Appellants v Respondent

1 The appeals the subject of this proceeding, are concerned with one reassessment and three assessments to land tax under the Land Tax Act 2005 ("the Act") that were issued by the Commissioner of State Revenue ("the Commissioner") to the Appellants on 11 November 2013 in respect of land situated at and known as 905-959 Taylors Road, Plumpton, being the land contained in Certificate of Title Volume 8592 Folio 884 ("the Land") for the years 2009 to 2012 ("the Assessments").

(a) Re-assessment - 2009 Land Tax Notice No 055485776 issued on 11 November 2013;

(b) 2010 Land Tax Assessment Notice No 080324028 issued on 11 November 2013;

(c) 2011 Land Tax Assessment Notice No 080324010 issued on 11 November 2013; and

(d) 2012 Land Tax Assessment Notice No 080324002 issued on 11 November 2013.

3 At all material times, the Land was jointly owned by the Appellants as tenants in common in varying shares. The shares and the extent of the liability of each appellant referable to the Assessments are not issues in this appeal.

4 On 9 January 2014, the Appellants filed objections to the Assessments on the grounds that "the subject land was used for the purposes of primary production in the relevant period pursuant to an oral crop share farming agreement".

5 By a notice of determination on objection to the Assessments, the Commissioner disallowed the objections. The objection decision states, critically, that the Land must satisfy the requirements of s 66 of the Act to qualify for the primary production land tax exemption. The Commissioner found that the Land was in greater Melbourne and not located in an urban zone, but that the Land was not used primarily for primary production for the purposes of s 66 of the Act. It is common ground for the purposes of this appeal that the only issue is whether or not the Land was used for primary production. Strictly speaking, there may be issues as to whether the Land is within an "urban zone" for the purposes of s 66(b) of the Act, but the Commissioner made it clear in the course of the hearing of this appeal that it is not contended that there is any issue in this respect.

6 Additionally, at the hearing of the appeal, the Appellants sought to rely, in addition to the provisions of s 66, on the provisions of s 68 of the Act, which provides an exemption from land tax for land being prepared for use for primary production. In spite of the application of these provisions being raised by the Appellants at such a late stage, the Commissioner did not raise any objection to possible application of s 68 being argued and determined in these proceedings. The addition of this issue does not have any consequences in terms of evidentiary matters or any significant effect on the time involved in hearing the appeals. The Commissioner's facilitation of the airing of all relevant issues was, in my view, quite proper and was appreciated by the Court.

7 Consequently, given the statutory prescription of the entitlement for exemption of primary production land, the main question raised in this appeal is whether, in the years of assessment - 2009 to 2012 - the Appellants used the Land primarily for primary production within the meaning of s 66(c) of the Act or whether the exemption of the land being prepared for use for primary production under s 68 of the Act is applicable.

8 The matter now comes before the Court as an appeal under Part 10 of the Taxation Administration Act 1997.

9 In the relevant years of assessment, s 66 of the Act provided:

66 Exemption of primary production land in greater Melbourne but not in an urban zone

Land is exempt land if the Commissioner determines that the land comprises one parcel -

(a) that is wholly or partly in greater Melbourne; and

(b) none of which is within an urban zone; and

(c) that is used primarily for primary production.

10 Section 64 of the Act contained the following definition of the expression "primary production":

primary production means -

(a) cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or

(b) the maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce; or

(c) the keeping of bees for the purpose of selling their honey; or

(d) commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or

(e) the cultivation or propagation for sale of plants seedlings mushrooms or orchids.

11 Section 68 of the Act provided for exemption of land being prepared for use for primary production, as follows:

68 Exemption of land being prepared for use for primary production

(1) Land is exempt land for a land tax year if the Commissioner is satisfied that -

(a) the land is being prepared for use primarily for primary production; and

(b) the land will become exempt land under section 65, 66 or 67 within 12 months after the day on which the preparation referred to in paragraph (a) commenced.

(2) The Commissioner may extend the period referred to in subsection (1)(b) by a further period of 12 months.

12 The sole reason why the Commissioner disallowed the objections was that, in the relevant years, the Land did not satisfy the requirements of s 66 of the Act in that the Land was not used primarily for primary production. For the sake of completeness with respect to the legislative picture, it is also noted that the Commissioner has not at any stage exercised the power under sub-s 68(2) to extend the period referred to in s 68(1)(b) the period of 12 months.

13 The principal ground of appeal - putting aside for the moment the meaning and operation of s 68 - is that the Land was, for the years 2009 to 2012, exempt from land tax under s 66 of the Act. The critical provisions of that section require that the Land was, at relevant times, "land ... that is used primarily for primary production". The expression "primary production", as will be seen from the definition contained in sub-s 64(1) which is set out above, means, relevantly, "cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state)". Accordingly, it follows that the critical issue for decision under these provisions is whether the Land had the character of land that is used primarily for cultivation for the purpose of selling the produce of cultivation.

14 As the Commissioner submits, the relevant time at which to ask whether the Land had the requisite character is at midnight on 31 December of the year immediately preceding the land tax year in question, a position which follows from the provisions of s 36(1) of the Act.[1] In the present circumstances, this means midnight on each of 31 December 2008, 2009, 2010 and 2011. Moreover, in order to characterise the use of the land at the relevant time, one may look to activities occurring "during a period not overlong and not over short within which [the relevant time] falls".[2]

15 Before exploring the meaning of the expression "primary production" as defined in the provisions of sub-s 64(1) of the Act, it is important to consider the operation of the provisions of s 66 in which this defined expression is couched.

16 First, it is clear from the provisions of s 66(c) of the Act that the land must be used "primarily" for primary production in order to attract the exemption. It follows that the exemption requires a conclusion that the land was used "primarily" for primary production. Such a conclusion does, however, not necessarily follow if part of the land is used for primary production and the rest of the land unused or if a primary production use of the land is the main or predominant use among multiple uses.[3] Moreover, the relevant activities must be capable of imparting to the whole parcel of land the necessary character.[4] Consequently, the relevant activities must not be minimal, slight, spasmodic or token, but must have some degree of substance and intensity to them.[5]

17 Moving to the meaning of the expression "primary production" in the context of s 66(c), the first point to be made is that it is apparent from the definition of that expression in sub-s 64(1) that a purpose needs to be shown if this definition is to be satisfied, namely, "the purpose of selling". It follows that not all cultivation of land is carried out for such a specific commercial purpose.

18 The critical aspect of requirement of the definition of "primary production" is that "cultivation" takes place on the land. As the word "cultivation" is not defined in the Act, it follows that the word should be taken to be used in its ordinary sense.[6] Consequently, some assistance is provided by the dictionary definitions of the word "cultivation".[7] The Shorter Oxford English Dictionary defines "cultivation", insofar as relevant, to mean "the action of cultivating". It defines the word "cultivate", so far as is relevant, to mean "prepare and use (soil) for crops; bring (land) into a state of cultivation; break up (ground) with a cultivator; give attention to (a plant) to promote growth, improve fertility, etc; produce or raise by agriculture or horticulture". Similarly, the Macquarie Dictionary defines the word "cultivate", insofar as it is relevant, to mean "to work (land) in raising crops; to dig, turn over (earth); to encourage the growth or development of; to grow".

19 Having regard to these dictionary definitions, the provisions of s 66 of the Act and the definition of "primary production" being considered together with the authorities discussed in the reasons which follow, the meaning of the word "cultivate" in the context of these provisions would, in my view, extend to activities that precede the sowing of crops, which activities include the preparation of the soil for crops and the bringing of the land into a state of cultivation. Moreover, it is submitted by the Appellants that it is not necessary that the activities be profitable, provided that they are carried out for the purpose of sale of the produce of "cultivation". They also contended that there is nothing in s 66 that mandates an operation - cultivation - in the nature of business. The Appellants also submitted that the scale of the activity is not relevant, save and except to show that the relevant cultivation was genuine and not merely colourable. In my view, for the reasons which follow, I think these submissions by the Appellants correctly state the position.

20 The Appellants also rely upon a number of authorities which are said to sustain the submission that the idea conveyed by the expression "cultivation for the purpose of selling" is the improvement of the land for the purpose of selling the produce of the improved land. In general terms, this does correctly state the position, but, as discussed in the reasons which follow, a degree of proximity in time is required as between this preparatory work and the more immediate work of cultivation - planting, sowing and harvesting - and, particularly, having regard to the provisions of s 68 of the Act.

21 I turn now to the nature of cultivation more specifically and the nature of primary production. Land may be cultivated in some instances by breaking up the soil, as by ploughing, or in other instances by activities that may or may not be associated with the breaking up of the soil. It is the land, not the soil alone, which is the subject of cultivation. This, it was said in Safety Beach Estate Pty Ltd v Commissioner of Land Tax (NSW) ("Safety Beach"),[8] may be achieved by improvement to the water supply to plants, by fertilizing, by spraying plants with insecticides and fungicides, and by the establishment of wind breaks. More particularly, Rath J said in Safety Beach:[9]

In my opinion the expression "cultivation thereof for the purpose of selling the produce of such cultivation" should not be limited to annual crops, or crops with periodical production. The idea conveyed by the expression is the improvement of the land for the purpose of selling the produce of the improved land. The land may in the relevant sense be cultivated in some instances by breaking it up, as by ploughing, or in other instances by activities that may or may not be associated with the breaking up of the soil. It is the land, not the soil alone, which is the subject of cultivation. This may be achieved by improvement to the water supply to the plants, by fertilizing, by spraying plants with insecticides and fungicides and by the establishment of windbreaks.

In Grozdanov v The Queen,[10] the Court of Appeal considered the ordinary meaning of the word "cultivation" and adopted the broad meaning of the word to encompass the whole process of production from the soil and to cover all aspects of husbandry, for example, agriculture.[11] Moreover, in the Safety Beach case, it was said that in determining the "use" of the land, it is necessary to consider all the circumstances bearing on the degree, extent and intensity of the uses and the question is one of fact and degree to be approached on a broad common-sense basis.[12] It was also said in that case that the word "primarily" permitted the weighing of the non-use of another part of the land.[13] Nevertheless, in considering the question of land use on this basis, the use of the word "primarily" in s 66(c) is significant with respect to the meaning and effect of these provisions. This is clear from the decision of the Full Court in Abbott v Commissioner of Land Tax where Crockett J said:[14]

The foregoing facts appear to me to be the principal relevant findings made by the Judge and were not the subject of any dispute. Upon them can it be said that it has been established that the 209 acres as a whole have been shown during the years in question to have been used primarily for the maintenance of animals thereon, etc. or primarily for the business of primary production?

The question is clearly one of fact and degree. The fact is to be determined as one of inference to be drawn from the primary facts as found. What inference should be drawn must obviously be dependent upon the meaning to be given to the adverb "primarily". That will depend both upon the context in which it is legislatively used and upon its dictionary meaning of "chiefly" or "principally". This means that when the land with respect to which exemptions are claimed is employed for dual uses those uses are to be compared, weighed and evaluated. But is it sufficient, when each of two uses is substantial, to determine the matter by saying that one of those uses is, as between the two of them, the main or principal use? I think not. The character of the parcel of land as a whole is that which has to be judged. It is not enough to say of two genuine and substantial uses that one is - perhaps only marginally - when compared with the other, the "chief" use. It must be a sufficiently "chief" use as to give its character to the whole of the land. To achieve this it must be sufficiently such a use as to give rise to that degree of predominance of use as will fairly allow the character of the whole parcel of land to be described - in this case - as on used for primary production - or a particular form of it, namely "the maintenance of animals", etc.[15]

22 It is also clear from the authorities that this question is to be determined "looking at all the activities together with the surrounding circumstances ... of the taxpayer's ... evident purpose in carrying out those activities".[16] The nature of the test to be applied was also considered by Dr P. Gerber sitting in the Australian Administrative Tribunal in AAT Case 5593 where he said:[17]

1. Whether a man is carrying on primary production - or indeed any business - is, ultimately, a question of fact. Some indicia are dimly discernible through decided cases[18]; Webb J expressed one test felicitously in Martin v FCT:[19]

The test is both subjective and objective: it is made by regarding the nature and extent of the activities under review, as well as the purpose of the individual engaging in them, and, as counsel for the taxpayer put it, the determination is eventually based on the large or general impression gained.

It is not necessary for present purposes to delve more deeply into the nature of the test to be applied, save to observe that to the extent subjective matters may be had regard to, they do not include self-serving statements of intention by or on behalf of the claimant of an exemption.

23 The authorities also show that provisions such as s 66 of the Act are directed to the current use of the land. The concept of current use was considered in Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No 2).[20] The following passages in the judgment of White J are of particular relevance in the present context:[21]

1. ... Brownie AJA [in Blacktown City Council v Fitzpatrick Investments][22] appeared to accept that because the acquired land formed part of the applicant's "land bank", being land acquired and held for the purpose, when the time was right, of being subdivided and resold for profit, that the land was thereby actually used. His Honour said that this was consistent with the reasoning in cases such as Royal Newcastle Hospital[23] and Brickworks[24]. Brownie AJA cited Taylor J in the High Court in Royal Newcastle Hospital[25] where his Honour said:

But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question had been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land.

1. With respect, neither decision indicates that the mere holding of land for future residential development is a current use. In Royal Newcastle Hospital the Hospital was using the virgin land surrounding the hospital that housed patients suffering tuberculosis because the hospital got, and purposely got, fresh air and peace and quiet which provided current advantages to it and its patients.[26] The issue in the Brickworks was whether "new land" acquired in 1939 that adjoined a brickworks and quarry could be used for those purposes in 1960, notwithstanding the introduction of a planning ordinance for which that was not a permitted use. The question was whether that was an existing use of the land. If it were, it could be continued. Gibbs J who gave the leading judgment, said:[27]

If the whole of the land in question was acquired for and devoted to the purpose of quarrying and brick-making, the whole may be held to have been used for that purpose although only part of it was physically used. Obviously where an expanse of land has been acquired for the purpose of quarrying it cannot, because of practical considerations, be excavated all at once, but this does not mean that the part which has not been actually dug up is not used for the purpose of quarrying. Similarly a farmer, who has acquired land for the purposes of an orchard, may be said to use the whole of it for that purpose, although only part has been planted with trees.

In the present case, immediately before 27th June 1951 the respondent owned one tract of land, all of which had been acquired for the purposes of the quarry and brickworks, and all of which was devoted to those purposes. Some of the land was physically occupied by the buildings and by the brick pit which was in the process of gradual extension. It is beyond argument that some of the land was at the relevant date used for the purpose of quarrying and brick-making. In my opinion there is no justification for regarding the new land as separate from the old, or for saying that the old land was used, but the new land was not, immediately before 27th June 1951.

1. In the same way it could be said that the whole of land might be used for the purpose of cultivating crops, though parts of it from time to time are left to lie fallow.
2. But in such cases the whole of land can be said to be in current use because the whole is devoted to a purpose and the parts in current physical use give character to the whole. Could it be contended that the applicant in Brickworks could have relied on existing use rights if land had been acquired for the purpose of quarrying and brickworks, but no quarrying or brickworks had ever been conducted on the adjoining land? That would appear to have been the analogous position in Blacktown City Council v Fitzpatrick Investments Pty Ltd:[28]

The relevance of these passages in the present context is, in my view, to emphasise that a broad common sense approach to considering "cultivation" involves more than focusing only on the planting, growing and harvesting phases of the particular crop and that, applying this approach, it follows that land may be said to be used for cultivation even though each and every part may not be under crop. Nevertheless, as is clear from the Safety Beach case, such use must not merely be colourable.[29]

24 As already observed, the Appellants also submit that the fact that the activity of "cultivation" is not profitable is not relevant in the present context. It is said that it would be an unusual result that the exemption would arise only when there is income from the property because that result would unfairly discriminate against those whose use of land is solely for primary production but who, because of the nature of the crop or weather conditions, do not derive income for a considerable number of years. In my view, these submissions correctly state the position, support for which is provided by Camden Park Estate Pty Ltd v Commissioner of Land Tax (NSW) where, in the context of primary production exempting provisions, Rogers J said:[30]

I should, very briefly address myself to the other question argued by counsel. As I have already remarked, Camden Vale Pty Ltd did not enjoy any income in the accounting year ended 30 June 1975. On behalf of the taxpayers it was submitted that one takes nine-tenths of nil and that requirement has been satisfied. It was submitted that, approaching the Act in the way that I have been content to adopt, it would be an unusual and surprising result that the exemption should arise only when, in truth, there was income from the property. I agree with that. I agree with that for a number of reasons. Firstly, in my view, what the sub-section is designed to do is to ensure that, not only is the land used primarily for one of the designated purposes, but that the income which is derived from the land is also derived from primary production. One example will suffice: It would not have been intended that there should be a large pastoral property on which the major source of income should be the letting of the homestead at an exorbitant rental. The property would still be primarily used for the grazing of cattle and sheep. The letting of the homestead might only be an incidental activity for a short period of the year. The legislative purpose, however, is to ensure that the exemption enures for the benefit of those whose primary source of income from the land is primary production and who use the land for the purpose of primary production.

The other reason I have for coming to this conclusion is that it would quite surprisingly and unfairly discriminate against those whose use of the land is solely for primary production but who, because of the slow maturing of the crop, do not derive income from a considerable number of years. The growing of trees, flowers of a long maturing kind such as proteas, macadamia nuts and other types of produce readily come to mind. I cannot detect anything in the purpose of the Act to disqualify land so used from the exemption provisions merely by reason of the fact that no income is derived in the relevant year.

Similar views were expressed by the New South Wales Court of Appeal in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue.[31]

25 Alternatively, the Appellants submit that if it is found that s 66(c) of the Act requires a "business" of primary production for the purpose of attracting the exemption, then the Appellants contend that the activities carried out by them pursuant to the share farming agreement were in the nature of a business. In this respect, it is said that the notion of business of primary production extends to the ploughing and preparation of the land for the purpose of sowing and the later sowing of crops for purposes of sale.[32] In my view, neither the words of s 66(c), the definition of "primary production" contained in s 64(1) of the Act, nor the authorities referred to in these reasons support the requirement of a "business" of primary production. Critical, nevertheless, is the "purpose of selling the produce of cultivation".

26 The Appellants also make submissions with respect to the general approach that the Court should take in construing the exemption afforded by s 66 of the Act. It is common ground that the ordinary principles of statutory interpretation are applicable, but the Appellants emphasise a number of recent decisions which are said to deal with the "modern approach" to statutory interpretation. In relation to these decisions, the Appellants recognise that the goal of statutory interpretation is to promote the purpose or object of an enactment - that is to ascertain the legislative intention. This position is, of course, entrenched by statute in the provisions of s 35 of the Interpretation of Legislation Act 1984. The Appellants also observe that the decisions to which they make reference differ in the degree of emphasis to be placed on the legislative text and the structure of the statute; the extent to which regard may be had to the context and the breadth of that context; and the point at which the broader context may be considered - that is in the first instance or merely at some later stage when ambiguity might be thought to arise. This is, of course, unsurprising, as the process of statutory interpretation is not something undertaken in a vacuum and much will depend upon the legislative language, the context of the legislation and the circumstances in which the legislation might be applied.

27 In CIC Insurance Ltd v Bankstown Football Club Ltd,[33] it was said that:

The modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. ... Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, ... is reasonably open and more closely conforms to the legislative intent.

In later decisions, the High Court placed greater emphasis was placed on the actual text of the legislation and the purpose of the statute was said to reside in its text and structure.[34]

28 Against this background, the Appellants contend that the purpose of s 66 of the Act is clear; whether that purpose is taken to reside in the text and structure of the Act itself or in the broader context. Section 66 is, as submitted, an exemptive provision and was clearly placed in the Act for the purpose of relieving from liability to land tax taxpayers that use their land primarily for primary production. So much is clear in general terms. The Appellants also make the point that although the general purpose of the Act, as taxation legislation, is to raise revenue, a relieving provision such as s 66 is designed to lighten the burden cast upon taxpayers and is also designed to achieve other social purposes, like the encouragement of farming activities of the kind specified in the definition of "primary production" in s 64. The Appellants add that this is an objective of successive governments and parliaments in the State of Victoria. Unsurprisingly, I do not understand there to be any difference between the Appellants and the Commissioner on the general propositions or assumptions as to the purpose of the legislation. Nevertheless, as the cases make clear, particularly the decisions of the High Court to which reference has been made, the language of the legislation is of primary importance. Moreover, in a representative democracy such as the one in which we live, the matter of preeminent importance is the giving effect to the will of Parliament as expressed in its legislation, untrammelled and uncompromised by suppositions and views as to the legislative purpose of its enactments in circumstances where the language of the legislation is clear and can be given full effect.

29 But there may, however, be some other issues to be considered in relation to the interpretation of exemptive provisions in legislation. In this respect, the Appellants submit that exemptive provisions should not be narrowly construed and should be interpreted to promote the purpose or object underlying the relevant legislation. A variety of instances of the application of that approach were referred to, and include the following:[35]

(a) In Krakos FCT v Krakos Investments Pty Ltd[36], Hill J described the former section 160ZZR of the Income Tax Assessment Act 1936 as having been "introduced to overcome small business objections to capital gains tax becoming payable on the full amount of a gain arising from the disposal of goodwill of a business."

(b) In FCT v Murry[37], Kirby J referred to section 160ZZR, which affords CGT relief for goodwill, and said "provisions of this kind, affording relief to the taxpayer, have conventionally been treated as, to some extent, beneficial. It has been said that they 'should not be narrowly construed and should be interpreted to promote the purpose or object underlying the relevant Act'[38]. Each case must depend upon its own statutory language and apparent statutory purpose. However, I consider that the foregoing approach is the correct one. It is the approach which I would adopt to the relieving provisions of s 160ZZR, understood in their context and construed against the undisputed facts of the case."

(c) In Diethelm MFG v CMR of Taxation[39], French J (as he then was) said that "an exemption which exists for the purpose of encouraging, rewarding or protecting some class of activity is not to be given a narrow application."

(d) That beneficial legislation should be construed generously and that if there is doubt it should be resolved in favour of the taxpayer has been affirmed in a number of decisions.[40]

The Appellants submit that these statements establish a principle that an exemption which exists for the purpose of encouraging, rewarding, or protecting some class of activity is not to be given a narrow application. Thus, it is said, it follows that s 66 of the Act, being an exemptive provision, must be given a generous and broad operation.

30 More particularly, the Appellants submit that the incentive and benefit to which s 66 of the Act is addressed and intended to provide would be cut down if its provisions were construed literally so as to make the exemption unavailable to those that fail to make profits on their cultivation activities or fail to produce excess product or crops - in excess of what is needed to re-sow the land - to be able to sell that excess.

31 The Commissioner, on the other hand, submits that the correct approach to construing the provisions of s 66, particularly paragraph 66(c), is to focus on the language of these provisions. Moreover, it is stressed that the focus must be on the statutory text and that this has been emphasised by the High Court on many recent occasions; and in the authorities to which reference has been made. More particularly, the Commissioner highlights the position that the purpose of the statute is to be derived from what the statute says, not from any assumption about the desirable operation of the relevant provisions. In this respect, reference is made to Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross, where French CJ and Hayne J said:[41]

A second and not unrelated danger that must be avoided in identifying a statute's purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions.[42] As Spigelman CJ, writing extra-curially, correctly said:[43]

Real issues of judicial legitimacy can be raised by judges determining the purpose or purposes of Parliamentary legislation. It is all too easy for the identification of purpose to be driven by what the particular judge regards as the desirable result in a specific case.

And as the plurality said in Australian Education Union v Department of Education and Children's Services:[44]

In construing a statute it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose.

In particular, the Commissioner emphasises the position that "there is no requirement to approach the matter in some beneficial fashion striving to expand the reach of the exemption".[45]

32 In my view, having regard to the authorities to which reference has been made, particularly by the Commissioner, the approach advocated by the Commissioner is clearly the correct one to be adopted in the present circumstances. Nevertheless, I am not of the view that the authorities cited by the Appellants in support of the approach to the construction of these provisions which they advocate, or at least aspects of that approach, is necessarily inconsistent with that advocated by the Commissioner. As I have observed, the process of statutory interpretation is not one to be conducted in a vacuum, but neither is it a process which can proceed from any assumption about the desirable operation of a particular piece of legislation. To the extent that any approach or approaches need to be reconciled, I am of the view that the statement by Kirby J to which the Appellants referred in FCT v Murry[46] is apposite, namely, that "each case must depend on its own statutory language and apparent statutory purposes". As will be appreciated from the previous discussion, to the extent that this statement needs any qualification, it is, on the authorities, that the statutory language, when clear, must govern.

33 Returning now to the language of s 66(c) and the definition of the expression "primary production", it does, in my view, follow from the language of these provisions in light of the approach to statutory interpretation which has been discussed, that the principal question is, as the Commissioner contends, whether the land had the character of land that is used primarily for cultivation for the purpose of selling the produce of cultivation. I do accept, however, that the process of cultivation is, as would be appreciated from common experience, likely to require a period of preparation before any crops are planted or provide any yields, and that cultivated land may well, as a matter of good farming practice, lie fallow to allow the land to recover. The land may also be regarded as lying fallow, though in a cultivated state utilising, for example, nitrogenous enriching crops which are not grown for the purposes of sale, but to rehabilitate the land.

34 In relation to preparation of land for cultivation, reference was also made by the Appellants - and reliance placed - on the provisions of s 68 of the Act which provide an exemption from land tax if the Commissioner is satisfied, inter alia, that the land is being prepared for use primarily for primary production. The provisions of ss 66 and 68 must be read together, particularly as they are not only in the same statute, but are also in the same division - Division 2 of Part 4 (exemptions and concessions); a division titled and directed to "Primary production land". The Appellants sought to identify the species of preparatory work that might be contemplated by the provisions of s 68; such as the provision of water supply and other, perhaps "structural", preparatory work of a similar kind. I do not take it, however, that the Appellants are suggesting that preparatory work as part of "cultivation" for the purposes of s 66 and the definition of "primary production" would not have a greater immediacy and temporal proximity to the process of seeding, growing and harvesting contemplated by these provisions - then what might be contemplated by s 68. In any event, for the reasons which follow in the particular circumstances of these proceedings, I am of the opinion that these issues do not arise as the evidence simply does not support the Appellants' case - whatever view one takes as to the boundary between the operation of s 66 and s 68.

35 Finally, it should be observed that the Appellants carry the onus of proving their case - that the land was, at midnight on 31 December 2008, 2009, 2010 and 2011, used primarily for cultivation for the purpose of selling the produce of cultivation.[47] It is clear that the burden of proof can be an important aspect of primary production cases.[48] Moreover, in that regard, self-serving, non-contemporaneous statements made by taxpayers must be treated with caution - especially statements that are "general, vague and lack[ing] detail required" to prove the facts in issue.[49]

36 The Land, which was acquired in 1995 by some of the Appellants and related persons, comprises approximately 167 acres. More specifically, the Land was acquired by transfer registered on 23 August 1995 for $410,000 by Vasil Koroneos, Daphne Koroneos, Christine Bogdanis, Peter Bogdanis, Louis Koroneos and Keilor Fresh Produce Pty Ltd[50] as tenants in common in equal shares of 3/25 each as to the natural persons and as to a share of 10/25 to the company. The land at this stage was then covered in rocks, "ranging from the size of a small basketball to a small room".[51]

37 The ownership of the Land changed in 2004. On 27 April 2004, the registered proprietors became the Appellants as tenants in common in various shares, namely CDPV Pty Ltd[52] as to an 8/25 share, Vasil Koroneos as to a 3/25 share, Daphne Koroneos as to a 3/25 share, Christine Bogdanis as to a 3/25 share, Peter Bogdanis as to a 3/25 share and LJMSL Pty Ltd[53] as to a 5/25 share. The land at this time was still covered in rocks,[54] and, the Commissioner contends, not being used for primary production.

38 The land was also infested with Serrated Tussock, Paterson's Curse and all manner of other noxious weeds, and the land had pest animal and soil erosion problems. The evidence indicated that these issues were able to be controlled to the satisfaction of the local council, the City of Melton (which, prior to 2012, was the Shire of Melton), under its "Environmental Enhancement Policy". Under that policy, landholders were given a rebate on their rates if they undertake works to control weeds, pest animals and soil erosion to the satisfaction of the City of Melton.

39 Land tax assessments were issued to, and paid by, the Appellants for each of the years 2005 to 2008. In the 2009 year, the value of the Land, and hence the land tax bill, had risen substantially.[55] By facsimile transmission dated 23 February 2009 addressed to the Commissioner, Christine Bogdanis sought an exemption, stating: "The property has always been used for Primary Production purposes, including growing wheat, lettuces and have cattle on the property 100%".[56] A primary production exemption was obtained accordingly.[57] As the evidence given during the hearing of this appeal indicates, the position as put in that 23 February 2009 facsimile transmission was simply not the case.

40 Later in 2009, by contract of sale dated 3 September 2009, the Land was sold by the Appellants for $27.5 million, as exempt land, to a developer. The named purchaser in the contract of sale is ID 905 Taylors Road Plumpton Pty Ltd (ACN 139 184 053), but it apparently later nominated ID West Land Pty Ltd (ACN 146 507 584), a company directed by Elvis Centofanti and Matthew Belford.

41 The contract price was payable over many years, depending on zoning changes allowing development. The contract of sale contains a number of special conditions, the following being of some relevance in the present context:

(a) The purchaser had, before settlement, a right to access the land for development purposes, including infrastructure works (special condition 32).

(b) The purchaser agreed to pay to the vendor an annual 'spraying amount' of $10,000 in reimbursement of the cost to the vendor of keeping the land clear of weeds by spraying (special condition 16).[58]

(c) The vendor warranted that it would 'continue its farming/primary production operation' (special condition 34.1).[59] The purchaser agreed to pay any increases in the land tax, municipal, water and other periodic rates and charges prior to, in effect, development approval (special condition 17).

42 In 2013, the Commissioner commenced an investigation.[60] The Appellants were asked for details and records to substantiate their claim for exemption.[61] At this time, the Appellants' position became that, apart from controlling weeds and other maintenance, the only "farming activity" conducted on the land was the planting of wheat, but that "the wheat has not been harvested nor generated any income".[62] On 11 November 2013, the Commissioner issued the Assessments in question, being those for the 2009 to 2012 land tax years.[63]

43 I turn now to the detail of the evidence itself against the background of the views I have set out previously in relation to the proper construction and operation of the provisions of s 66(c) of the Act, together with the definition of "primary production" contained in sub-s 64(1) and also s 68 of the Act. It follows that the issue to which the evidence must be directed and against which its effect must be assessed is, what was the purpose of the cultivation of the Land and could it be said to be primary in the sense that the predominant or preponderant purpose of the cultivation was for the sale of produce. It should also be emphasised in this respect that the purpose of selling the produce must not be just the primary purpose of the cultivation, but the primary purpose of the use of the whole of the land. As will be seen from the discussion which follows, the evidence advanced in support of the appellant's case does, in my view, fall well short of answering the critical question in the affirmative.

44 The critical period which must be focused on is the period from 2008 to 2012. In relation to this period, the notices of objection to the Assessments put forward one proposition and one proposition only, namely, that "the subject land was used for the purposes of primary production in the relevant period pursuant to an oral crop share farming agreement". This single stated ground of objection is followed by the statement that "further documentary material in support shall be provided as soon as possible". No further documentary material was produced which could, in any respect, be seen as evidencing - at least in any unequivocal way - the alleged "oral crop share farming agreement" which, in these proceedings, was claimed to have been made with Robert Horan. It is the case, however, that hundreds of pages of documents were provided to the State Revenue Office by letter dated 23 September 2013 from Stella Poly, a Director of Brentnalls Vic, chartered accountants, acting on behalf of the Appellants. As will be seen from the discussion which follows, many of these documents are invoices, commencing with invoice from Hercules Excavations dated 16 September 2008 for clearing a 70 acre paddock of rocks to be clean enough to spray the weeds by tractor. There are also a number of tractor repair invoices and the like. The evidence of Louis Koroneos, the sole director of LJMSL Pty Ltd, the sixth appellant, was that tractors were not used on the Land and, in any event, it is most unclear on the evidence whether the alleged share farming agreement had commenced and whether or not Robert Horan had actually occupied or carried out any work on the Land at this time.

45 In relation to evidentiary matters generally, the Commissioner correctly observed that the onus is on the Appellants to establish that between 2008 and 2012, there was a share farming agreement with Robert Horan on certain terms and that the share farming agreement gives to the whole of the Land the character of primary production within the meaning of the Act, which, naturally, includes the purpose. The Commissioner is, as observed in the Commissioner's submissions, at an evidentiary disadvantage inasmuch as those who are seeking an exemption have within their control almost all of the evidence in relation to what is occurring on the Land and why things were or were not done on the Land. The Commissioner can only really point to objective circumstances with a view to determining the position. Consequently, I accept that, when the Court is faced with a case of this nature, and particularly where, as in this case, the Court is faced with very uncertain evidence, a focus must be maintained on whether the onus has been met.

46 Moreover, the Commissioner submits that it is important in this context to observe that over the course of a number of years, the Commissioner has been actively misled by the owners about what was in fact going on at the property and misled for the express purpose of seeking the primary production exemption. Particular reference was made in this respect to a letter from Christine Bogdanis to the State Revenue Office dated 23 February 2009 in support of the primary production exemption claim. Critically, the letter stated:[64]

The property has always been used for Primary Production purposes, including growing wheat, lettuces and have cattle on the property 100%. Though there was a change of ownership in 2005/2006 year, the beneficial ownership has not changed nor has the usage of the land changed. The property has remained a primary producer through this change, a fact that has been relayed to the State Revenue Office.

This letter was followed by a letter dated 28 June 2013 from Brentnalls Vic to the State Revenue Office, advising of, among other things, the following:[65]

● The Land is used for the growing of crops and other farming activities such as ongoing maintenance of the Land by way of the control of noxious weeds and long grass. The activities have been conducted on the Land since its acquisition by the Owners and the amount of time engaged in activities on the Land varies from year to year and season to season.

● The persons conducting activities on the Land are the current Owners via their business, Keilor Fresh Produce Pty Ltd.

● There is a conditional Contract of Sale in place for the Land but the Owners retain possession of the Land whilst the contract remains conditional.

47 The letter of 28 June 2013 from Brentnalls Vic to which reference is made in the 16 October 2014 letter from the State Revenue Office, and to which reference has been made, was followed by a letter from Brentnalls Vic to the State Revenue Office dated 25 July 2013 - presumably under cover of email dated 26 July 2013, given the reference to matters put in that letter as set out in this letter from the State Revenue Office. Critically, this later Brentnalls Vic letter states, omitting formal parts and the last paragraph, that:[66]

Further to your letter dated July 12th 2013, regarding the investigation of the abovementioned land and the primary production land tax exemption, we hereby provide the following additional documents and information as requested:

● Copies of various receipts (expenses) in response to activity conducted on the land for the financial years 2009 through 2013. Please see attached.

● A full and completed copy of the contract of sale for this property. Please see attached.

● Wheat has been the only crop sown on this land and unfortunately, to date, the wheat has not been harvested nor generated any income. This is due to the poor condition of the crop, the lack of rainfall and poor condition of the land.

● A dam was built on the land for the purposes of providing the appropriate water supply for the future crops, but due to the number of years of drought in the area, water supply has been limited.

● The current crop of wheat is looking promising (refer to photos attached) and it is very hopeful that it will be harvested and produce an income. This is due to the increase in rainfall and an improvement in the condition of the soil/land.

● The only other farming activity conducted on the abovementioned land is that of thistle clearing and maintenance.

The copies of the various receipts (expenses) in response to activity conducted on the Land for the financial years 2009 through 2013 were apparently attached to this letter.[67]

48 Turning now to the documents attached to the 25 July 2013 letter from Brentnalls Vic, there is detail provided by these accountants of the crops said to have been grown on the Land which, according to them, is wheat and has only ever been wheat. This is contrary to the evidence of Robert Horan, who says that barley was also grown. There is also mention of the drought and lack of water, mention of the current crop of wheat looking promising, and otherwise the work is said to be thistle clearing and maintenance. Also with that material are further supporting documents which are to be found in something like a further 100 pages of the Court Book.[68] In this further supporting material are accounts of Keilor Fresh Produce Pty Ltd and invoices addressed to that company for tractor repairs.

49 During the course of his cross-examination, Louis Koroneos gave evidence that tractors were not used on the Land. Moreover, Mr Koroneos was taken to some other particular matters in these further documents, including matters like invoices for spinach seed. This is inconsistent with the position put by the Appellants to the Commissioner that only wheat was grown on the Land. As observed, the evidence of Mr Horan was that both wheat and barley was grown on the Land, but there is no evidence of spinach having been grown on the Land. Invoices also provided in this additional material are for fertilisers and for weed control and rabbit control poisons and the like. The evidence was that there were no rabbits on this Land, but rather, problems with kangaroos. In any event, the evidence of Mr Horan is that he was the one cultivating the Land and any costs involved in fertilisers, weed control[69] and the like were costs borne by him.

50 In my view, the only conclusion that can be drawn from an examination of this material is that it related to activities conducted by Keilor Fresh Produce Pty Ltd on land other than the Land the subject of this proceeding. Thus, the position put by Ms Bogdanis and by Brentnalls Vic to the Commissioner was entirely misleading. It is not necessary, in the present proceedings, to explore explanations for this conduct, save to say that it indicates that evidence adduced by the Appellants in these proceedings must be viewed and considered with great caution, particularly in the absence of any explanation for the position which this material indicates. In this respect, the Commissioner drew attention to the position that Ms Bogdanis was not called to give evidence in this proceeding, which was said to be a matter of significance, as on the evidence of Mr Koroneos, she was the person who had full knowledge of the operations of Keilor Fresh Produce Pty Ltd and in relation to the use of the Land. On this basis, it would appear that she would have been in a position to provide an explanation, but she did not do so. In this respect, it should also be observed that Mr Koroneos, who is not literate, stressed that it was Ms Bogdanis and not himself who was able to understand the relevant documentation and who had knowledge of business arrangements and use of the Land. Clearly, Mr Koroneos was not in a position to provide any explanation as to the material provided to the Commissioner and why it was misleading.

51 Moreover, to the extent that the affidavit evidence of Mr Koroneos might be said to provide some explanation, the Commissioner submitted that, in this respect, regard should be had to his evidence to the effect that neither his affidavit of 26 November 2015 nor his supplementary affidavit of 28 January 2016 were cast in the sort of language which he would use. It is also not necessary, for present purposes, to explore this aspect of his evidence further, save to observe that his evidence in cross-examination, to which I now turn, did not support his affidavit evidence-in-chief and indicated, rather, that little weight could be put on that evidence-in-chief.

52 Taking Mr Koroneous' evidence as a whole, one can, in my view, only conclude that he really had little, if any, interest in what Mr Horan was doing on the Land. This is particularly clearly demonstrated by a number of passages from the transcript of Mr Koroneos' evidence:[70]

He never grew anything except barley?---Who?

Horan?---I don't know what he was doing. You know it's - when it's this small - - -

You don't even know?---- - - you realise what it is barley or - or wheat.

So you never even found out what it was that he grew?---No.

And you were in a share farming arrangement with him?---Yes.

Mr Koroneos the real arrangement was for him to do whatever it took to keep the weeds down and to keep the State Revenue Office off your back. That's the real agreement isn't it?---No, no, not really.

Not really?---No.

That was part of it was it?---No.

53 Turning to the alleged share farming agreement, the evidence of Mr Koroneos is again most unsatisfactory and does not provide any basis upon which, in my view, it could be concluded that the terms of any such agreement were settled and understood between the supposed parties - particularly when one also has regard to Mr Horan's evidence - or that any such possible terms were agreed or implemented. Mr Koroneos' evidence in cross-examination indicates this very clearly:[71]

"Horan was to cultivate the land for the purpose of selling the product of cultivation and in return he was to carry out further clearance and maintenance works on the land to improve its suitability to cultivate for further primary produce. The agreement was that the appellants as the owners of the land would receive 25 per cent of the proceeds of sale of any excess grain harvested. Grain in excess of what is needed to re-sow the land". That's what you said when you made an affidavit in this case. Now first of all you wouldn't have put it quite like that, I think would you. That's rather hifalutin language that you wouldn't have used isn't it?---I don't know, that's - I can't understand what - - -

You wouldn't have said something like, "Horan was to cultivate the land for the purpose of selling the product of cultivation"?---That's correct.

What would you say?---What do you mean, cultivation?

Was he going to farm it?---He was going to sow wheat or barley you know.

In this paragraph you say that the agreement was that you, the family?

---Yeah.

"Would get 25 per cent of the proceeds of the sale of any excess grain harvested, that is in excess of what's needed to re-sow the land"?---And expenses.

Let me just deal with that in parts. Some of the grain that's harvested you'll use to sow next year's crop, is that what you had in mind?---I don't know. I'm not cereal you know in Europe I remember I was young boy you know. Some they used to get seed from somewhere else you know, they buy new one, just changing it you know. But I don't know in Australia, I'm not cereal (indistinct).

You didn't know when you reached the agreement with Mr Horan whether each year he would buy seed and plant a new crop or whether he'd use last year's - - -?---Well I - I had the agreement to sow up there and I mean plant it, you know put them in and like it and what is after expenses so I can get 25 per cent. I didn't ask he get same seed to plant it or to buy it.

What I'm suggesting to you at the moment Mr Koroneos is that what you've said in your affidavit is a little bit different from that?---What is it?

I'm trying to take this in stages. At the moment I'm trying to establish the part of it where you say in your affidavit that what we were talking about was the proceeds of sale of any excess grain harvested, grain in excess of what is needed to re-sow the land. Now just that part about resowing the land. What I was exploring with you is that there really is two ways you can sow a crop where you're repeat sowing the same crop. You can buy your new seed from outside and plant it or you can keep some of the seeds from last years' crop and use them?---That's on Horan's - you know on Horan's you know it's better than me on cereal crops.

HIS HONOUR: But isn't what Mr Williams putting to you correct? You've got to get the seed from somewhere. You either buy it in or keep some from last year?---Well I didn't ask him about that, what he was going to keep for the seed, what are you going to get some for next year, so he can re-sow you know. Then after what is left you know.

MR WILLIAMS: So you didn't know whether he was going to re-sow with last years' seed or buy new seed?---No.

If that's right then how could you have had an agreement with him that was based on the only proceeds that you were entitled to a share of being what was in excess of what was used to re-sow?---Well (indistinct) the agreement with Horan to their farm, then when he come to harvest it, you know to get the crop, after his expenses you know we get 25 per cent, our family to get it. That's very simple. I don't know to put other way round.

The other thing is that there's a difference isn't there between getting 25 per cent of the total - - -?---Not of total, no, on the profit.

Yes, 25 per cent of the total profit - - -?---I mean after expenses.

- - - versus a 25 per cent share of the proceeds of sale of whatever wheat is left over after re-sowing?---That's correct.

There's a difference between those two concepts isn't there?---Not really.

Did you really know what the arrangement was for Mr Horan at all?---H'mm.

Did you really know what the arrangement was for Mr Horan at all?

---Gentlemen you know, we had to agree you know so he can sow the paddock. Then after what - you know after when you come to harvest it you know, so - and he get for his expenses, you know after the expenses if there's any leftover we will share 25 per cent to me, 75 for Horan.

Is this agreement still going?---Well, no.

When did it stop?---We had the company go under (indistinct). They said we better do it with Horan, because they not satisfied what I was doing.

So when the company that bought it, you're talking about ID Land, is that the company you mean?---That's correct, yes.

That's Mr Jeffrey Garvey isn't it? When he bought it he said he wasn't satisfied did he, with what you were doing?---That's correct, more or less.

So he made some other arrangement?---I don't know.

When did that arrangement start and when did your arrangement stop?

---Well why don't you ask - I don't know, I don't know I said.

Well hang on a second Mr Koroneos. You're telling me about an agreement you say you've got with Mr Horan where you get a share of proceeds?---Yes, that's correct.

So when did that agreement come to an end so that you're no longer entitled to a share of proceeds?---I don't know. I don't remember.

This evidence was contradicted by Mr Horan in relation to the fact that, at least by 2011 when Mr Garvey (apparently on behalf of the purchaser of the Land) approaches him, it all changes. Mr Horan's evidence concluded with the position on those matters that he, Mr Horan, was entitled to keep all of the proceeds of sale and it would be accounted for as between him and ID, the purchaser company. He then said that that might have been Mr Koroneos, he did not know. It was clear from Mr Horan's evidence that when Mr Garvey did come on the scene, Mr Horan was able to take his activity on the Land at a higher level. Moreover, in about September 2010, the $10,000 payments began, or were first due, under the contract of sale - payments to the Appellants, as vendors of the land, to keep down weeds pursuant to special condition 16 of that contract.[72]

54 Overall, Mr Horan's evidence was also and similarly unsatisfactory and did not provide any support or consistency with the evidence of Mr Koroneos with respect to any share farming agreement. In particular, any suggestion that the agreement involved the Appellants as the owners of the Land receiving 25% of the proceeds of sale of any excess grain harvested - grain in excess of what was needed to re-sow the Land[73] - was not supported by the oral evidence of Mr Horan. In the course of cross-examination as to the calculation of profit for the purpose of this alleged agreement and, consequently, the input costs to be deducted from any receipts before the calculation of profit, Mr Horan said:[74]

Can you explain to me what you said to him about how it would work at the time?---That's what I said. You - we'd get 25 per cent of the profit if there was a profit after expenses.

And how would that be worked out?---Pardon.

How would that be worked out?---Well obviously if he was inspecting the place, he'd see how much a crop would grow.

And one of the largest inputs, I suggest to you in your farming enterprise was your own time. Would you agree?---My time and machines, yeah.

And you owned those machines?---Yeah.

So it would be fair, wouldn't it, in calculating a profit to allow some proportion of the costs of owning and operating those machines?---Yeah.

Because obviously you weren't just using them on this property?---Yeah.

You were using them next door and you were using them at the other places. So there had to be some apportionment, didn't there?---Yeah.

How were you going to - - -?---Oh well, it's - it's based on acreage, cost per acre.

So you had in the back of your mind, did you, that there would be some cost per acre that would be allowed for all of that?---Yeah.

How is that worked out?---By what I - what I estimated work I could get. If my estimates aren't correct, I could be out hundreds of dollars. But I - if I'm working it out, if you employ me to come and do your place, and I have to work out a quote. Is that what - - -

Sure?---To say I'm going to charge you $200 an acre to do this farm and that's it, and you go, "Thank you very much."

Sure, and whatever I agree to pay, I've got to pay?---That's right.

But you didn't have an agreement like that with Mr Koroneos, did you?---I said if I give the profit after what expenses, we'll get 25 per cent.

Yes, and what I'm trying to get at, Mr Horan, is how you work out what those expenses are?---How do I - how did - how did I work it out.

Yes?---It was an unknown factor for me because I didn't know how much in the first year it was going to cost.

So it was an unknown factor for you and an unknown factor for him?

---Virtually.

So again - - -?---I had a rough idea how much it was going to cost me.

All right. At the end of the first year, then, having said nothing more than that, how are you going to sit down with him and work out whether or not you'd made a profit?---How was I going to work it out?

Yes?---If I made a profit I'd tell him.

But, how would you know if you'd made a profit?---By the yield of the paddock.

Right. But, what would the expenses be?---Well, I have costing and figures of how much things cost, if - - -

Do you? How much was your time going to be charge at?---Well, if I wanted to charge $5 I'd charge $5. If I wanted to charge $100 I'd charge $100.

Yes. So it was entirely up to you - - -?---If I wanted to charge $2 I'd charge $2.

If you charge $1,000 you'd charge $1,000?---Yeah.

A minute?---Well, whatever you determine.

So it was entirely in your hands. You didn't discuss it with Mr Koroneos at all. You would charge whatever you thought was a fair thing for your time?

---And whatever I thought, yeah.

55 In relation to this evidence, the proper conclusion is, in my view, that Mr Koroneos did not have any real idea what Mr Horan was doing on the Land and that there was nothing in the nature of concluded terms in any share farming agreement - if indeed any agreement of this nature was actually contemplated by the alleged parties at any relevant time.

56 Against this background, the Commissioner made the following submissions with respect to what follows in terms of relevant purpose and the operation of s 66(c) and the associated provisions of the definition of "primary productions". Thus, Mr Williams QC said:[75]

MR WILLIAMS: I mean you could conduct farming activities without having a contract. People trust each other. I wouldn't be standing up here on behalf of the commissioner and saying that unless it, you know, satisfies the full requirements of a legal contract it doesn't assist the court in determining what the purpose was. It could but if actually there really isn't an understanding at all, the proposition that there's an oral share farming agreement is actually dressing up as something else. What in fact was no more than a convenient arrangement whereby Mr Koroneos had reached the point, as he told Your Honour, that he couldn't make a go of farming this land.

And he had a neighbour or a person operating on the neighbouring land, Mr Horan, who was happy to do some activity on the land which would have the benefit for Mr Koroneos' purposes of weed suppression and a bit of rock clearing. And that's Mr Koroneos' purpose because he knows if he stops farming he's going to have to do those things. Even if he doesn't farm at all he's still going to have to suppress weeds and over time he's probably going to have to clear rocks, because clearing rocks makes weed suppression easier.

That's why he paid Mr Hercules $38,000-half to do it, as is described in the Hercules' invoices as to what the reason was. So over time either that task falls to Mr Koroneos and his family, in circumstances where they're not farming at all, they've just got to do that to keep the land up, or conveniently let Horan do what he likes on the land which is entirely consistent with showing no interest in what it is that Horan's growing, whether it's turning a profit or not and whether you're entitled to a profit share.

HIS HONOUR: Yes. But suppose Mr Horan had come on to the land on some vague arrangement, let's put it like that, which the owner of the land was not particularly interested in for all sorts of reasons, and run a very successful farming into cultivation enterprise, that would still trigger 66 wouldn't it or would it?

MR WILLIAMS: We would say that it doesn't because the question is what's the purpose of that activity going on the land?

HIS HONOUR: By whoever's doing it?

MR WILLIAMS: But what's the activity and who's directing it? If it's looked at from the perspective of the owners certainly the purpose is weed control and rock management.

HIS HONOUR: Yes, yes, I understand you're putting that. Yes, yes.

MR WILLIAMS: Even if it's looked at from Horan's purpose however, and one accepts Your Honour's proposition, it would still only be one of the several purposes. So Horan might have a commercial purpose but it doesn't mean that that's the only purpose and that's therefore the only use.

HIS HONOUR: Yes.

MR WILLIAMS: Because you can't ignore the owner's use simply because Horan's the one conducting the activities or the owner's intention rather for the use. But even looked at from Mr Horan's perspective, and even if Your Honour was to reject what I've just said and say that the entire focus is on what Mr Horan's purpose is because he's the one conducting this activity.

HIS HONOUR: Yes, yes.

MR WILLIAMS: Even on his evidence Your Honour would not be inclined to find, I respectfully submit, that the principle purpose was to sell the produce of the land. Mr Horan referred at least a couple of points in his evidence to what I might call a bad neighbour problem, which is well known in farming.

On the basis of the evidence to which reference has been made and for the reasons which follow I am of the view that these submissions by the Commissioner accurately state the position.

57 On the evidence, it is not, in my view, established that the principal purpose, was to sell the produce of the Land. In this respect, Mr Horan referred in his evidence to what might be described as the "bad neighbour" problem, which is well known in farming. In this respect, he made mention of a farmer who has well cared for the property farmed and on which weeds have been eradicated, but describes the whole of his property as being susceptible to weed infestation because of his neighbours' lack of weed eradication or control. Mr Horan made mention of this because he was conducting other farming operations on nearby land and in terms of keeping this land clear of weeds, he was concerned not to be impinged upon as a result of "bad neighbours". In this respect, I observe his evidence in answer to the question, "I'm not asking you to focus on what Mr Garvey's motivation is, I'm asking you about your motivation", as to which he answered, "The motivation for me was to keep the land [ie the Land] clear in production so that it wouldn't impinge on any other productions in that area".[76] He also said, in answer to earlier questioning with respect to weed management and weed spraying, that "Well because of the [weed] management - it's in my interests to - in my interests to do that because it eliminates weeds going to the next property".[77] Thus, Mr Horan's first and only answer with respect to his motivation was so that the Land did not impinge on his other farming activities as a result of weed infestation. This is, of course, not the purpose relevant to the provisions of s 66(c) or the definition of "primary production" contained in the Act. At best, in my view, land cultivation for the purpose of selling the seed - selling the produce having regard to wheat and barley crops - may have been a side benefit, but could not, on the evidence, be described as the primary purpose. Moreover, the fact that some seed might be produced on the Land for sowing on other properties farmed by Mr Horan is probably not, in the factual context of this proceeding, something that could be described as cultivation for the purpose of selling the produce. Even if one took a broad view of the words in parenthesis in paragraph (a) of the definition of "primary production" - "whether in a natural, processed or converted state" - this activity could not be regarded as the primary purpose but, at best, a mere side benefit. Moreover, any claimed sale of produce from the Land was so minimal as to be consistent with the "side benefit" subsidiary purpose analysis to which I have referred.[78]

58 Finally, in terms of evidence, there is the evidence of Benjamin Kroker, Senior Land Management Officer of the City (and previously the Shire) of Melton, who gave evidence in relation to cultivation of the Land. Mr Kroker's evidence was challenged on the basis that his claimed expertise did not provide any proper basis for his giving, what was said by the Commissioner to be, opinion evidence. In response, the Appellants relied on s 78 of the Evidence Act 2008, particularly paragraph 78(a) in that "the opinion is based on what the person saw, heard or otherwise perceived about the matter or event". In my view, Mr Kroker's evidence with respect to his experience qualified him to give the evidence which he sought to give and, in any event, the objection was not really pressed by the Commissioner following Mr Kroker's evidence.

59 I am, however, inclined to the view that Mr Kroker's evidence falls within the category of evidence discussed by Forrest J in Matthews v SPI Electricity Pty Ltd.[79] More particularly, in that case, Forrest J said:[80]

Merely because a witness has expertise does not mean that his or her evidence is opinion evidence.

The end result is that a witness is entitled to give evidence about observations and conclusions based upon the application of specialised knowledge which does not constitute an opinion within the meaning of s 79 [of the Evidence Act].

For these reasons, I am of the view that the evidence of Mr Kroker is admissible on this basis.

60 The substance of Mr Kroker's evidence was that there was cultivation on the Land at relevant times and that cultivation of land was and is an accepted means of weed control. In this respect, reference was made to a series of applications to the City of Melton (and before that, the Shire) for a rate rebate on the basis of steps taken to control weeds.[82] The ready inference from both Mr Kroker's evidence and the documents relating to the rate rebate is that weed control was also an accepted benefit of cultivation.

61 Viewing all this evidence together, I am of the view that it cannot be said that the Land was used primarily for cultivation for the purpose of selling the produce of cultivation. At best, that was something in the nature of a side benefit. Rather, it was most advantageous for the Appellants to allow Mr Horan to use the Land for whatever cultivation purpose he chose, as long as the effect was to control weeds and otherwise generally maintain the Land. Mr Horan's purpose, insofar as it might be relevant to the operation of these provisions of the Act, was also primarily to control weeds and to avoid the "bad neighbour" problem, and if, as a side benefit, he obtained some seed for re-sowing on the Land or for sowing on other properties he was farming or made some money from the sale of seed from time to time, then he was content. Mr Horan's purpose was not to use the Land primarily for cultivation for the purpose of selling the produce of cultivation.

62 In relation to s 68 of the Act and any issues with respect to preparation for cultivation under its provisions or the provisions of s 66, I am of the opinion that the evidence simply does not support the view that there was any work of a preparatory nature to the relevant primary purpose under s 66. Rather, as indicated, it was all about weed control with some side benefits as discussed. In this respect, the Appellants made reference to the construction of a dam on the Land. This occurred, however, many years prior to the land tax years in question and could not be regarded as preparatory work or evidence going to purpose with respect to the use of the Land in these years.

63 In my opinion, the Appellants have not discharged their burden of proving that the Land was, at any of the four relevant times, land used primarily for cultivation for the purpose of selling the produce of cultivation.

64 Moreover, in my opinion, the evidence adduced by the Appellants is unsatisfactory and should be approached with a high degree of caution.

65 More particularly, the current position of the Appellants is that the Land was used by a Mr Robert Horan to grow barley and wheat under a share farming agreement. Conspicuously absent, however, is a contemporaneous document supporting the alleged agreement. There is, of course, no particular reason why any alleged share farming agreement need be in writing, but having regard to the inability of the Appellants' witnesses to give evidence as to the terms, much less the critical terms, of that share farming agreement, the assertion of some arrangement of this nature by the Appellants must be rejected. In any event, more generally, few, if any, records or other substantiating documents have been produced which would provide any basis for supposing such an agreement existed. For the most part, the evidence is vague and self-serving, and was, with respect to the share farming agreement, as asserted, quite inconsistent.

66 In the first year of operation of the alleged share farming agreement, it was said that Horan planted a barley crop - on less than one-third of the land. It is said that that crop did not generate enough barley to sell and the same happened the next year, the next, and, in the fourth year, the year relevant to the 2012 land tax year, no crop was even planted. There is no evidence upon which it could be concluded that this was for the purpose of good land management, leaving the Land fallow or otherwise restoring its productive capacity.

67 In these circumstances, and for the reasons already discussed in some detail, it is not established that Horan's primary purpose was to generate enough produce to sell, and, in any event, only a relatively minor portion of the Land was allegedly cultivated. Rather, as indicated, the proper inference from the evidence is that the position of Mr Horan was that he was particularly concerned to avoid the "bad neighbour" problem as a result of untended weed-invested land affecting nearby land which he had cropped. As the evidence indicates, one way of controlling weeds was to sow a crop or simply plough the Land. It appears, however, that the Land was ploughed more intensively than might have been ploughed merely to turn over the soil and prevent weed growth. In the circumstances, this remains consistent with the view that Mr Horan's purpose was to control weeds and if so doing by planting a crop some seed was produced which he might use in useful planting in his other farming operations on other land, then this was a bonus - a side benefit.

68 As discussed previously, the evidence indicates that there was no agreement as to the commercial aspects of any alleged share farming agreement - Mr Horan was even unable to provide any basis upon which his costings might be calculated and, particularly, could not indicate how his own time and labour might be compensated or paid for under such an agreement, other than that he would consider how much he would take out of the proceeds of sale of any crop after deducting his expenses, and that would be his payment or compensation. In any event, there is no evidence that any crop was sold and, in all the circumstances, it is, in my view, simply not possible to conclude that there was any cultivation for the purposes of sale. In relation to the latter, there was also discussion and submissions on the proposition by the Appellants that the growing of seed by Mr Horan on the Land for use in other plantings on other land, or even the same Land, could be regarded as falling within the definition of "primary production" as contained in paragraph (a) of that definition - "cultivation for the purposes of selling the produce of cultivation"; with an emphasis on the words in parenthesis, "whether in a natural, processed or converted" state. In the course of those discussions and submissions, I raised the example of a large acreage wheat farm in the Wimmera of Victoria which retained a certain proportion of seed from each year's crop for replanting. The need for seed for replanting of crops is an obviously essential feature of agricultural activity, and so in the Wimmera wheat farm example, any exemption would clearly not be affected because of seed retention for replanting according to usual farming practices.

69 In the present circumstances, however, even if the seed from crops grown on the Land was used for replanting on that Land and elsewhere in Mr Horan's cropping, the utilisation of the Land for cultivation and cropping is not of a scale and type which suggests that the purpose of cultivation was for selling the produce, namely the seed, whether directly or to the market generally, or to Mr Horan on some basis under a share farming agreement. In this respect, it should be remembered that the evidence does not support the view that it could be taken that Mr Horan's use of seed from the Land was in some way "sold" to him under the share farming agreement for his own purposes for further cropping.

70 Finally, much was made of the fact of drought and poor yields on the Land, together with the suggestion that much of the produce had been eaten by kangaroos. The weakness in this evidence is that it was clear from the evidence that Mr Horan also cropped land in the general area - particularly having regard to the evidence of his concern to avoid the "bad neighbour" problem as a result of seeds from noxious weeds blowing from the Land onto his cropping land elsewhere - so one might ask why yields were so bad on the Land, given that the drought was all-embracing and that, as a matter of general knowledge, we know that kangaroos do not take much notice of fences.

71 Thus, in my view, the Court should draw an inference that the Appellants or the developer were seeking to do the minimum thought necessary on the Land to maintain an exemption from land tax pending its development. Moreover, weed control is not primary production, and nor is rock clearing. The extent of any pre-settlement activities being conducted on the Land by the developer at relevant times is unclear. Finally, it is unnecessary to consider whether, more generally, "land-banking" can amount to a use of land.[83]

72 For the preceding reasons, the following orders will be made in each proceeding:

73 The parties are to bring in orders as indicated to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further on this issue.

[1] See Numo v Commissioner of State Revenue [2016] VSC 274.

[2] Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 660. See also Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (2010) 80 ATR 68 at 70 [4].

[3] Abbott v Commissioner of Land Tax (Vic) [1979] VicRp 31; (1978) 9 ATR 728 at 732; Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 661-2; Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278 at 280. See below [23].

[4] Abbott v Commissioner of Land Tax (Vic) [1979] VicRp 31; (1978) 9 ATR 728 at 732; Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 661-2; Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278 at 280.

[5] Carjulgar Industries Pty Ltd v Commissioner of Land Tax (Qld) (1983) 9 QLCR 151 at 155-6; Clarke v Commissioner of Land Tax (NSW) (1980) 11 ATR 794 at 804; Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7 at 10-12; Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 661; Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278 at 280-1.

[6] D C Pearce and R S Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths 8th ed, 2014) [3.30].

[7] See also Grozdamov v The Queen [2012] VSCA 94; (2012) 34 VR 426 at 432 [31]-[32].

[8] (1979) 9 ATR 451 at 455.

[9] (1979) 9 ATR 451 at 455.

[10] [2012] VSCA 94; (2012) 34 VR 426.

[11] See Grozdanov v The Queen [2012] VSCA 94; (2012) 34 VR 426 at 432-6 [31]-[47].

[12] Safety Beach Estate Pty Ltd v Commissioner of Land Tax (NSW) (1979) 9 ATR 451 at 457.

[13] Safety Beach Estate Pty Ltd v Commissioner of Land Tax (NSW) (1979) 9 ATR 451 at 457.

[14] [1985] VicRp 15; [1985] VR 164 at 165-6.

[15] Cf Dixon v Bridge (1967) 84 WN (Pt 2) (NSW) 248.

[16] Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775 at 784 [24].

[17] [1989] AATA 279; (1989) 21 ATR 3140 at 3143.

[18] Cf Thomas v FCT (1972) 3 ATR 165; Ferguson v FCT 79 ATC 470.

[19] [1953] HCA 100; (1953) 90 CLR 470 at 474.

[20] [2016] NSWSC 332.

[21] [2016] NSWSC 332 [88]-[91].

[22] [2001] NSWCA 259.

[23] Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493 ("Royal Newcastle Hospital").

[24] Parramatta City Council v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1 ("Brickworks").

[25] Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493 at 515.

[26] Council of the City of Newcastle v Royal Newcastle Hospital [1959] UKPCHCA 1; (1959) 100 CLR 1 at 4.

[27] Parramatta City Council v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1 at 22-3.

[28] [2001] NSWCA 259.

[29] (1979) 9 ATR 451.

[30] (1983) 14 ATR 557 at 561-2.

[31] [2011] NSWCA 366; (2011) 85 ATR 775, see especially, 784 [23]-[24].

[32] AAT Case 5593 [1989] AATA 279; (1989) 21 ATR 3140; AAT Case 11,507 [1996] AATA 465; (1996) 34 ATR 1144; Hope v The Council of the City of Bathurst [1980] HCA 16; (1980) 144 CLR 1.

[33] (1997) 187 CLR 384 at 408 (citations omitted).

[34] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 and _Certain Lloyd's Underwriters Subscribing v Cros_s [2012] HCA 56; (2012) 248 CLR 378. See also, EHL Burgess Properties Pty Ltd v Commissioner of State Revenue [2015] VSC 295, [69]-[78] and later on appeal in Commissioner of State Revenue v EHL Burgess Properties Pty Ltd (2015) 209 LGERA 314 at 327-35 [46]-[80].

[35] Appellants' Submissions (31 March 2016) [20].

[36] (1995) 61 FCR 489 at 492.

[38] Plessey Australia Pty Ltd v Federal Commissioner of Taxation [1989] FCA 428; (1989) 20 ATR 1538 at 1543.

[39] [1993] FCA 437; (1993) 44 FCR 450 at 457.

[40] Cf Repatriation Commission v Hawkins [1993] FCA 479; (1993) 45 FCR 205 at 211; MLC Ltd v FCT [2002] FCA 1491; (2002) 126 FCR 37 at 45-8.

[41] [2012] HCA 56; (2012) 248 CLR 378 at 390, [26].

[42] See Palgo Holdings Pty Ltd v Gowans [2005] HCA 28; (2005) 221 CLR 249 at 262 [28]; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at 283 [97].

[43] Spigelman, 'The Intolerable Wrestle: Developments in Statutory Interpretation' (2010) 84 Australian Law Journal 822 at 826 (emphasis added).

[44] [2012] HCA 3; (2012) 248 CLR 1 at 14 [28] (citations omitted). See also Miller v Miller [2011] HCA 9; (2011) 242 CLR 446 at 459 [29].

[45] Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (NSW) [2011] NSWCA 366; (2011) 85 ATR 775 at 785 [28]. See also Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2016] NSWSC 332 at [65] (referring to Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (NSW) [2011] NSWCA 366, [28]: "it is not a purpose of s 10AA [the exemption for land used for primary production found in the Land Tax Management Act 1956 (NSW)] to encourage primary production. Rather, the provision concerns land use for primary production as defined. There is no requirement to approach the matter in some beneficial fashion to expand the reach of the exemption."

[46] (1998) 193 CLR 605 at 632-3 [77].

[47] See Taxation Administration Act 1997, ss 110 and 127. See also Land Tax Act 2005, s 69.

[48] See, eg, Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 661-2.

[49] As the taxpayer's evidence was described in a recent primary production case, Cornish Investments Pty ltd v Chief Commissioner of State Revenue [2012] NSWADT 204 at 864 [38]. See also Warriewood Valley Pty Ltd v Commissioner of Taxation [1993] FCA 396; (1993) 26 ATR 270 at 281; Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 at 403.

[50] Keilor Fresh Produce Pty Ltd (ACN 060 721 173) was incorporated on 30 June 1993, then and since with sole director Louis Koroneos: SC56. SC56 meaning the document behind tab 56 of the documents filed by the Commissioner pursuant to rule 7.06 of the Supreme Court (Miscellaneous Civil Procedure) Rules 2008.

[51] Affidavit of Louis Koroneos (sworn 26 November 2015) [10].

[52] CDPV Pty Ltd (ACN 102 177 668) was incorporated on 13 September 2002, then and since with sole director Louis Koroneos: SC57. It apparently acts as trustee for the KFP Superannuation Fund.

[53] LJMSL Pty Ltd (ACN 164 359 915 was incorporated on 15 December 2003, then and since with sole director Louis Koroneos: SC58. It apparently acts as trustee for the Koroneos Superannuation Fund.

[54] Affidavit of Robert Horan (sworn 28 January 2016) [3].

[55] The relevant value for the 2009 year was $3,340,000, an increase of $608,000 on a previous valuation. Thus, as the land tax assessments indicate, the land tax payable without any exemption was under the 2009 Land Tax Assessment $32,625 - a substantial increase from the land tax payable under the 2008 Land Tax Assessment of $1,220.

[56] Affidavit of Krystin Claire Rosel (sworn 29 February 2016) Exhibit KCR-2.

[57] Affidavit of Krystin Claire Rosel (sworn 29 February 2016) Exhibit KCR-3.

[58] See also Affidavit of Peter Bogdanis (sworn 28 January 2016) [3].

[64] Affidavit of Krystin Claire Rosel (sworn 29 February 2016) Exhibit KCR-2.

[65] As summarised in the letter from the State Revenue Office to the appellant's solicitors, G & M Lawyers, dated 16 October 2014: Court Book 532-8.

[69] But as to the later position with respect to weed control by the appellants under the Contract of Sale of the Land, see above [41].

[73] See Affidavit of Louis Koroneos (sworn 26 November 2015) [15].

[79] [2012] VSC 340, [35]-[44].

[80] [2012] VSC 340, [35].

[81] [2012] VSC 340, [43].

[82] Melton Shire Council Environmental Enhancement Policy 2010 - Proposed Works Form (Court Book 401-5).

[83] See Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (NSW) (No 2) [2016] NSWSC 332, [23]-[125].