which would be produced by the application of an approach to valuation which denied that choice. Even under this test, because there is no compensation for disturbance costs or loss of profit or other consequential losses, ordinarily, as pointed out by Fricke, merely paying market value will not provide adequate compensation for the loss of the property of which the owner has been deprived. But if the test depends on what a man desiring to sell could actually have obtained for the property on the relevant date, the owner is being deprived of the opportunity to choose not to sell the property into the current market, without compensation. If the current market is one dominated by vendors who are under pressure to sell, the value of that right to choose not to sell would be significant.

Was the Spencer test applicable?

  1. [70]
    It is then necessary to consider whether the wording of s 47 of the regulation, or s 31(2)(c) of the Act, requires an outcome which is different from the Spencer test of market value.  As to s 47, that was evidently interpreted by Mr Glanville as requiring the assumption that the stock actually were sold and delivered when ordered to be destroyed or disposed of.  But in my opinion there is nothing in that definition section which requires any departure from, or limitation to be applied to, the Spencer test.  The term being defined is “estimated market value”, which suggests that it is about market value, and that is then defined in terms of “the value” of the stock.  As noted in Emerson at p.521, the Spencer test has been used as the correct way to find the “value” in a variety of contexts. 
  1. [71]
    Paragraph (b) performs two functions.  The first is to require an assumption of a sale on the holding on which the stock are located, no doubt to ensure that owners do not obtain a benefit from being relieved of having to pay transport costs which would otherwise have been payable if they were selling the stock through some saleyard away from the holding.  The other is to fix a date for the valuation.  That is a commonplace requirement with any valuation, but it has long been recognised that the Spencer test can be applied to determine value as at a particular date without proceeding on the basis of an assumption that there will be an actual sale on that date.  That is because the test operates by reference to a hypothetical sale, by a vendor who has a free choice not to sell.  I do not consider that there is anything in s 47 which requires any departure from the Spencer test. 
  1. [72]
    Nor do I consider that there is anything in s 31(2)(c) which requires such a departure.  That paragraph also uses the term “market value” and that ought to be interpreted as applying the Spencer test in the absence of some indication to the contrary.  The appellant relied on this subsection specifically for the proposition that there was no entitlement to receive more than what would have been achieved if the cattle had been sold on the open market at the relevant time.  But there is in my opinion nothing in the subsection to indicate that a concept of “market value” other than in the Spencer sense was intended.  The question of any modification introduced by the other terms in this paragraph was not explored before the magistrate, nor indeed on the hearing of the appeal.
  1. [73]
    Applying the approach to construction of these provisions referred to by Gaudron J in Marshall (supra), in my opinion they did not require any test other than the Spencer test for market value as it has come to be applied, in particular as it was applied by the majority in Emerson.  In my opinion that test should be applied unless clearly excluded, because anything less would not provide fair compensation to the dispossessed owner.  It is generally recognised that people should not be deprived of their property rights other than on terms of fair compensation.[23]  In this context it may be noted that, under the corresponding legislative regime in New South Wales, the valuation of breeding cows takes into account their additional value for breeding.[24] 
  1. [74]
    It follows that in my opinion Mr Glanville’s approach to valuation as expounded in his letters to the valuers was incorrect. It also follows that the valuations on that basis were prepared on the wrong basis. That provided sufficient justification for this rejection by the magistrate. Far from the magistrate erring in failing to give sufficient weight to them, in my opinion they were properly rejected by the magistrate.

Were the findings as to value wrong?

  1. [75]
    The next question is whether the magistrate was justified in accepting the valuation evidence on behalf of the respondent. There were as I have mentioned some aspects of that evidence and some statements made by those witnesses which suggest that they may have taken consequential loss into account. Mr Daniels referred in his first valuation to the fact that the owner would suffer a substantial loss of income from the destruction of the herd. That was not directly a material consideration, because the application in the Spencer test assumes a vendor willing to sell for a fair price.  But the prospect of future profit would certainly be a matter taken into account by such a vendor, as recognised by Callinan J in Boland at [354], the passage quoted earlier.  It would also be relevant to the application of the test proposed in Pastoral Finance Association (supra).  It is in this sense indirectly relevant.  In my opinion the approach to these issues adopted in paragraph 13 of Mr Daniels affidavit was correct.
  1. [76]
    Mr Sturtridge in paragraph 10 of his statement in my opinion correctly stated the Spencer test.  His evidence was to the effect that the current market for cattle at the relevant time did not reflect the Spencer test of market value because it was dominated by vendors anxious to sell.  I think that that was the significance of the statement in the valuation Exhibit C.  Indeed, the thrust of the evidence of Mr Daniels and Mr Sturtridge was that the proper application of the test for market value produced a figure significantly above the prevailing saleyard figures in north Queensland.  It was also to the effect that those figures were not a good guide to the true market value of cattle of this type and quality.
  1. [77]
    There were some issues between the parties as to the quality of the cattle and even as to their weight. There was also an issue as to the age of the cattle concerned, and as to the significance this had in terms of breeding potential. I think it is sufficient to say in relation to these matters that there was a conflict of evidence and the magistrate was entitled to accept the evidence of the witnesses for the respondent.
  1. [78]
    It was submitted that it was irrelevant for the magistrate to have found, and presumably to have taken into account in relation to the assessment of market value, that the respondent was diligent in trying to improve the line of cattle, and that it would not wish to dispose of such a large number of stock in one sale: p.6. In my opinion the former finding was directed to the issue of the quality of the cattle in question, which is obviously relevant to the assessment of market value, and to some extent a matter which had been in issue between the witnesses for the appellant and the witnesses for the respondent. I have referred to some of the evidence of each of them which touched on that aspect; it appears that the magistrate has in this respect accepted the evidence of the respondent’s witnesses.
  1. [79]
    As to the second finding, in my opinion the degree of enthusiasm for selling of the vendor is irrelevant to the application of the Spencer test, although the fact that there may be objectively good reasons why a particular owner may be reluctant to sell has always been regarded as a relevant consideration in the application of that test.  It would obviously be relevant to the application of the of the Pastoral Finance Association test, and it is the sort of matter discussed by Callinan J at [354].  On his Honour’s analysis at the end of that paragraph, it is relevant to consider whether the property in question had any particular objective value to the owner, which would make relevant the value to the respondent of these cattle as breeding cattle.  In my opinion this finding was also not irrelevant, and it was not an error of law for the magistrate to take it into account.
  1. [80]
    The next finding challenged was that a willing but not anxious vendor would not normally sell off such a large section of his herd. The significance here is that the herd in question was a breeding herd, and it was one which, on the evidence accepted by the magistrate, the owner had over a period of some years made some effort to improve. Again I think that that was a relevant consideration. It was certainly accepted by the witnesses on all sides that it would be unusual to have a single sale of cattle in the numbers involved in this case. This particular finding was directed to the proposition that the earlier large sale was anomalous. It was plainly relevant to that issue, and there was evidence to support such a finding.
  1. [81]
    The next finding challenged was that there would be a value to the respondent in retaining breeder cows in order to produce further calves. It was not disputed that such a finding was open on the evidence, but rather that it was irrelevant to value. But for the reasons I have given earlier, plainly it was not. It was relevant to an objective assessment of the attitude of a willing but not anxious vendor, who would not lightly relinquish property which had some particular value because of its capacity to generate future profit. In my opinion this was a relevant finding in the circumstances.
  1. [82]
    It is perhaps a little unfortunate that the magistrate identified as a crucial issue the question of whether allowance should be made for a “breed on” value.[25]  There was no question of allowing any such value as something in excess of market price.  But in my opinion that was not what the respondent’s witnesses were actually doing.  It seems to me that their evidence indicated a proper understanding of the Spencer test.  What Mr Sturtridge was doing was using a method which, in his opinion as an expert and experienced valuer, would produce a valuation which did satisfy the Spencer test.  The contrary was not shown in cross-examination.  In my opinion it was open to the magistrate to accept that Mr Sturtridge was by this technique determining a figure which in his opinion was the valuation according to the Spencer test, and was therefore “market value” or “value” for the purpose of the Act and regulation.
  1. [83]
    Overall, in my opinion the magistrate has not been shown to have been wrong in making a finding as to the value of the cows which in substance (with some rounding) adopted the valuation of Mr Sturtridge.

The value of the bulls

  1. [84]
    It was also submitted that the finding that the value of bulls should reflect the cost of replacement was irrelevant. In relation to the bulls, Mr Daniels gave a valuation of $4,500, one which appears on its face to be difficult to justify if they were purchased for between $900 and $1,800. Mr Sturtridge did not address the question of the value of the bulls. Neither for that matter did Mr Keys. The appellant’s valuation was $738 per head. If the appellant’s valuers were applying the wrong test for market value, it is likely that their figure for the value of the bulls was also too low, but that in itself does not provide much in the way of guidance as to what the true figure is. The magistrate in those circumstances really had very little in the way of reliable evidence of market value when it came to assessing a value for the bulls. What he said at p.9 was simply: “The only matter outstanding relates to the bulls and calves. Whilst a breed on value cannot be paid in relation to the bulls, I am of the view that a value should reflect the costs of replacement. Produced to the court have been invoices for the purchase of bulls. I am of the view that the average price paid would be as per the appellant’s submission of $1,450.”
  1. [85]
    The idea that replacement value is necessarily irrelevant to the assessment of market value is not consistent with the statement of Gleeson CJ in Boland at [79]:  “A decision as to what price would be achieved in such a sale [ie the hypothetical Spencer sale] involves a factual judgment, and may be made by reference to comparable sales, or a capitalisation of profits formula, or, in certain circumstances, by reference to costs of reinstatement or other criteria.”  The cost of replacement is in my opinion analogous to the cost of reinstatement.  The problem of course is that the magistrate did not in fact assess on the basis of cost of replacement, but on the average purchase cost.  There are at least two difficulties with that approach which occur to me.  The first is that bulls obviously have a limited useful life, so that one would expect the value of such a bull some years after purchase to be less than the purchase price.  In addition, there was evidence that about 25 percent of the bulls taken off the property were not purebred Brahman bulls of the kind purchased by the respondent, and therefore presumably less valuable.[26] 
  1. [86]
    It was submitted on behalf of the respondent that the acquisition cost was cogent evidence of the value of the bulls. There was evidence in Exhibit 21 which demonstrated that between August 1989 and July 2002 the respondent purchased 2,339 bulls at an average price of $1,449.  It was submitted that the approach taken by the magistrate was logical and fair in treating the average purchase price paid as reflective of the average market value of the bulls.
  1. [87]
    I think there is some force in the proposition that the approach of the magistrate involved a fair and reasonable basis for assessing compensation for the loss of the bulls, if one is dealing with the matter on a broad brush approach. But the function of the magistrate was to hear an appeal from the decision of the chief inspector, and for that purpose the magistrate had all the powers and functions of the chief inspector: subsection (11).  The chief inspector’s function was simply to apply the Act and regulation.  Where the Act and regulation specify that the compensation payable shall be the market value of the stock, the function of the chief inspector, and on appeal the magistrate, is to determine the market value of the stock, not to determine fair compensation.  The magistrate was conducting an appeal by way of rehearing (s 36(9)) which in my opinion in this context means a rehearing de novo.[27]  That means that it was a matter for the magistrate to determine what was the amount of compensation prescribed under the regulation, not exceeding the market value. 
  1. [88]
    In these circumstances the magistrate really had no proper evidence of market value. I take it he rejected the evidence of Mr Daniels in relation to the value of the bulls, which is unsurprising given that there was no basis for thinking that at the relevant time they were worth much more than their purchase price. As I have indicated, in my opinion Mr Paine and Mr O'Brien adopted the wrong test for determining market value, and therefore the magistrate properly rejected their evidence as to the assessment of market value of the bulls. The other witnesses did not give any evidence as to the assessment of market value of the bulls. It would not have been appropriate for the magistrate, or indeed for me, to comb through the evidence of sales exhibited to various affidavits to try to place some valuation on the bulls on the basis of that material.
  1. [89]
    In these circumstances the magistrate was in a very difficult position; however what the respondent paid for the bulls when it bought them was some evidence of market value, since the presumption would be that it paid the market price for the bulls when they were purchased. Although I doubt very much that s 31(2)(b) when speaking of average market value is referring to an average over as long a period as 13 years, in the absence of evidence to the contrary this was some, no doubt very slight, evidence of market value during that period, which could on a presumption of continuance provide some evidence of market value in the relevant period in 2002.
  1. [90]
    More significantly, the evidence in Exhibit 21 as to purchases of Brahman bulls in more recent years suggests that the amount paid then for bulls by the respondent was always above $1,450 per head.  In July 2002 the respondent purchased 138 bulls through Primac Elders Limited, Rockhampton, most for $2,000 each although seven were for $1,800 each and six were for $1,750 each.  On the same day the respondent purchased through Clermont Agencies of Clermont three red Brahman bulls for $2,500 each, and 21 red Brahman bulls for $2,000 each.  On 13 September 2001 the respondent purchased 48 Brahman bulls for $1,800 each through Primac Elders Limited at Rockhampton, and 25 Brahman bulls for $1,500 each and 11 Brahman bulls for $1,800 each, both through that company’s Moura branch.  The following day it purchased 26 Brahman bulls for $2,000 each, and 26 for $1,750 each through that company’s Rockhampton branch, and 36 Brahman bulls for $1,800 each through that company’s Moura branch.  This is some evidence of the market value for these bulls at the time of purchase.  Although there was evidence the market was lower in 2002, there was really no evidence to show how much lower it was.  On the whole, I think the evidence of these purchases, so far as it goes, suggests that if anything the figure of $1,450 may be a bit low.[28]  I think much of the problem is that, as the written submission for the respondent said at para.135, not much attention was given in the appeals to the position of the bulls.
  1. [91]
    The appellant’s submission on the appeal before me, in relation to the value of the bulls, was essentially that the only probative evidence as to the market value of the bulls at the relevant dates was that given by Mr Paine and Mr O'Brien. Since I have concluded that their assessment of market value was on the wrong basis, that evidence cannot be accepted as the market value of the bulls at the relevant dates. In my opinion the appellant has not shown that the magistrate erred in failing to act on the valuation evidence of Mr Paine and Mr O'Brien. It seems to me that in all the circumstances, given the way in which the appellant conducted its case before me and before the magistrate, the appropriate course for me is simply not to interfere with the decision of the magistrate in relation to the bulls.
  1. [92]
    It follows that the appeal must be dismissed with costs.

Footnotes

[1] On the basis of the numbers used at this time, the amount of compensation fixed by the chief inspector totalled $3,444,416.60.

[2] Allesch v Maunz (2000) 203 CLR 172 at 180.

[3] The magistrate was entitled to do this:  Jacobs “Law of Resumption and Compensation in Australia” (1998) para 15.13.

[4] University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481 at 483;  Coulton v Holcombe (1986) 162 CLR 1.

[5] Fricke “Compulsory Acquisition of Land in Australia” (2nd edition, 1982) p.324.

[6] The Pastoral Finance decision was also cited as authority in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209, at [16] and [80] by Gleeson CJ, and at [173] by Hayne J, and discussed by Callinan J at [354].

[7] Fricke “Compulsory Acquisition of Land in Australia” (2nd edition, 1982) p.324.

[8] Davies JA and Williams J;  Pincus JA dissented.

[9] References to authority were given, including of course Spencer’s case.

[10] Supreme Court Library referred [1985] FC 35.

[11] See the judgment of Shepherdson J p.2:  counsel for the appellants “argued that market value means the value obtainable in the market.”

[12] See Adamson “The Valuation of Company Shares and Businesses” (7th Edition 1986) pp.72-77.  Among authorities cited was Perpetual Trustee Co Ltd v Commissioner of Taxation (1942) 65 CLR 572 at 579, where the need to exclude a market affected by abnormalities was recognised in valuing listed shares.

[13] Exhibit JJD2 to his affidavit which was Exhibit 33.

[14] Exhibit B to his statement which was Exhibit 22.

[15] He said (para 25) that only a minor proportion of the stock were Braham cross:  para 25.

[16] On p.57 counsel for the appellant used the term “slaughter value”.

[17] This was the sale that the magistrate discounted as in effect a forced sale, because the respondent was pressed by its bank to sell:  pp.6-7.

[18] This was the term used by Mr Keys at p.78.

[19] He had no previous experience specifically in valuing cattle:  p.183.

[20] Paragraph 36 of his statement which became Exhibit 19.  Exhibit 21 was a bundle of documents produced by the respondent which recorded the purchase of 2,339 bulls between August 1989 and July 2002, for an average price of $1,449.

[21] And by Williams J in Abrahams (supra).  It was also the submission advanced by counsel for the unsuccessful appellant in Martin v Lewis (supra).

[22] That also follows from the reference by Isaacs J to the price arrived at “not by … a forced sale, but by voluntary bargaining …”.

[23] See Legislative Standards Act 1992 s 4(3)(i).  See also the Australian Constitution s 51(xxxi).  There is a presumption that legislation is not intended to alienate vested property interests without adequate compensation: Pearce & Geddes “Statutory Interpretation in Australia” (4th Ed. 1996) pp 137-8.

[24] Letter from New South Wales Agriculture, 7 September 2001, to Mr Menegazzo, attached to his statement Exhibit 19.  The statutory formula in that legislation may be different, but was presumably an attempt to provide fair compensation.

[25] That was however understandable in view of the way in which the appellant’s case emphasised the exclusion of such a component.

[26] Anderson, Exhibit 28(vii), para 6.  The magistrate did not say whether he accepted this evidence, but it is not clear that this issue was actively pursued by the appellant before the magistrate.

[27] Phillips v The Commonwealth (1964) 110 CLR 347 at 621;  Re H (a pharmacist) [1972] Qd R 402;  Re Schubert [1989] 2 Qd R 99.

[28] On the other hand, I suppose the bulls purchased during this period were younger than the bulls the subject of the appeal.

Close

Editorial Notes

  • Published Case Name:

    State of Queensland v Mowburn Nominees Pty Ltd

  • Shortened Case Name:

    State of Queensland v Mowburn Nominees Pty Ltd

  • MNC:

    [2004] QDC 531

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    21 Dec 2004

Litigation History

EventCitation or FileDateNotes
Primary JudgmentMagistrates Court (no citation or file number)30 Apr 2003Plaintiff appealed under s 31 of Stock Act 1915 (Qld) against compensation assessment in respect of live stock destroyed in accordance with the Act; compensation of $6,385.497 awarded
Primary Judgment[2004] QDC 2704 Mar 2004Department of Primary Industries purported to appeal against Magistrates orders; where Magistrate fulfilling administrative decision; whether proceeding an "action" under s 45(1)(a) of Magistrates Court Act 1921 (Qld); appeal struck out: McGill SC DCJ
Primary Judgment[2004] QDC 53121 Dec 2004Rehearing of Department of Primary Industries' appeal following [2004] QCA 212; whether Magistrate erred in valuation of chattels; appeal dismissed: McGill SC DCJ
Appeal Determined (QCA)[2004] QCA 212 [2005] 1 Qd R 19525 Jun 2004Department of Primary Industries applied for leave to appeal against [2004] QDC 27; whether right of appeal to District Court under s 45(1)(a) of Magistrates Court Act 1921 (Qld); leave granted, appeal allowed and proceeding remitted to District Court for rehearing: M McMurdo P, McPherson JA and Philippides J

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Abrahams v Federal Commissioner of Taxation (1944) 70 CLR 23
1 citation
Jump To
Cite 1 - (1944) 70 CLR 23
Allesch v Maunz (2000) 203 CLR 172
1 citation
Jump To
Cite 1 - (2000) 203 CLR 172
Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209
5 citations
Jump To
Cite 1 - (1999) 74 ALJR 209
Cite 2 - (1999) 74 ALJR 209
Cite 3 - (1999) 74 ALJR 209
Cite 4 - (1999) 74 ALJR 209
Cite 5 - (1999) 74 ALJR 209
Building and Civil Engineering Holidays Scheme Management Ltd v Post Office (1966) 1 QB 247
1 citation
Jump To
Cite 1 - (1966) 1 QB 247
Coulton v Holcombe (1986) 162 CLR 1
1 citation
Jump To
Cite 1 - (1986) 162 CLR 1
Department of Primary Industries v Mowburn Nominees Pty Ltd [2004] QDC 27
1 citation
Jump To
Cite 1 - [2004] QDC 27
Department of Primary Industries v Mowburn Nominees Pty Ltd (2004) 25 Qld Lawyer 46
1 citation
Jump To
Cite 1 - (2004) 25 Qld Lawyer 46
Emerson v Custom Credit Corporation Limited[1994] 1 Qd R 516; [1992] QCA 154
2 citations
Jump To
Cite 1 - [1994] 1 Qd R 516
Cite 2 - [1994] 1 Qd R 516
Hazeldell Limited v the Commonwealth (1970) 37 CLLR 47
1 citation
Jump To
Cite 1 - (1970) 37 CLLR 47
Marshall v Director General Department of Transport (2001) 205 CLR 603
2 citations
Jump To
Cite 1 - (2001) 205 CLR 603
Cite 2 - (2001) 205 CLR 603
Martin v Lewis [1985] QSCFC 35
1 citation
Jump To
Cite 1 - [1985] QSCFC 35
Pastoral Finance Association Ltd. v Minister (1914) AC 1083
1 citation
Jump To
Cite 1 - (1914) AC 1083
Perpetual Trustee Co. (Ltd.) v Federal Commissioner of Taxation (1942) 65 CLR 572
1 citation
Jump To
Cite 1 - (1942) 65 CLR 572
Phillips v The Commonwealth (1964) 110 CLR 347
1 citation
Jump To
Cite 1 - (1964) 110 CLR 347
Re H (a Pharmacist) [1972] Qd R 402
1 citation
Jump To
Cite 1 - [1972] Qd R 402
Re Schubert [1989] 2 Qd R 99
1 citation
Jump To
Cite 1 - [1989] 2 Qd R 99
Spencer v The Commonwealth (1907) 5 CLR 418
3 citations
Jump To
Cite 1 - (1907) 5 CLR 418
Cite 2 - (1907) 5 CLR 418
Cite 3 - (1907) 5 CLR 418
State of Queensland v Mowburn Nominees Pty Ltd[2005] 1 Qd R 195; [2004] QCA 212
1 citation
Jump To
Cite 1 - [2004] QCA 212
Succession Duties (SA) v Executor Trustee and Agency Co. of South Australia Ltd (1947) 74 CLR 358
1 citation
Jump To
Cite 1 - (1947) 74 CLR 358
University of Wollongong v Metwally (1985) 59 ALJR 481
1 citation
Jump To
Cite 1 - (1985) 59 ALJR 481

Cases Citing

Case NameFull CitationFrequency
Murphy v GDS Building Services Pty Ltd t/as Zen Roofing [2022] QCAT 1972 citations
1

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