Chief Commissioner of State Revenue v Metricon Qld Pty Ltd

016] VSCA 338 Ryde Municipal Council v Macquarie University (1978) 138 CLR 633; [1978] HCA 58 Shell-Mex and BP Ltd v Clayton [1955] 1 WLR 982 Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue (2009) 25 VR 59; [2009] VSCA 167 Saville v Commissioner of Land Tax [1980] 12 ATR 7 Singer v Berghouse (1994) 181 CLR 201; [1994] HCA 40 at 212 Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545 The Council of the Town of Gladstone v The Gladstone Harbour Board [1964] Qd R 505 Thomason v Chief Executive, Department of Lands [1995] QLAC 4; (1995) 15 QLCR 286 Category: Principal judgment Parties: Chief Commissioner of State Revenue (Appellant) Metricon Qld Pty Ltd (Respondent) Representation: Counsel: Mr C J Leggat SC, Mr I S Young (Appellant) Mr M L Robertson QC, Ms E Bishop (Respondent)

Solicitors: Crown Solicitor's Office (Appellant) Bolster & Co (Respondent) File Number(s): 2016/127945 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2016] NSWSC 332 Date of Decision: 31 March 2016 Before: White J File Number(s): 2013/120263; 2013/212871

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT

1. MACFARLAN JA: In my view, the appeal should be dismissed with costs for the reasons given by Barrett AJA.
2. WARD JA: I have had the advantage of reading in draft Barrett AJA's reasons with which I agree. For those reasons the appeal should be dismissed with costs.
3. BARRETT AJA: This is an appeal from a judgment of a judge of the Equity Division (White J) setting aside several land tax assessments raised by the appellant, Chief Commissioner of State Revenue ("Chief Commissioner"), against the respondent, Metricon Qld Pty Ltd ("Metricon"). [1]
4. The sole issue at trial was whether certain land at Terranora in the Tweed Valley owned by Metricon was, in respect of each of five tax years, [2] exempt from taxation by force of s 10AA(2) of the Land Tax Management Act 1956 (NSW). Under that section, land that is not "rural land" is exempt from taxation "if it is land used for primary production" and certain other conditions are met. [3] It was not disputed below or on appeal that the land in question satisfied all criteria for exemption, save the condition that it was, at the relevant time, "land used for primary production".
5. The only question for the primary judge was therefore whether the land was, for the purposes of s 10AA(2), "land used for primary production". Those words are given meaning by s 10AA(3): "For the purposes of this section, land used for primary production means land the dominant use of which is for: (a) cultivation, for the purpose of selling the produce of the cultivation, or (b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or (c) commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or (d) the keeping of bees, for the purpose of selling their honey, or (e) a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or (f) the propagation for sale of mushrooms, orchids or flowers."
6. It was common ground that the land was, at all material times, used for the maintenance of cattle for the purpose of selling them or their natural increase or bodily produce. That use was clearly within s 10AA(3)(b).

Facts

1. Land tax assessments were issued to Metricon in respect of the Terranora land for the 2009, 2010, 2011, 2012 and 2013 land tax years. Metricon acquired a substantial tract in that locality in 2008 and 2009 at a cost of some $60 million. The parcels to which the proceedings initially related are described as 37 Fraser Drive (also called 22 Fraser Drive), 14 Mahers Lane, 126 Mahers Lane, 140 Mahers Lane, 153 Mahers Lane, 412 Terranora Road, 490 Terranora Road and 512 Terranora Road. Shortly before the hearing before the primary judge, Metricon abandoned its challenge to the assessments in respect of 14 Mahers Lane, 412 Terranora Road and 490 Terranora Road. It also abandoned its challenge in respect of 126 Mahers Lane for the 2010 tax year.
2. From April 2009, cattle grazing operations were conducted on the lands by a partnership of Jeffrey and Merrin Gilliland and Tim and Anna Gilliland. The Gillilands had been farmers and graziers in the district for many years. They agisted cattle on the subject lands under an agreement with Metricon. Before April 2009, Jeffrey and Merrin Gilliland had agisted cattle on some of the land.
3. In October 2007, that is, a year or more before each parcel was acquired by Metricon, parts of the land were rezoned as zone 2(c) Urban Expansion. That new zoning allowed for residential development subject to development consent. Parts of the areas were zoned 7(d) Environmental Protection. The lands are close to existing residential developments.
4. It was common ground before the primary judge that the availability of the primary production exemption under s 10AA of the Land Tax Management Act was to be determined in respect of the five areas of land separately. [4]
5. Circumstances applying to distinct parts of the land were recorded as follows: 1. 22 Fraser Drive (also called 37 Fraser Drive) consists of a number of separate lots. Under the Tweed Local Environmental Plan, development approval for that land could not be granted unless a development control plan for the whole of the relevant area had been prepared. Also, Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) applied, so that a project application had to be prepared and submitted to the Department of Planning. In November 2009 the Department notified Metricon that it had received the application for a proposed subdivision of land at the southern end of Fraser Drive into about 300 lots. The Department advised Metricon's consultant of the requirements for the environmental assessment of the project application. The requirements were extensive and involved the furnishing of subdivision plans, a landscape master plan, an agricultural buffers assessment, a cultural heritage assessment, an acoustic report, a soil contamination assessment, a conceptual stormwater assessment, an ecological assessment, a vegetation management and rehabilitation plan and many other items. The required documents were provided. Project approval was granted on 30 May 2014, that is, after the relevant land tax years. As at 27 March 2015, a construction certificate for phase 1 bulk earthworks had still not been issued. 2. On 28 June 2013, Metricon applied for a construction certificate for the construction of a temporary sales office and related signage on the 22 Fraser Drive land. This certificate was in due course granted. The construction of the office and sign occurred after the relevant land tax years. 3. The remaining lands in issue were acquired by Metricon for the purpose of future development, but no application for development approval had been lodged in respect of them at the conclusion of the latest of the land tax years under consideration. 4. In the relevant land tax years, Metricon paid consultancy fees of approximately $2.2 million. 5. The properties at 126, 140 and 153 Mahers Lane are contiguous. From 31 May 2010, 126 Mahers Lane was used by a tenant as a commercial rose farm. On the expiry of the lease, the property was included with the other lands used by the Gillilands for cattle grazing. There was a house on 126 Mahers Lane. Rental income of $575 per week was derived in each of the 2011, 2012 and 2013 land tax years. 6. 140 Mahers Lane consists of three separate lots comprising 11.5 hectares. There was a single house on part of the land. The house was leased to a family at a rent of $220 per week and was tenanted from March 2009. There were also stockyards on 140 Mahers Lane. 7. There were two houses on 153 Mahers Lane. The property has a total fenced area of 9.15 hectares, not including a dam. One of the houses was let to a family. The net rents after deduction of expenses associated with the lettings were paid by Metricon to the vendors from whom Metricon bought the property. The rental income in respect of 153 Mahers Lane ranged from about $600 per week to $690 per week. 8. The tenanted houses on 126, 140 and 153 Mahers Lane and their curtilages were fenced off from the grazing area of the land. The areas occupied by houses and curtilage were 6.2 per cent in the case of 126 Mahers Lane, 2.4 per cent in the case of 140 Mahers Lane, and 8.3 per cent of the total area in the case of 153 Mahers Lane. 9. The primary production use of the lands was for the maintenance (including fattening) of cattle for sale.

The decision of the primary judge

1. The principal findings of the primary judge were as follows: 1. The relevant starting point is to recognise that the word "use" bears more than one ordinary meaning and therefore falls to be construed in the particular statutory context. 2. Under s 10AA, the ordinary and natural meaning of "use" includes but is not limited to physical use of the land. A use of land merely requires the doing of something with it for a purpose, such as putting it to advantage or turning it to account. 3. The bare holding of subject land, notwithstanding its being intended for future development, is not a present use. 4. The relevant inquiry under s 10AA is focused on a present use of land for primary production which is the dominant use. 5. The question under s 10AA(3) whether the primary production use is the "dominant use" requires comparison with other present or current, as distinct from future or intended, uses of the land. 6. The competing use against which the primary production use is weighed need not constitute an actual physical use of the land. 7. The competing use must, however, be a present use as distinct from an intended or future use. 8. A use of land requires the doing of something with the land, whether by physical use or putting it to advantage. 9. A land developer may use land that is stock in trade by engaging in certain activities on the land in preparation for its subdivision and sale, but preparatory activities engaged in away from the land do not amount to use of it. 10. Mere holding of land does not amount to present (as distinct from intended future) use of it, even if the land is treated as stock in trade and part of a land bank
2. Those findings led to several conclusions. First, Metricon's holding of the lands as part of its stock in trade or "land bank" was not a current use. Second, although preliminary work undertaken by consultants engaged by Metricon for the purposes of future residential development might, in one sense, be characterised as a "current land development use'", such activities were primarily concerned with an intended future use. Third, the expenditure incurred in the obtaining of approvals required for future residential development (in the order of some $2.2 million) likewise did not involve a use of the lands, intangible or otherwise. Fourth, the obtaining of income tax deductions by Metricon for outgoings in respect of the land did not constitute an intangible use of the land (the deductions were available whether the land was used or merely held). Fifth, the letting of the land to the Gillilands under the agistment agreements constituted a competing use but that use did not outweigh the nature, extent and intensity of the primary production use.

Issues in this Court

1. The Chief Commissioner's notice of appeal sets out fourteen grounds of appeal. Mr C J Leggatt SC, with whom Mr I S Young of counsel appeared for the Chief Commissioner, put his case on the footing that the grounds of appeal raise three issues.
2. The first and leading issue is whether "intangible use" (such as "land banking use" or "land development use" in the sense already mentioned), as distinct from "physical use" (such as cattle grazing or some other physical activity pursued on the ground) is relevant for the purposes of s 10AA and, if so, whether such an intangible use was, at relevant times, the "dominant use" of the land in question.
3. The second issue (which arises whichever conclusion may be reached on the first) is whether, in respect of three of the relevant parcels, a residential use predominated over the cattle grazing use.
4. Thirdly, there is a question whether, if "intangible use" is relevant to the statutory scheme, that use (in the form of "land banking use" or "land development" use), when aggregated with residential use, predominated over the cattle grazing use in respect of the land in question.
5. A notice of contention filed by Metricon advanced several propositions: that "use", for s 10AA purposes, means actual physical use; that the process of comparison directed by s 10AA(3) entails setting various actual physical uses against one another; and that that process does not allow cattle grazing currently engaged in by way of actual physical use to be set against a "use" of ownership and holding to meet future requirements of a property development business. Only uses of like physical quality can be the subject of meaningful comparison. Submissions in support of those contentions were made on Metricon's behalf by Mr M Robertson QC with whom Ms E Bishop appeared.

High Court decisions

1. Much attention was given in the course of submissions to three decisions of the High Court on the general issue of so-called "intangible use" of land: Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493; [1957] HCA 15 (the "Royal Newcastle Hospital case"), Ryde Municipal Council v Macquarie University (1978) 138 CLR 633; [1978] HCA 58 (the "Macquarie University case") and Minister Administering the Crown Lands Act v NSW Aboriginal Land Council (2008) 237 CLR 285; [2008] HCA 48 (referred to, for convenience, as the "Wagga Wagga land claim case"). [5]
2. The question in the Royal Newcastle Hospital case was whether particular land was, in terms of a rating statute, "used or occupied by the hospital … for the purposes thereof". The land was vacant and "in its virgin state comprising ridges and gullies heavily timbered with a good deal of underwood". It surrounded sanatorium buildings in which tuberculosis patients were housed and treated. The High Court decided by majority that holding of the bushland in its virgin state in order to ensure tranquil surroundings and abundant fresh air for tuberculosis patients was sufficient to warrant a conclusion that the land was "used or occupied by the hospital . . . for the purposes thereof".
3. The majority consisted of Williams, Webb and Taylor JJ. Substantive judgments were delivered by Williams J and Taylor J. Webb J expressed agreement with both of them. Fullagar and Kitto JJ dissented. Each delivered a substantive judgment.
4. The essence of the opinion expressed by Williams J was that the hospital "occupied" both the sanatorium buildings and the surrounding bushland and did so for the purposes of the hospital. Williams J found it unnecessary to decide whether the hospital "used" the bushland. That question was, however, squarely addressed by Taylor J and answered in the affirmative. Taylor J said (at 515): "The word "used" is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute 'use' will depend to a great extent upon the purpose for which it has been acquired or created. Land, it may be said, is no exception and [the relevant statutory provision] itself shows plainly enough that the 'use' of land will vary with the purpose for which it has been acquired and to which it has been devoted.. . . Each of the forms of user referred to in the section relate to use by the owner and some of them, no doubt, contemplate a use which is synonymous with actual physical occupation and enjoyment. Others contemplate a use in a less direct form. 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 has 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. In my opinion where a hospital acquires or sets apart, for a project which may properly be described as a purpose of a public hospital, a tract of land which it considers is the minimum requirement for its contemplated project and thereupon proceeds to carry out that project it, thereby, uses the whole of the land. How its purposes shall be fulfilled is, within reason, for it to decide and, as I have already said, it is nothing to the point to say that it has employed in the project more land than may, upon the views of others, be thought to have been necessary, or that in fact, it has derived no benefit or advantage therefrom in the fulfilment of its purposes."

Other appellate decisions

1. Relevant aspects of s 10AA have been considered by this Court in two cases, namely, Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775 and Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; (2014) 96 ATR 875. Reference should also be made to the Court's decision in Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 and to two Queensland decisions.
2. The Leda Manorstead case concerned grazing land on which certain earthworks had been undertaken with a view to future residential subdivision. Development approvals for subdivision had been granted but it was common ground that the owner did not intend to develop in accordance with those approvals. Its intention was to seek revised approvals. It was held at first instance that the land was used for two undertakings: commercial land development and cattle grazing; and that, having regard to a number of evaluative factors, the former predominated. That assessment was upheld on appeal. Allsop P (with whom Campbell and Whealy JJA agreed) said (at [24]) that s 10AA is not concerned with activity on the land which is understood or evaluated as preliminary to the undertaking of a future use. Allsop P continued: "There must be a present use for which the land is being used. That does not deny, however, the proper evaluation of any given circumstances. The appropriate task is the one which the primary judge undertook. Upon evaluation of all the material he asked himself what the people who owned the land were actually using it for. Or, to put the matter another way, what was the purpose of what the owner was doing on the land so that the question as to what the land was being used for could be answered? Here, looking at all the activities together with the surrounding circumstances of Leda's evident purpose in carrying out those activities, it could be concluded (and was concluded by the primary judge, rightly, in my view) that the land was being used for commercial land development. The fact that the land was, at that time, at the stage of earthworks does not deny the present use of the land for commercial land development. It does not matter, in my view, that the residential housing estates likely to be built in due course had not yet been completed, had not yet been sold and had not yet taken their place in a completed residential development."

Legislative history

1. The Chief Commissioner placed before this Court an account of legislative developments culminating in the enactment of s 10AA in its current form. The progenitor provisions (s 9(2) and 9(3) of the Land Tax Management Act 1956 (NSW) in its original form) applied a special taxation regime to "land used for primary production" as defined by s 3, being "land used primarily for" certain forms of cultivation "thereof" and certain forms of activity "thereon". In 1970, a general exemption was introduced for "land used for primary production", with that expression defined in the same way as in the original 1956 legislation. In 1991, an exemption concerning "land used for primary production" was based on a definition of that expression referring to "land used primarily for" certain activities. The current s 10AA was introduced by the State Revenue Legislation Further Amendment Act 2005 (NSW). The purpose was, in part, to make the land tax exemption provision compatible with provisions concerning exemption from local government rating.
2. In this case, as in the Leda Manorstead case, the Court has before it extrinsic material in the form of the Explanatory Note to the Bill that became the State Revenue Legislation Further Amendment Act 2005 (NSW) and the speeches of the relevant Minister upon the second reading of that Bill in the Legislative Assembly. Allsop P dealt with the extrinsic materials as follows in the Leda Manorstead case (at [28]): "Both parties provided the Court with extrinsic material relating to s 10AA and related provisions in the Local Government Act 1919 (NSW), in particular s 118. Much of the secondary material can be seen to be directed to the mischief or purpose of sub-s (2), rather than sub-s (3): see the Second Reading Speech to the State Revenue Legislation Amendment Bill 2005 and the definition of 'farmland' in the Local Government Act 1993 (NSW), s 515 and the similarly worded earlier provision of the Local Government Act 1919 (NSW), s 118. Looking at the terms of s 10AA in its place in the Act, the provision is not to be understood as a statutory encouragement for primary production as that phrase is used in the colloquial sense. The provision concerns land used for primary production as defined. What the provision is apt to achieve and what can be taken as its purpose from its text and context in the Act is the provision of an exemption for land used for primary production to the extent and in the manner referred to in sub-ss (2) and (3). There is no requirement to approach the matter in some beneficial fashion striving to expand the reach of the exemption or to narrow the taxing operation of the section according to strict language. More particularly, there is nothing in the purpose of the legislation, drawn from its words and context or from the secondary material insofar as that addresses mischief to require used 'for' to be limited to use of land which is producing beneficial or commercial return, as argued by Leda."

The core meaning of "use"

1. Decided cases are replete with statements that "use" is a word of variable meaning and that the construction of one statutory provision concerning "use" of land may well be an unreliable guide to the correct construction of another such provision. [10] For that reason, approaches taken in cases about different statutory contexts in which the word "use" is employed with respect to land must be treated with caution. It must nevertheless be accepted that "use", in relation to land, has a core meaning independent of statutory context. In the recent Berrima Gaol land claim case (New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50), French CJ, Kiefel, Bell and Keane JJ said (at [34]): "True it is that the words 'used' and 'occupied' might be said to take much of their meaning from context. But that is not to say that they are devoid of a commonly understood meaning in ordinary parlance. They require an examination of activities undertaken upon the land in question and, in the case of 'occupied', factors such as continuous physical possession must be taken into account."
2. Examination of "activities undertaken upon the land in question" is thus central to identification of "use", according to the commonly understood meaning of the expression; and, as Allsop P pointed out in the Leda Manorstead case, the inquiry is not limited to activities producing beneficial or commercial return. Furthermore, past activity may be indicative of present use even if the activity is for the time being not continuing. This is because the absence of activity on the land at a given time may be part of a scheme of calculated and continuing utilisation that stems from past activity and remains in course of implementation without discernible activity at the time in question. [11]

The statutory text

1. With those introductory observations, I turn to the statutory text. The first thing to note is that s 10AA is concerned with "use" at large rather than "use" by any particular person. It differs, in that way, from a number of other exempting provisions of the Land Tax Management Act and from some of the provisions of other statutes relied on in submissions and referred to above. [12] A substantial majority of the 23 categories of exempt land referred to in s 10(1) of the Act refer to land "owned" by a named entity or an entity of a specified kind. In some of those cases, a particular kind of use or occupation is an additional condition of exemption. Only a few of the s 10(1) categories refer to land "used" for a particular purpose without regard or reference to its ownership. There is, in those few cases as well as in s 10AA, a manifested legislative intention that land is to be exempt from land tax (to the advantage of its owner) regardless of the identity and attributes of the owner and by reference solely to the "use" to which the land is put by the person - whether or not the owner - who has the ability to "use" it. [13]
2. If the "dominant use" of relevant land is "for" one of the activities enumerated in paras (a) to (f) of s 10AA(3), the land will answer the description of land "used for primary production" and thereby satisfy that aspect of the conditions for statutory exemption under s 10AA as a whole. The expression "dominant use" has regard to quantification of uses within paras (a) to (f) as against uses that are not within those paragraphs. [14] Where the whole of the relevant land is obviously used, the inquiry required by s 10AA(3) is whether that land is used "for" any of the activities or purposes listed in paras (a) to (f) and, if so, whether it is also used "for" an activity or purpose not within those paragraphs. Where the evidence discloses that the land is used both "for" an activity within paras (a) to (f) and "for" an activity not within those paragraphs, it is necessary to weigh the respective uses against one another in order to ascertain which is the "dominant use". The words "the dominant use of which is for" make it clear that the extent (measured in some appropriately rational way) of activities or purposes within paras (a) to (f) "for" which the land is used is to be compared with the extent to which the land is used "for" other activities or purposes. [15]

Inactivity as "use"

1. In expressing that opinion, I do not intend to suggest that "use" in the s 10AA sense does not sometimes include inactivity. As explained in Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338 at [34], land which is, for the time being, left fallow as part of a crop rotation cycle is "used" for agriculture despite the current absence of activity on it. [20] The deliberate maintenance of a state of inactivity is, of itself, the implementation of a purpose "for" which the land is used, that is, the purpose of agriculture including by allowing time for soil regeneration. In the Royal Newcastle Hospital case what was, on one view, inactivity on the hospital's virgin bushland was, in the relevant sense, positive deployment of that land for the specific purpose of keeping it in a virgin state conducive to more advantageous operation of the hospital's sanatorium. [21] As noted in The Council of the Town of Gladstone v The Gladstone Harbour Board (above), the crucial factor in the Royal Newcastle Hospital case was that the owner "intentionally derived actual and present advantages by keeping the land in its virgin state".
2. It is the positive purpose of deriving present advantage by leaving the bushland untouched that distinguishes the Royal Newcastle Hospital case from the Wagga Wagga land claim case. In the latter case, the former police station site had fallen into disuse and there was simply no utilisation of the land, whether by physical activity or passive enjoyment of its features. The only postulated use centred on a decision to sell, coupled with steps taken towards sale. The High Court held that this did not constitute "use" for the purposes of the relevant statutory provision. The word "use" in that context was held to mean actual physical use or "used in fact" as distinct from purely notional, potential or contingent use. Neither the lack of physical use, whether indirect or direct, nor the decision to sell was seen as calculated to produce immediate and ongoing benefit from the land. On that footing, it could not be said that either amounted to a form of exploitation of the land comparable to the passive use manifested in the Royal Newcastle Hospital case.
3. Purpose is a concept necessarily at work in s 10AA(3). Each of the six activities in paras (a) to (f) has a purpose or objective of commercial gain. There is a distinction, however, between the purpose for which land is acquired, on the one hand, and the purpose for which it is currently being devoted to use, on the other. This point is particularly important when considering any competing use under s 10AA(3). The purpose of acquisition may or may not correspond with the purpose of current use. Land acquired specifically for the sowing of crops may be put to either that use or some other use, such as cattle grazing or residential subdivision development. The inquiry directed by s 10AA(3) is as to current tangible and physical deployment and its purpose, not the purpose of acquisition.

Conclusion on the meaning of "use" in context

1. In summary, I am of the opinion that the concept of "use" relevant to s 10AA as a whole (and s 10AA(3) in particular) - a concept in which the preposition "for" plays a central role - is one of physical deployment of Isaacs J's "concrete physical mass" [22] in pursuance of a particular purpose of obtaining present benefit or advantage from it, with deployment understood as including not only activity but also inactivity deliberately adopted as a means of obtaining such actual and present advantage from the land; and with purpose understood as objectively ascertained purpose. There is no requirement that immediate productive return be achieved, as long as some benefit or advantage accrues. In a s 10AA(3) case, each "use" considered in the search for "dominant use" must be of the character I have described. Otherwise, the necessary process of comparison cannot sensibly be undertaken. The contentions of Metricon in that respect should be accepted.
2. In saying this, I respectfully depart from the approach that commended itself to the primary judge and which his Honour confirmed in his later decisions on s 10AA in Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1637 and Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9. His Honour there confirmed the view that the possible uses to be considered for the purpose of determining what is the dominant use of land are not necessarily confined to physical uses of the land. That view should not be accepted. ."
3. In the judgment now under appeal, his Honour considered it meaningful to proceed in the manner adopted by the Administrative Decisions Tribunal in the proceedings that culminated in the appeal to this Court in the Ferella case, that is, by seeking to compare an alleged primary production use by an owner who kept a single horse on the land with that owner's use of the house on the land "for rental purposes" or "use as an investment property earning income from the letting". [23] On the construction I consider to be correct, the use that the Tribunal should have compared, for s 10AA purposes, with any primary production use involving the horse was simply use (in the form of physical deployment) of the house as a residence. As has been noted, the section is not concerned with the identity of a person who uses the land. The fact of use and the nature of that use are alone relevant.

"Future use" and "land banking"

1. There is much to be said for the view expressed by Fullagar J in the Royal Newcastle Hospital case that "intangible use" is an expression without meaning. It is, at the least, apt to confuse and, if employed at all, is probably best confined to cases of the Royal Newcastle Hospital kind where immediate and present advantage is consciously and deliberately taken of land without physical activity on or affecting it. A better description of that situation is probably "passive use". [24]
2. In cases of what has become known as "land banking", courts have been called upon to determine the point at which land acquired with a view to its being made the subject of future commercial development is to be characterised as devoted to a current use. The issue is perhaps better framed by asking at which point in the development phase it can be said that the land is being used for the end purpose of subdivision and sale. The inquiry brings to the fore the critical distinction between a current use and an intended future use.
3. In the Leda Manorstead case, it was decided that the land was being used for two purposes, namely, commercial land development and cattle grazing. Although it was common ground that the land was acquired for the purpose of commercial land development, that factor of itself did not compel the conclusion that the land was being used for that purpose. It was the evidence of substantial earthworks carried out on the land and certain other activities (which outweighed the cattle grazing use) that produced the finding that the land was being used for commercial land development. Allsop P reiterated (at [11], [24], [42]) that it would be erroneous to portray the decision below as premised on a characterisation of the earthworks and other activities as merely preparatory to the future intended use of residential subdivision. In accepting the findings at first instance in that case, this Court made it clear (at [24], [40] that s 10AA is not directed to activities that are preliminary to the undertaking of some future use, including the bare holding of land). As Allsop P put it, "[t]here must be a present use for which the land is being used" which may be ascertained by reference to the purpose of the activity under evaluation.
4. If "land banking" is understood as merely accumulating and holding a stock of land with a view to its future development, such "land banking" cannot be regarded as being, of itself, use of the land. Inactivity in the form of mere holding, although accompanied by a present intention to subdivide and sell at some future point, is not the source of present benefit or advantage and therefore does not constitute a use for the purposes of s10AA(3). What is required is some physical activity that causes the land to be raised out of a state of non-use into one of actual deployment in pursuance of the purpose of deriving advantage through subdivision and sale. [25]

Decision on the principal issue

1. As the Chief Commissioner pointed out, the substantial expenditure of money and other resources by Merticon on planning residential development of the land did not occur in a vacuum. That expenditure was obviously and intimately connected with the land. It occurred in connection with the land. It would not have been incurred but for Metricon's ownership of the land and its intention to subdivide and sell in due course.
2. All this may be accepted. But it does not follow that, by incurring that expenditure and acquiring the services of planners and other consultants retained to formulate and progress a scheme of residential subdivision, Metricon in any way made "use" of the land. Given my conclusions as to the meaning of "use" in the particular statutory context, those activities of Metericon did not amount to such "use". There was no deployment of the land in pursuance of a purpose of obtaining present benefit and advantage from it. The land was not subjected to either activity or lack of activity deliberately adopted as a means of obtaining such actual and present advantage. A purpose of obtaining benefit and advantage from the land by subdivision and sale obviously existed and caused Metricon to employ the consultants and to incur the expenditure in the relevant tax years. But the actuating benefit and advantage were, at that point, projected or anticipated only; and pursuit of them at that point did not require or involve any deployment of the land as such. [26]
3. In my opinion, therefore, the primary judge was correct in his conclusion that there was not, in relation to any of the relevant tax years, a "use" of any of the relevant land. While Metricon had embarked upon a property development venture, it was a venture which, at the times relevant to land tax assessment, did not extend to "use" of the land. The steps that had been taken - albeit substantial steps in terms of money and time - were preparatory to the commencement of a use of the land by means of development by subdivision and sale. [27] The primary judge correctly decided that, at each time material to land tax assessment, any such use lay in the future. His Honour himself put the matter well when he said in the later case of Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue (above) at [25]: "An intended future use does not become an actual existing use merely because substantial moneys and resources are applied in its planning and preparation."

The residential use issue

1. I turn now to the Chief Commissioner's secondary contention [28] that use for cattle grazing was overshadowed by or secondary to residential use so that residential use was, in terms of s 10AA(3), the "dominant use". That contention relates to the properties at 126 Mahers Lane, 140 Mahers Lane and 153 Mahers Lane. As has been noted, the percentages of the properties occupied by tenanted houses and their curtilages were 6.2 per cent, 2.4 per cent and 8.3 per cent respectively. The monthly rents generated were, at the relevant times, approximately $2,300, $880 and $2,500. The primary judge found that the levels of income and expense in connection with the rental use exceeded the income and expenses allocated to the different areas of land, on a pro rata basis, in respect of the primary production use.
2. The Chief Commissioner points out that the statement of the primary judge regarding respective levels of income and expense, while correct, does not refer to the magnitude of the difference. The pro rata rate of return in respect of the residential tenancy exceeded the primary production rate of return by a factor of 8 to 1.
3. The primary judge said (at [151]) that the respective rates of return were relevant to, but not determinative of, the assessment of which use was dominant. His Honour continued (at [152]-[153]): "The comparison is not like with like. It involves of questions of degree on which minds can reasonably differ. It is not of much help to ask what would an observer of the lands would see. The observer would see cattle peacefully grazing and would see that most of the lands were dedicated to that purpose. But the observer would also see the houses occupied by families where the occupancy was not associated with the farming activity. To return to the matters identified by the Land Appeal Court of Queensland in Thomason . . . , the areas of land used for primary production is very much greater than the amount of land used as residences. The cattle are not always grazing on the Mahers Lane properties, whereas the residences are presumably almost always occupied. The residences are used for day to day living. The cattle-grazing is designedly for animals requiring minimal levels of maintenance, but the quality of the pastures and the care and selection of the cattle combine to produce a cattle farm of exceptional quality. The time spent by the tenants in using the land is much greater than the time that the Gillilands are on the land and probably greater than the time which the cattle are on the land. More labour and resources are spent by the Gillilands in their use of the lands than are incurred by Metricon (or the vendors to Metricon) who use managing agents to collect rents and who engage contractors to carry out such repairs and maintenance as are the landlords' responsibility under the residential tenancies. I do not think that the figures for income and expense provide any clear guide to the relative levels of the extent and intensity of the different uses. On balance I think the Gillilands' primary production use is greater in scale and intensity and is the dominant use."

Outcome

1. Although, as explained at [61]-[63] above, my opinion on the meaning of "use" in s 10AA differs to some extent from that expressed by the primary judge, I am satisfied that his Honour correctly viewed the "dominant use" of all relevant parcels of land at relevant times as a "use" within s 10AA(3)(b) and that the order setting aside the several land tax assessments was rightly made. I therefore propose the following orders: 1. Appeal dismissed. 2. That the appellant pay the respondent's costs of the appeal.

Endnotes

1. Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No 2) [2016] NSWSC 332; [2016] ATC 20.
2. Land tax is levied for a particular year commencing 1 January by reference to land owned at midnight on the 31 December immediately preceding that year: Land Tax Management Act 1956 (NSW), s 8.
3. The other conditions are that that use of the land (a) "has a significant and substantial commercial purpose or character" (s 10AA(2)(a) and (b) "is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made)" (s 10AA(2)(b)).
4. The primary judge referred, in that connection, to Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; (2014) 96 ATR 875 at [34]. As White J himself explained in that case and in Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9 at [10]-[16], land tax is levied according to the taxable value of land based on value determined and recorded pursuant to the Valuation of Land Act 1916 (NSW). Under that Act, the Valuer-General must ascertain each year the land value of each parcel of land in New South Wales other than land in certain categories. In general, land tax is assessed and the applicability of exemptions is determined according to parcels taken into account by the Valuer-General.

5. To these cases must now be added New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50 (the "Berrima Gaol land claim case") in which judgment was delivered on 14 December 2016 after the hearing of this appeal.
6. In the recent Berrima Gaol land claim case referred to at footnote [5], it was pointed out (at [23]) that it was not necessary in the Wagga Wagga land claim case to decide whether there could be steps taken on land in preparation for its sale which are of a kind which could constitute use or occupation. None of the steps taken towards sale had been taken on the land itself. Apart from the surveyor's and agent's visits to the land, everything that was done towards sale took place away from the land. Neither these steps nor the decision to sell the land could therefore be said to constitute a use of the land.
7. White J referred to the second aspect of use, as found by the Administrative Decisions Tribunal, as use "for rental purposes" (at [37]) or "use of the land as an investment property earning income from the letting" (at [57]). Those descriptions looked at matters from the perspective of the owner. Section 10AA does not direct attention to use by any particular person. What was categorised as the owner's rental use or investment property use could equally have been viewed as the tenant's residential use. As White J put it in Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (above) at [149], physical use of land by a tenant is "the other side of the same coin as the non-physical use of the land by the owner in leasing it".
8. By Gibbs J at 525 (Jeffriess J concurring).
9. NSW Hansard, Legislative Council, 29 November 2005, speech of the Hon Michael Costa, Minister for Finance, Minister for Infrastructure and Minister for the Hunter (commencing at 5.22pm).
10. In s 10AA as a whole and s 10AA(3) in particular, "use" is an abstract noun. There can, to my mind, be no doubt that the meaning of the noun corresponds with that of the transitive verb "to use".
11. Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338 at [34]-[36] citing Saville v Commissioner of Land Tax [1980] 12 ATR 7.
12. For example, in both the Royal Newcastle Hospital case and the Macquarie University case, the relevant statutory provision referred to land "used or occupied" by the particular institution "for [or solely for] the purposes thereof".