Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue

State Revenue (2014) 98 ATR 545; [2014] NSWSC 678 Young v Chief Commissioner of State Revenue (NSW) [2020] NSWSC 330 Category: Principal judgment Parties: Godolphin Australia Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: D Russell QC with J Emmett SC TL Wong SC with S Kanagaratnam

Solicitors: Johnson Winter & Slattery (Plaintiff) Crown Solicitor for New South Wales (Defendant) File Number(s): 2019/00401271 Publication restriction: Nil

Judgment

1. HER HONOUR: In this matter, the plaintiff, Godolphin Australia Pty Ltd (Godolphin), seeks a review, pursuant to s 97(1) of the Taxation Administration Act 1996 (NSW) (Taxation Administration Act), of the decision of the defendant, the Chief Commissioner of State Revenue (Chief Commissioner) to assess Godolphin for land tax in respect of two properties known as "Kelvinside" and "Woodlands" (the Land) for the 2014-2019 tax years (see the notices of land tax assessment issued on 19 March 2020 for the 2014-2016 land tax years (exhibited at Exhibit PK-1 to the affidavit of Prashanth Kainthaje affirmed 14 September 2020, marked Exhibit J at the hearing) and 20 July 2020 for the 2017-2019 land tax years, respectively) (the Assessments).
2. Godolphin contends that the Land was exempt from land tax on the basis of the exemption for rural land used for primary production conferred by s 10AA(3)(b) of the Land Tax Management Act 1956 (NSW) (Land Tax Management Act) because the dominant use of the Land, in each of the relevant land tax years, was for "the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce". In summary, Godolphin (which operates a thoroughbred stud) maintains that the dominant use of the Land is the maintenance of stallions for the purpose of selling their bodily produce (specifically, their semen) or their natural increase; the maintenance of mares, foals and other horses for the purpose of selling those mares, foals, and other horses or their natural increase; and/or the maintenance of cattle for the purpose of selling cattle and their natural increase.
3. Godolphin seeks orders revoking the Assessments; to be assessed for land tax for the 2014-2019 land tax years excluding the taxable value of the Kelvinside and Woodlands land; and for costs.
4. It is not disputed that each parcel of the Land is rural land within the meaning of s 10AA(4) of the Land Tax Management Act (see Chief Commissioner's further amended appeal statement at 10). Further, the Chief Commissioner accepts (and the Assessments reflect) that some parcels of the Kelvinside property were exempt from land tax pursuant to the primary production exemption (namely, PID 3619809, PID 3678272 and PID 292526). The Chief Commissioner also accepts that certain parcels of land were used for cattle grazing (although the Chief Commissioner says that the dominant use for each parcel was not cattle grazing) (see Chief Commissioner's further amended appeal statement at 10(ii)-(iii)) and that s 10AA(3)(b) of the Land Tax Management Act does not require an animal maintained on the land to be sold at a particular age or sold at a particular time after it is born (see Chief Commissioner's further amended appeal statement at 10(i)).
5. However, the Chief Commissioner argues that, while the dominant use of the Land was for the maintenance of animals, that use was not for the requisite statutory purpose of selling those animals, their natural increase or bodily produce. Rather, it is contended that the purpose was for breeding and training thoroughbred racehorses and spelling thoroughbred racehorses in between race events; and that any sale of the thoroughbred horses was ancillary or incidental to that purpose. Alternatively, to the extent that a purpose of sale did exist, the Chief Commissioner says that it was not the dominant purpose or sufficiently proximate to the current use of the Land for the maintenance of animals and therefore did not satisfy the statutory test set out in s 10AA(3)(b) of the Land Tax Management Act.
6. Further or in the alternative, the Chief Commissioner says that, to the extent that the Land was being used for the maintenance of animals for the purpose of selling their natural increase or bodily produce, that use was not dominant in comparison to other uses of the Land (including the breeding and training of thoroughbred horses for the purpose of racing and the spelling of racehorses in between races).
7. The Chief Commissioner seeks orders that: the plaintiff's further amended summons be dismissed; that, pursuant to s 101(1)(a) of the Taxation Administration Act, the respective Land Tax Assessment Notices be confirmed; and that Godolphin pay the Chief Commissioner's costs of the proceeding.
8. The amount of land tax in issue is approximately $1,438,000.

The Land

1. The Land the subject of the Assessments is located at Aberdeen and Jerrys Plains and comprises two large properties (the whole of Woodlands, comprising the parcels of land at Jerrys Plains and Doyles Creek; and most of Kelvinside, comprising the parcels of land at Aberdeen).
2. Woodlands consists of the parcels of land identified by Lot, Deposited Plan (DP), address and Parcel Identification Number (PID) in the second table at [5] of Godolphin's further amended appeal statement filed on 14 September 2020. Relevantly, there are only two PIDs in issue, being PID 194885 (the northern half and some small south-western lots) and PID 303702 (the southern half).
3. Kelvinside consists of four separate, but contiguous, PIDs (namely PID 292024, PID 292022, PID 292533 and PID 291959/4196725 (itself consisting of DP 624789 and DP 220425) (see Exhibit AH-1 to the affidavit of Ava Hurley sworn 8 December 2020, marked Exhibit 2 in the hearing, at tab 2) in the first table at [5] of the plaintiff's further amended appeal statement; excluding for this purpose the parcels of land which the Chief Commissioner has acknowledged are exempt from land tax) (see above) those exempt parcels being: Lot 1 in DP 1168564, Aberdeen NSW 2336, PID 3619809; Lot 159 in DP 712988, Aberdeen NSW 2336, PID 3678272; Lot 532 in DP 1180147, Aberdeen NSW 2336, PID 3678272; and Lot 134 in DP 752485, Lot 134 Aberdeen NSW 2335, PID 292526.
4. The remaining parcels are thus Lot 4 in DP 179687, Aberdeen NSW 2336, PID 292533; Lot 51 in DP 705560, Aberdeen NSW 2336, PID 292533; Lot 81 in DP 624789, Aberdeen NSW, PID 4196725 (in the 2016, 2017, 2018 and 2019 land tax years) and PID 291959 (in the 2014 and 2015 land tax years); Lot 1 in DP 220425, Rouchel NSW 2336, PID 4196725 (in the 2016, 2017, 2018 and 2019 land tax years) and PID 291959 (in the 2014 and 2015 land tax years); Lot 306 in DP 608406, Aberdeen NSW 2336, PID 292024; and Lot 303 in DP 255663, Aberdeen NSW 2336, PID 292022.
5. The Chief Commissioner's solicitor, Ms Ava Hurley has deposed that the PIDs in respect of Kelvinside partially overlap other lots (because some span two Local Government Areas, being Muswellbrook and Singleton; and/or exclude public roads) (see Ms Hurley's affidavit sworn 8 December 2020 at [10]). Further, I note that PID 291959 was replaced by PID 4196725 at some stage during the relevant land tax years (again, see Ms Hurley's affidavit at [8]).

Godolphin's equine operations

1. Godolphin, as adverted to above, runs a thoroughbred stud operation that involves breeding and racing thoroughbred horses; and selling thoroughbred horses or their semen or progeny. It also engages in associated agricultural activities such as raising cattle and growing lucerne.
2. In essence, (although I accept that this is a generalisation) the opposing parties' contentions as to how to characterise Godolphin's operations might be said to involve different perspectives as to the slogan adopted to describe Godolphin's business model and referred to by Mr Vincent (Vin) Cox, Managing Director of Godolphin, namely, "breeding to race and racing to breed" (see Mr Cox' first affidavit sworn 25 August 2020 at [39]; Mr Cox' second affidavit sworn 16 October 2020 at [53]-[59]). Akin to a "chicken or egg" proposition, in colloquial terms, the argument in one sense is whether the dominant purpose of the breeding, training and maintaining of horses on the land in question is to race those horses or whether the dominant purpose of Godolphin's racing programme (and the activities leading up to this, including breeding, training and maintenance) is to increase the value to be attributed to the sale of their semen and/or progeny.
3. In this regard, it is relevant to note that when Godolphin initially entered the thoroughbred stud market in Australia (trading as Darley Australia - see T 100.21-30) it operated largely as a breeding stud and acquired Ingham bloodstock (see T 99.9-16). Its business model then expanded to include racing.
4. Godolphin emphasises in its submissions that, while there is a significant level of integration between different parts of Godolphin's operations, Godolphin has a different dominant use for different properties (which it says is reflected in its acceptance that some of the land it owns, in particular the Crown Lodge and Osborne Park properties to which I refer in due course, does not fall within the primary production exemption and is subject to land tax). Further, Godolphin notes that it does not use the Land or run its operations by reference to the boundaries of specific PIDs or DP lots. Rather, it operates four properties, each of which comprises a number of PIDs used for overlapping purposes; those being Kelvinside, Woodlands, Crown Lodge and Osborne Park (see below). Godolphin also carries out thoroughbred stud operations in Victoria but those are not relevant for present purposes.

Woodlands

1. On Woodlands, Godolphin maintains thoroughbred broodmares and their offspring (Mr Cox' first affidavit at [20]-[27]). The substantial majority of the offspring (around 70%) will be sold by Godolphin, usually after they have commenced their racing career, with most being sold relatively early in their career (Mr Cox' first affidavit at [41]-[42]; Mr Cox' second affidavit sworn 16 October 2020 at [54]; Exhibit PAH-1 to the affidavit of Paul Hartmann, Financial Controller of Godolphin, affirmed 26 August 2020, marked Exhibit D at the hearing, at tab 11). Most of the thoroughbred horses that are not sold are used as part of Godolphin's breeding programme (as stallions or as broodmares). Godolphin also uses substantial parts of Woodlands for the purpose of maintaining cattle for sale (Mr Cox' first affidavit at [11]-[15]) and uses particular parts of Woodlands to grow lucerne (Mr Cox' second affidavit at 10).
2. On Woodlands, Godolphin also maintains a small number of other horses for purposes ancillary to breeding or "education", being what are referred to as "nanny mares" and "hacks" (used to keep young horses calm) and "teasers" (used to prepare mares for insemination or "cover" by a stallion) (Mr Cox' first affidavit at [46]-[49]).

Kelvinside

1. On Kelvinside, Godolphin maintains what it describes as a thoroughbred stud operation, in which stallions inseminate (or "cover") mares for substantial fees (see Mr Cox' first affidavit at [56]-[59]; Mr Cox' second affidavit at [7]-[9]). (Pausing here, I note that the Chief Commissioner points out that only about 10% of the relevant PID on Kelvinside is used for the stallion covering activities, although Godolphin's evidence is that the stallions also exercise on other parts of Kelvinside.)
2. It is relevant in this context to note that a horse is not recognised as a "thoroughbred" (in Australia and elsewhere globally) unless it is produced by natural cover; thus insemination by natural cover is the only way that thoroughbred stallion semen can be supplied to owners of thoroughbred broodmares (see Ms Jacqueline Stewart's first affidavit sworn 24 August 2020 at [7]-[24]). This also has the consequence that semen cannot be sold separately for use by way of artificial insemination while retaining the status of the resulting progeny as thoroughbred horses. The relevance of this for present purposes is that it appears that the Chief Commissioner accepts (consistent with Commonwealth Taxation Ruling No IT 219, issued 24 September 1969) that, if semen were extracted and sold separately, such a transaction would be the sale of bodily produce (see Exhibit PK-1 to Mr Prashanth Kainthaje's affidavit affirmed on 14 September 2020, marked Exhibit J at the hearing, at p 3 - being a letter from the Chief Commissioner of State Revenue to Mr Kainthaje concerning the application by Darley Australia for primary production land exemption) but did not initially accept that the process of insemination fell within the concept of sale of bodily produce. As apparent from the above, artificial insemination practices would result in loss of thoroughbred status and thus would not be feasible for a thoroughbred stud operation.
3. In its written submissions, Godolphin spends some time dealing with the characterisation of the contractual arrangements under which the stallions cover mares (the Live Foal Agreements). Suffice it to note that Godolphin submits that these contracts are properly characterised as contracts for the sale of goods (not for the supply of services). However, it is not necessary here to deal with this issue as the Chief Commissioner now accepts that stallion covering involves maintenance of animals for the purpose of selling their bodily produce (semen). Rather, the Chief Commissioner's contentions on this appeal is that the stallion covering services on Kelvinside are not a dominant use of the relevant land.

Crown Lodge

1. On Crown Lodge, which is located next to the Australian Turf Club's Warwick Farm Racecourse, Godolphin trains racehorses (Mr Cox' second affidavit at [13]-[21]). As noted above, Godolphin accepted that the primary production exemption does not apply in relation to this property.

Osborne Park

1. On Osborne Park, Godolphin operates its primary training facility for horses that have commenced their racing careers (Mr Cox' second affidavit at [22]-[26]). Godolphin also uses Osborne Park for spelling horses (Mr Cox' second affidavit at [50]). Again, Godolphin does not dispute that land tax is payable in respect of this property.

Categorisation of horses maintained by Godolphin

1. At this point, it is convenient to explain the cycle or progress through Godolphin's equine operations of the horses maintained by Godolphin on the four properties.

Foals

1. Mr Cox has deposed that foals are born, weaned, trained, and commence their education at Woodlands (see Mr Cox' second affidavit sworn on 16 October 2020 at [29]-[30)].
2. In each of the land tax years, the overwhelming majority of foals are retained by Godolphin, with very few foals sold as "culls". So, for example, in the years 2013 to 2016, 210 foals were produced by Godolphin mares, 30 of which were sold as "foal culls" with the remaining 180 being retained (the Chief Commissioner says to enter Godolphin's race programme - see the Darley Flying Start 2013 Presentation); and in 2017 and 2018, 140 foals were produced by Godolphin mares with 137 being retained.

Yearlings

1. Mr Cox has deposed that, during January to April of their yearling year, yearlings "begin education to race when they are able to be handled and led" (see Mr Cox' first affidavit at [78]). The education process (described in Mr Cox' second affidavit at [31]-[33]) includes use of "a sand training track that allows a horse to get used to a rider and become familiar with the look and feel of a racetrack" together with "wide practice barriers" to "familiarise the young horse with the feel of being led into a starting gate" (see at [33]).
2. Mr Cox' evidence is that the yearlings begin "an intensive 4-6 months of training, commencing when the horse is approximately 18 months old" (see Mr Cox' second affidavit at [34]). That intensive training involves the transportation of the entire foal crop (in each land tax year) in batches to Crown Lodge for one week of training after which they return to the Land. That process is repeated up to five times per yearling batch (Mr Cox' second affidavit at [35]). Mr Cox has deposed that the purpose of that "racehorse training is to get the yearlings accustomed to activities that take place on the racetrack" (Mr Cox' second affidavit at [36]).
3. The Chief Commissioner says that the clear purpose of the yearlings' intensive training cannot be artificially segregated into a purpose of racing while the yearling is maintained at Crown Lodge and a purpose of sale when the same horse is maintained on the Land. It is said that one informs the other. (Pausing here, to some extent Godolphin's argument accepts this - but, as adverted to above, Godolphin places emphasis on the racing being a fundamental part of the sale process rather than the sale process being ancillary to the racing.)
4. The Chief Commissioner argues that at no time during this period of intensive training is a yearling maintained on the Land for the purpose of selling it; rather, it is said that the evidence is that "when the yearlings are not at Crown Lodge they spell at Kelvinside". The Chief Commissioner argues that it would be nonsensical to suggest that, in the intermission between its second and third rotations of intensive training at Crown Lodge, a yearling spelling on the Land (awaiting its third rotation of intensive training) is maintained on the Land for the purpose of selling it. It is submitted that, having regard to the integrated nature of Godolphin's business, yearlings are maintained on the Land for the purpose of spelling in between intensive racehorse training rotations (i.e., they are maintained for the purpose of racing).

Horses of racing age - geldings, mares and stallions

1. Mr Cox' evidence is that Godolphin races mares between the ages of two and five to six years old and stallions between the ages of two and five years old (Mr Cox' first affidavit at [82]); and that such racehorses will race for a period and then "spell for a time", with approximately 85% of horses spelling in NSW doing so at Kelvinside (Mr Cox' second affidavit at [50]). Mr Cox' evidence is that all horses need to rest (or spell) (whether racing or training - see T 49.1-16) and that races are timed best to suit each horse's ability, age, distance and group (Mr Cox' second affidavit at [47]).

Geldings

1. Mr Cox' evidence is that Godolphin gelds the "vast majority of the male thoroughbred horses that it does not consider to have stallion prospects" (Mr Cox' first affidavit at [50]), and that those geldings are "usually sold at three years of age" (Mr Cox' first affidavit at [52]).

Mares

1. Mr Cox' evidence is that "once their racing career is finished", mares either become part of Godolphin's broodmare "band" or are sold to third parties (Mr Cox' first affidavit at [36]).
2. The Chief Commissioner notes, for example, that the Godolphin January 2017 Monthly Report records that in order to bring the broodmare number down to 150 "[Godolphin] aim[ed] to sell a further 70 mares this year" and that it is anticipated that from 2019 "we will be basing approximately 120 yearlings into the racing operation each year, lowering the number of racehorses in the system from 400 to 300".
3. The Chief Commissioner argues that the monthly report statement is indicative of purpose (and from this that the sale of 70 mares was not to "realise a return" on the sale but was driven by the desire to bring approximately 120 yearlings into the racing operation). It is thus submitted that the focus and purpose of Godolphin in maintaining mares on the land is breeding (in order to race offspring) and racing (not sale).

Stallions

1. As to the stallions, as already noted the Chief Commissioner accepts that, during the times that they are maintained on Kelvinside (specifically PID 4196725), they are maintained for the purpose of selling their bodily product (i.e., semen). However, the Chief Commissioner says that this is not the dominant use of PID 4196725 (see the submissions on this issue in due course).

Relevant legislation

1. Section 10AA of the Land Tax Management Act, which in its present form took effect on 7 December 2005, provides that: 10AA Exemption for land used for primary production (1) Land that is rural land is exempt from taxation if it is land used for primary production. (2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land - (a) has a significant and substantial commercial purpose or character, and (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made). (3) For the purposes of this section, land used for primary production means land the dominant use of which is for - … (b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce … (4) For the purposes of this section, land is rural land if- (a) the land is zoned rural, rural residential, non-urban or large lot residential under a planning instrument, or (b) the land has another zoning under a planning instrument, and the zone is a type of rural zone under the standard instrument prescribed under section 33A (1) of the Environmental Planning and Assessment Act 1979, or (c) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.
2. As noted above, it is common ground that the Land is rural land under ss 10AA(1) and (4) of the Land Tax Management Act.
3. Pursuant to s 100(3) of the Taxation Administration Act, Godolphin bears the onus of establishing its entitlement to the exemption conferred by s 10AA(1) of the Land Tax Management Act. Thus, Godolphin must establish (on the balance of probabilities) that in each of the land tax years the dominant use of the land was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce.
4. Prior to 7 December 2005, the primary production exemption was contained in s 10(1)(p), read with the definition of "land used for primary production" in s 3(1) of the Land Tax Management Act. The definition of land used for primary production relevantly included "land used primarily for … the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce" (i.e., the exemption focused in terms on primary use as opposed to dominant use).

Relevant principles

1. There is broad consensus between the parties as to the applicable principles (albeit with some qualifications to which I will refer where relevant). At the outset, Godolphin notes the observation of Allsop P, as his Honour then was, in Leda Manorstead (at [28]) that 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; and Godolphin submits that, by parity of reasoning, there is no requirement to do the reverse so as to deny the exemption.
2. In Metricon (at [59]-[60]), Barrett AJA held that the enquiry directed by s 10AA(3) is as to current tangible and physical development and its purpose (see also in this context the subsequent decision in Bayside Council v Karimbla Properties (No 3) Pty Ltd (2018) 99 NSWLR 66; [2018] NSWCA 257 (Bayside) at [109], [120] per Emmett AJA). His Honour observed that little is likely to turn on subjective purpose or intention, noting that the question is not what an owner, lessee or other person able to do so decides is to happen in relation to the land. Rather, the task is to determine whether, as an objective matter, the things that that person causes to happen constitute "use" and, if so, whether (and to what extent) that "use" is a use described in paras (a) to (f) of sub-s 3.
3. Pausing here, while the Chief Commissioner accepts that little is likely to turn on subjective purpose or intention (noting what was said in Metricon at [60]), the Chief Commissioner submits that the subjective intention of the person who claims to be using land for primary production can be a relevant consideration in making an objective evaluation of the whole of the circumstances; referring to Bayside, where Emmett AJA said (at [113]) that: The legislative framework … requires a central focus upon the physical activities that are being conducted on, or in respect of, the land at the relevant date, and an objective characterisation of those activities in order to determine whether the use of the land that those activities constitute is "for residential accommodation". In that process, regard cannot be had to the subjective intention, past, present or future, of the owner or the occupier, or of both, except in so far as that intention sheds light on the objective characterisation of the physical activities actually being conducted on, or in respect of, the land. [citations omitted]

Evidence

1. Godolphin filed affidavit evidence from the following: Mr Vincent (Vin) Cox (the General Manager and Managing Director of Godolphin since 2018), who swore affidavits on 25 August 2020 and 16 October 2020, respectively; Mr Paul Hartmann (an accountant who is the Financial Controller of Godolphin), who affirmed affidavits on 26 August 2020 and 16 October 2020, respectively; Mr Prashanth Kainthaje (Partner of Johnson Winter & Slattery, and solicitor for Godolphin) who affirmed an affidavit on 14 September 2020; Mr Michael Fleming (Principal of Bhima Operating Pty Ltd, a customer of Godolphin), who swore an affidavit on 25 August 2020; Ms Linda Monds (Director of Tyreel Stud Pty Ltd, a customer of Godolphin) who swore an affidavit on 24 August 2020; Mr Michael O'Donnell (Principal of the Mike and Debbie O'Donnell Fairhill Farm Partnership, a customer of Godolphin) who swore an affidavit on 24 August 2020; Mr Charles Pulford (Head of Sales for Darley Stallions) who swore an affidavit on 26 August 2020; and Ms Jacqueline Stewart (Keeper of the Australian Stud Book, Racing Australia) who swore an affidavit on 24 August 2020. Godolphin also called an expert economist, Mr James Mellsop (Managing Director of NERA Economic Consulting) who produced a report dated 24 August 2020 (the Mellsop Report) addressing the value added through breeding and racing.
2. The Chief Commissioner relied on an affidavit of Ms Ava Hurley (solicitor employed by the Crown Solicitor for NSW) sworn on 8 December 2020 and adduced expert evidence from an agronomist, Mr Peter Schuster, who produced a report dated 8 December 2020 (the Schuster Report) addressing the relationship between the maintenance of cattle and horses by Godolphin on the Land in the relevant tax years.
3. During the course of the hearing, I had the benefit of a video presentation of drone footage taken of the facilities operated by Godolphin on Kelvinside and Woodlands. I also had the benefit of a video showing the manner in which stallions are marketed to customers for stud purposes (the "Darley Virtual Stallion Parade" on 31 August 2020 - at which stallions are shown to breeders, with emphasis on their genetic background, racing prowess, and the prowess of their progeny), a video regarding the training of yearlings ("Educating Yearlings in Australia"), and a video of staff at Godolphin explaining their roles to "Staff Stories", notably concerning the process of spelling (which was compiled around late June - early July 2018).

Godolphin's submissions

1. At the outset I note that one of the key issues that Godolphin identified in the present case (as being of particular relevance to Kelvinside) was as to whether the transaction by which a stallion covers a mare owned by a third party falls within the concept of "selling [the stallion's] bodily produce". Godolphin maintains that the essence of the stallion stud operation is the sale of bodily produce (and cites various authorities in support of that proposition). Godolphin accepts that if the stallion stud activities do not fall within that concept then it cannot succeed in relation to Kelvinside (though it says that Woodlands may still be characterised as land used for primary production within the meaning of s 10AA, albeit that the issue as to characterisation of the stallion stud business may remain relevant given the integration of Godolphin's operations). Conversely, Godolphin contends that, if the stallion stud activities are the sale of bodily produce, that should be decisive of this proceeding in Godolphin's favour.
2. The Chief Commissioner, in his submissions, accepts that the stallion covering activities taking place on PID 4196725 (formerly PID 291959) at Kelvinside were (insofar as a Godolphin stallion covered a non-Godolphin mare) for an exempt purpose (i.e., the maintenance of animals for the purpose of selling their bodily produce) but contends that this was not the predominant use of the relevant PID (on the basis that these activities took place on only approximately 10% of the PID; the predominant use of which is said to be for non-exempt activities, namely the raising and training of thoroughbred horses to race and the spelling of thoroughbred horses that were racing) (this being one of the factual findings for which the Chief Commissioner here contends).
3. In light of the Chief Commissioner's acceptance of the proposition that stallion covering activities (at least in relation to non-Godolphin mares) would fall within the relevant category, it is not necessary here to set out in any detail Godolphin's submissions as to the characterisation of the stallion servicing activities as being pursuant to a contract for the sale of a good (i.e., the property in the stallion's semen) or the authorities on which Godolphin relies for that proposition. Rather, what is to be determined is whether these activities are the dominant use of the relevant Land. This involves consideration of the import of Godolphin's racing operations (which Godolphin says form part of its integrated business) on its stallion servicing operations (or more generally its breeding activities).

Dominant use of the Land

1. Turning then to Godolphin's submissions as to the dominant use of the Land, Godolphin says that the market for selling thoroughbred horses, their progeny or their semen is heavily impacted by the racing career of those horses and of other horses related to them. It is said that the increase in the value of a thoroughbred horse with a successful racing career can be very significant (see Mr Cox' first affidavit at [40]; and the Mellsop Report).
2. Mr Mellsop has identified that each of the following has an effect on the fees that can be derived by the owner of the stallion from stallion covering: the pedigree of a stallion; the racing history of a stallion; and the performance of a stallion's progeny as a racehorse. Further, Mr Mellsop says that the racing history of a thoroughbred horse has an effect on the sale price of that horse in the secondary market (compared to the sale price that would be achieved if the horse were sold as a weanling or a yearling) and that the racing history of a mare has an effect on the sales price of the mare's progeny in a primary or secondary market.
3. Godolphin says that this economic evidence is reinforced by its own marketing activities (referring to Mr Pulford's affidavit at [7]-[18]) and by evidence from broodmare owners who pay for their broodmares to be impregnated with the semen of Godolphin's breeding stallions (referring to the affidavits of Mr Fleming; Ms Monds and Mr O'Donnell). It is noted that a successful breeding stallion's semen is a highly valuable commodity to the owner of a broodmare. Godolphin's evidence is that one of its stallions will typically cover 100 to 150 mares in a season, with a fee for each cover between $11,000 and $132,000 (see Mr Cox' first affidavit at [63], [67]-[72]).
4. Godolphin notes that, while there is also a market in Australia for stallions covering non-thoroughbred mares, Godolphin does not participate in this market (see Mr Cox' first affidavit at [75]).
5. Godolphin's evidence is that it breeds horses with a purpose of being able to sell them or their progeny as thoroughbred racehorses or their bodily produce (the semen) in circumstances in which the resulting progeny will be thoroughbred racehorses (see Mr Cox' first affidavit at [45]) and that this means that, until sale, Godolphin must raise and educate the horses in a manner consistent with them becoming racehorses. It is noted that this education is a fundamental training process for all Godolphin's horses (see Mr Cox' second affidavit at [29]-[32]) whether those are to be sold, raced or used in breeding operations, because it helps horses become accustomed to dealing with humans.

Chief Commissioner's submissions

1. In summary, the Chief Commissioner contends that Godolphin has not discharged its burden of proving that the activities undertaken on each parcel of land in each of the land tax years were for the purpose of selling horses maintained on the Land. The Chief Commissioner argues that, to the extent that Godolphin sold horses bred and/or trained on the Land, these sales occurred as an ancillary and incidental part of Godolphin's activities for the purpose of breeding horses to race.
2. Further or in the alternative, the Chief Commissioner says that Godolphin has not discharged its burden of proving that the activities undertaken on each parcel of land in each of the land tax years were for the dominant purpose of selling horses maintained on the Land. It is said that, to the extent any purpose of sale existed, it was not sufficiently proximate to the activities taking place on the Land to satisfy the statutory test.
3. As adverted to above, the Chief Commissioner accepts that the stallion covering activities taking place on PID 4196725 (formerly PID 291959) at Kelvinside were (insofar as a Godolphin stallion covered a non-Godolphin mare, which I note was the majority of such coverings over the relevant period) for an exempt purpose but the Chief Commissioner points out that these activities took place on approximately 10% of PID 4196725 at Kelvinside. The Chief Commissioner contends that Godolphin has failed to prove that the stallion covering activities were the dominant use of this PID. Rather, it is said that PID 4196725 was predominantly used for other activities that are not exempt (namely the raising and training of thoroughbred horses to race and the spelling of thoroughbred horses that were racing).
4. In relation to the grazing of cattle on both Woodlands and Kelvinside, the Chief Commissioner says that this was undertaken for purposes subservient to those associated with horse breeding, training and spelling on the properties (including the removal of parasites, prevention of disease and balancing of grazing pressure, which it is said are not exempt purposes). Thus, it is contended that the activity of cattle grazing cannot assist Godolphin to establish the requirements of s 10AA(3)(b) (and it is noted that Godolphin accepts that the cattle activities alone would not be enough to establish that the "dominant use" falls within the exemption).

The physical use of the Land

1. The Chief Commissioner refers to the evidence as to the horses maintained on the Land during the relevant land tax years (see above) and contends that the overwhelming majority of foals, yearlings, horses of racing age, geldings and mares maintained on the Land are maintained for the purpose of racing. The Chief Commissioner says that the horses sold by Godolphin are only: the small minority of the "foal cull"; yearlings which cannot meet the training and trial standards set for it by Godolphin trainers; three year-old geldings which have already raced; and mares past their racing age that Godolphin has deemed are of unsuitable quality to produce foals with racing qualities.
2. The Chief Commissioner contrasts this with the maintenance on the Land of broodmares to breed with Godolphin's (or other) stallions in order to produce a pre-determined number of foals with racing quality (almost all of which it is said are retained by Godolphin and placed in the race programme); yearlings which are educated to race and placed in intensive race training at Crown Lodge and spelled from that intensive race training on Kelvinside; horses of racing age which are spelled on Kelvinside and the retention of mares who are past racing age as broodmares to commence the "breed to race" cycle again.
3. The Chief Commissioner says that Godolphin does not seek to identify, as at 31 December of each land tax year, which (if any) of the horses maintained on the land are for sale. It is said that Godolphin does not adopt the typical model of a breeder, by selling horses as yearlings (referring to Mr Cox' first affidavit at [39] and Mr Cox' second affidavit at [54]); rather, that whether a horse is ultimately sold depends on its racing performance, potential as a broodmare and bloodlines after a number of years spent on other non-exempt properties maintained by Godolphin. The Chief Commissioner says that, although Godolphin asserts that 70% of its horses are sold, the vast majority of those horses are sold after they have been educated to race, trained to race, and raced.
4. The Chief Commissioner says that this demonstrates that the next step in the life cycle of the foals and yearlings maintained on the Land was to race for commercial gain (not to be sold). Insofar as Godolphin accepts that horses were being maintained at Crown Lodge and Osborne Park for the purpose of racing, the Chief Commissioner argues that foals and yearlings being raised and trained to enter into the racing programme were being maintained for the purpose (or alternatively, the dominant purpose) of racing. It is said that the purpose of sale, if ultimately formed in respect of a particular horse, was also not a purpose that was present at the time the horse was being maintained on the Land (or, alternatively, was not a sufficiently proximate purpose to satisfy the requirements of s 10AA(3)(b) of the Land Tax Management Act.

Financial statements

1. The Chief Commissioner submits that Godolphin's contemporaneous financial records for each of the land tax years are relevant to ascertaining "the time and labour spent in conducting the different uses, the money spent or assets deployed in each use and the value derived or to be derived from it" (noting that each of those matters is a factor to be used and weighed in determining which of several competing uses is dominant - see Leppington Pastoral at [114] per White J, as his Honour then was). The Chief Commissioner says that Godolphin's contemporaneous financial records also indicate the physical deployment of the land "in pursuance of a particular purpose of obtaining present benefit or advantage from it" (citing Metricon at [61]).
2. Godolphin has produced Management Accounts for each of the land tax years 2013 to 2019 together with Profit and Loss Performance Reports for each of Woodlands, Kelvinside, Crown Lodge and Osborne Park. Godolphin's Management Accounts report profit and loss by activity type, namely, stallions, breeding operations, racing operations, and horse sales or horse and nomination purchases. The Chief Commissioner submits that an analysis of Godolphin's financial records discloses that in each of the land tax years, Godolphin's focus (in terms of time, labour, money spent and value sought to be derived) was on the racing and stud farm aspects of its operations. The Chief Commissioner says that there was minimal focus on generating commercial gains from the selling of horses (or their natural increase) such that sales are incidental or ancillary to the breeding and racing operation.
3. The Chief Commissioner argues that the fact that Godolphin's financial focus is on its racing and breeding operation demonstrates that the dominant use of the land is not for the purpose of selling horses or their natural increase. (Rather, that the dominant purpose of Godolphin in each of the land tax years was the non-exempt purpose of breeding, training, and then racing thoroughbred racehorses.)
4. As to those management accounts, the Chief Commissioner points to the following.

Stallions

1. It is noted that in each of the land tax years the net operating income from "stallions" was significantly positive; i.e., nomination sales exceeded expenses resulting in a very profitable activity type.
2. By way of example, it is noted that in 2019 (said by Godolphin in effect to be a typical year insofar as it is said to have been an "extraordinary year on the track") nomination sales were $23,845,000 generated from expenses of $5,976,000 (primarily consisting of staffing costs and other expenditure with only $834,000 attributed to "horse expense (stallions)") resulting in net income from "stallions" of $17,869,000.
3. As noted, the Chief Commissioner accepts that these records are indicative of the maintenance of stallions on PID 4196725 for the purpose of selling their bodily produce. However, the Chief Commissioner maintains that this is not the dominant use of PID 4196725.

Breeding operations

1. In each of the land tax years, breeding operations were reported as cost centre. By way of example, in 2019 breeding operations expenses were $9,055,000 (predominantly made up of "horse expense", "staff costs" and "other expenditure"). In other land tax years breeding operations expenses range from $8,645,000 to $9,116,000.
2. It is noted that the Management Accounts do not contain any record of how these costs are allocated to "stallions" (net nomination sales), racing operations, horse sales or another activity type.

Racing operations

1. In each of the land tax years, racing operations incurred losses despite significant race winnings and appearance money.
2. In 2019, Godolphin racehorses generated $34,327,000 in race winning and appearance money (a result described in the notes to the Management Accounts for 2019 as "an extraordinary year on the track"), which was offset against "total racing stable / office expense" of $25,423,000 resulting is a loss of $167,000. The Chief Commissioner notes that in other years, losses range from $12,065,000 to $16,806,000 and total allocated expenses range from $21,108,000 to $25,165,000.
3. Expenses on racing operations are the single largest category of expense incurred by Godolphin in each of the land tax years (being more than twice the amount spent on breeding and some three to four times more than that spent on stallions). The Chief Commissioner says that this expenditure is confirmed by a comparison of amounts recorded in Godolphin's profit and loss reports as spent at Crown Lodge and Osborne Park, on the one hand, and Woodlands and Kelvinside, on the other.

Horse sales and purchases

1. In each of the 2014, 2015 and 2018 land tax years, net horse trading was negative (with 2019 only a small profit of $418,000). It is noted that when the cost of breeding operations is taken into account, there is only one land tax year (2017) in which net horse trading generated a positive return.
2. The Chief Commissioner says that this is a curious position to be in if the dominant use of the Land was to maintain horses for the purpose of selling them arguing that it lacks the requisite "purpose or objective of commercial gain" (citing Metricon at [59]).
3. The Chief Commissioner says, by reference to Godolphin's submission that the racing history of a horse is determinative of its price on sale, that the horses sold by Godolphin are not assisted by their racing history. The Chief Commissioner says that Godolphin typically sells "low value" horses and that this is consistent with the Godolphin Australia - Plan Overview (see below).
4. To the extent that expenditure on training of thoroughbreds for racing does contribute to the sale value of the horses (within the "racing operations" cost centre, rather than the "breeding operations" cost centre), the Chief Commissioner says that if the focus was upon selling the horses (rather than racing them) some portion of these costs would ordinarily be understood as reducing the profitability of the sales operation. It is said that by adding a portion of the costs associated with training the horses to race to the costs of sale would diminish even further the commerciality to Godolphin of its horse sales.
5. The Chief Commissioner says that Godolphin's contemporaneous financial records do not disclose a commercial focus on selling horses and (when compared to the "stallion" and "racing operation" activities) are not supportive of horse sales being Godolphin's dominant purpose.

Average staff

1. The Chief Commissioner says that the Management Accounts demonstrate that approximately 52% of all staff employed by Godolphin in each of the land tax years 2016 to 2019 (noting that there are no records in 2013 to 2015) work in the racing operation; and that in each of these years, less than 7% of staff assisted with stallions, approximately 17% assisted with breeding operations, and the remainder were employed in support of all operations.
2. By way of example, it is noted that in 2019 Godolphin employed 159.3 full-time employees in "racing" compared to 18 for "stallions", 52.3 for "breeding" and 77.3 for "support". The Chief Commissioner says that this is a strong indicator that Godolphin's expenditure is focused on racing.

Business Plans and other presentations

1. The Chief Commissioner says that a review of Godolphin's own business plans and precautions demonstrates that Godolphin's focus is on racing (see Exhibit 4, being the documents produced by the plaintiff in response to a request by the Crown Solicitor's Office dated 10 June 2021).
2. It is noted that Godolphin's Business Plan is described as "breed to race"; and that the "Business Plan" is explicitly one whereby racing and breeding operations are funded by the commercial stallion operation, prize money and the sale of "surplus mares, weanling and racehorses". The Chief Commissioner says that the fact that only "surplus" horses are sold is indicative of the purpose being racing and breeding not sale.
3. The recorded "commercial objectives" in the Business Plan focus on racing (see the Key Performance Indicators, which the Chief Commissioner says are dominated by racing success with "Gross Commercial Sales Revenue" listed ninth out of ten).
4. The Chief Commissioner also notes that the Godolphin Australia Strategy includes "Focus on quality - maintaining a broodmare band of 200 with a view to entering 120 horses into the racing program each year".
5. Emphasis is placed on the "Godolphin Australia - Plan Overview", as demonstrating Godolphin's focus on racing, noting that it refers to bloodstock, continual aggressive assessment of racing stock, sale of lower end to lower-middle end performers (geldings), fillies to be mated to Darley stallions and those excess to needs sold in breeding stock sales, selection of upper-middle end performers (around six geldings annually) sold to high yielding Asian markets, constant maintenance of breeding stock, sale of "foal mares" that are not of sufficient quality (around 70/year); and pointing to the statement as to sale "without selling the silver ware" of commercial pedigrees where Godolphin has "extended exposure", thereby utilising "the intellect and investment of our subsequent co-investors".
6. The Chief Commissioner says that these documents are a contemporaneous and objective record of Godolphin's purpose (one that is focused on breeding and racing with selling only incidental to achieve racing success or breeding objectives).
7. Thus, the Chief Commissioner says that Godolphin's contemporaneous financial records demonstrate that vast majority of expenses incurred by Godolphin in each land tax year were incurred on its racing operations which returned significant losses in each of the 2013 to 2018 land tax years and a smaller loss in 2019. The Chief Commissioner says that the fact that Godolphin's expenditure in each of the land tax years was focused on racing (for no reward) is indicative of the dominant purpose for which Godolphin maintains horses.

Kelvinside's use

1. As noted, while the Chief Commissioner accepts that the maintenance of stallions on PID 4196725 (and more specifically DP 220425) is for the purpose of selling their bodily product, the Chief Commissioner says that that purpose was not the dominant use of PID 4196725 during each of the land tax years; rather, that the dominant use of PID 4196725 (and Kelvinside) during each of the land tax years was for: maintaining yearlings for the purpose of educating them to race; spelling yearlings between periods of intense racing training at Crown Lodge; and spelling thoroughbred horses in between race events.

Physical area used to maintain stallions

1. The Chief Commissioner says that contrary to Godolphin's submissions, the evidence demonstrates that Godolphin only maintains stallions on DP 220425 (see Exhibit A at tab 4 and Exhibit 2 at tab 1, p 9).
2. PID 4196725 is comprised of (see Exhibit 2 at tab 1, p 9): DP 220425, which has an area of 34.35 hectares; and DP 624789, which has an area of 332.47 hectares.
3. It is noted that, in total, PID 4196725 is comprised of 366.82 hectares, of which DP 220425 comprises less than 10%. Accordingly, the Chief Commissioner says that less than 10% of PID 4196725 is used to maintain stallions.
4. The Chief Commissioner says that the remaining 90% of PID 4196725 is used for the maintenance of yearlings (which are being educated and trained as racehorses), horses of racing age which are spelling in between race events and the maintenance of cattle (which the Chief Commissioner says are used as part of a follow through operation and subservient to the maintenance of horses).
5. The Chief Commissioner says that there is no evidence to suggest that any part of PID 292024, 292022 and 292533 (within Kelvinside) are used for the maintenance of stallions or to conduct covering activities.

Nature and intensity of use

1. As to the number of stallions compared to other horses, reference is made to the Godolphin "Horse Management System" (see Exhibit D at tab 10) which contains data on the number of horses "held and maintained by Godolphin at Kelvinside and Woodlands" as at 31 December of each year (excluding hacks, teasers and nanny mares) (Mr Hartman's first affidavit at [20] and [21]). It is noted that because the data on horse numbers has been compiled as at 31 December of each year, that number may not include any stallion that is shuttled to the Northern Hemisphere prior to 31 December (of which the Chief Commissioner says there is no evidence).
2. The Chief Commissioner says that analysis of that data demonstrates that the comparison between stallions maintained on Kelvinside and other stations was: in 2013, four stallions compared to 46 non-stallions; in 2014, eight stallions compared to 19 non-stallions; in 2015, four stallions compared to 58 non-stallions; in 2016, five stallions compared to 47 non-stallions; in 2017, eight stallions compared to 95 non-stallions; in 2018, eight stallions compared to 67 non-stallions; and in 2019, six stallions compared to 80 non-stallions.
3. Accordingly, it is said that the number of stallions maintained on PID 4196725 (and specifically, on DP 220425) is comparatively minor (four to eight stallions) compared with the number of horses (19 to 95) maintained on Kelvinside more broadly. The Chief Commissioner says that the non-stallions are maintained at Kelvinside for the purpose of training them to race or spelling them in between races.
4. As to intensity of use, it is noted that DP 220425 contains the stallion barns, covering sheds, arrival yards, preparation barn, horse walker (stallion) and lunging ring; as well as stallion specific areas (paddocks for individual stallions and a showing area) which are only used by stallions and for the purpose of Godolphin's stud operations.
5. The Chief Commissioner says that those parts of DP 220425 relating to the covering of mares (and the associated infrastructure) can logically only be in use during the breeding season which "begins on 1 September each year and ends around Christmas" (Mr Cox' second affidavit at [31]). Accordingly, it is said that for approximately eight months of each of the land tax years, the covering facilities and facilities associated with covering on DP 220425 are not in use.

Cattle

1. The Chief Commissioner points to Godolphin's concession that the cattle activities alone, if they are the only activities that fall within s 10AA(3)(b) of the Land Tax Management Act, would not be sufficient to establish that the "dominant use" of the Land falls within the subsection (referring to submissions at [116]).
2. Thus the Chief Commissioner submits that if the breeding and training activities taking place at Kelvinside and Woodlands are a use of the land which is not for the maintenance of animals for the purpose of selling them or their natural increase; and the dominant use of Kelvinside is not for the maintenance of stallions for the purpose of selling them, their natural increase or bodily product, then the maintenance of cattle on the Land, separately and independently of the maintenance of horse on the Land, does not provide a foundation for the primary production exemption to apply. (Godolphin does not cavil with this.)
3. That said, the Chief Commissioner accepts that if the converse were found then the cattle operations will not assist the Chief Commissioner to establish that the primary production exemption does not apply, as they will be in aid of a purpose which otherwise satisfies the exemption and are relatively unimportant in comparison to the other uses to which the Land is put.
4. It is noted that Godolphin's evidence is that cattle are used to "implement follow-through rotations between cattle and thoroughbred horses in the same paddocks" (Mr Cox' first affidavit at [17]; and see at [18] as to the perceived benefit of such a follow-through rotation).
5. The Chief Commissioner's livestock expert, Mr Schuster, has set out the considerable benefits of the follow-through rotation of cattle to the "horse operation" conducted on the Land, including the removal of parasites, prevention of disease and balancing grazing pressure (Schuster Report at [29]-[35]). Mr Schuster's opinion is that the "maintenance of cattle is subservient to the maintenance of horses" (Schuster Report at [41]) and that "cattle are predominantly used as a management tool to favour the horse operation and to utilise portions of the Land or pastures which would otherwise not be used" (Schuster Report at [59]).
6. Mr Schuster was, based on the materials available to him at the time of his report, unable to form a view as to whether the cattle operation was "conducted to generate revenue" although he "suspect[s] this to be the case" (Schuster Report at [43] and [48]). In the circumstances, while unable to conclusively determine the purpose of the cattle operation Mr Schuster considered it "probable that the purpose is to assist in controlling internal parasites in horses, maintain pasture quality through strategic grazing management and generate revenue for the sale of cattle" (Schuster Report at [48]).

Godolphin's submissions in reply

1. As to the factual matters, Godolphin accepts that its business involves breeding and raising racehorses. It says that one of the objectives of racing those horses is to increase their value and the value of related horses, including their sires, dams, progeny and others who share their bloodline (referring to the Mellsop Report at [18]-[30]); another objective (and one of the central objectives) is to produce a high quality sire with a view to selling that stallion's semen in the future: (referring to the Flying Start 2018 presentation on page 6; and the Godolphin Australia Report dated 5 December 2018 on pages 2 and 7 about the objective of producing a high quality sire).
2. Godolphin acknowledges that geldings are not capable of becoming a stallion sire (although it is said that the gelding's success on the racefield and the price for which it is sold will be relevant to the value of related stallions and other related horses). Godolphin cavils with the proposition that geldings are sold only when their racing or stallion prospects fail to materialise. Reference is made to Mr Cox' evidence in his first affidavit at [53]-[54] that Godolphin also sells high quality geldings (including for prices up to $1.3 million). Reference is also made to Godolphin Australia report dated 5 December 2018 on page 5 regarding the sale of "upper-middle end performers".
3. As to the submission by the Chief Commissioner to the effect that it is only a small minority of the foal cull; yearlings which cannot meet the training and trial standards set for them; three-year-old geldings which have already raced; and mares part their racing age of an unsuitable quality to produce foals which are sold by Godolphin, Godolphin says that while the horses described in that paragraph are among those sold, Godolphin says the evidence simply does not support the assertion that it is only those horses that are sold. Godolphin says that the revenue from sales speaks for itself; that on average, it generates roughly half the revenue generated from racing - and this is before one takes into account the future benefit (which will still be predominantly referable to sales) to be derived from the horses that are retained as broodmares or the stallions that are retained as (exceptionally valuable) sires.
4. Godolphin says that the Chief Commissioner's analysis of financial statements (at [68]-[87] of submissions) only reinforces Godolphin's case. It is accepted that the racing operations are not profitable when viewed in isolation, indeed, they are a substantial net cost to Godolphin. It is noted that the substantial majority of the activities that lead to the expenses on racing operations occur on Crown Lodge and Osborne Park. Godolphin says this reinforces the legitimacy of Godolphin's position that the dominant use of Crown Lodge and Osborne Park can be regarded as different from the dominant use of Kelvinside and Woodlands, even though all four properties are used as part of an integrated business. Godolphin submits that the same may be said concerning the disparity in numbers of staff across the various parts of the business.

Determination

1. As adverted to earlier, a principal difference in the parties' opposing contentions is the perspective from which the racing operations are viewed in the context of Godolphin's equine operations: the Chief Commissioner argues that the breeding, training, education and spelling are for this purpose of racing ("breed to race") and that this is the dominant purpose (and dominant use) of the Land.
2. Emphasis is placed by the Chief Commissioner on statements in Godolphin's documents which focus on the objective of racing success. Godolphin, however, contends that the racing operation is part of the integrated thoroughbred stud operation - in that racing success increases the value commended by the stallions in "nominations" (i.e., the stallion covering activities) and the value of the progeny that is sold. As to the value of the former, there is no doubt that this vastly exceeds revenue ($17,869,000 from stallion servicing in 2019 compared to losses incurred in racing operators and breeding operators). It is submitted that, if not for the stallion operations, any rational owner of the business would close down the racing operators.
3. Mr Cox explains the "breed to race, race to breed" model as being that the breeding and supply of stock for the racing stable on the one hand is followed by the racing stable improving the stock and creating the supply of bloodstock assets. This is reinforced by the fact that stallion covering fees are clearly the key revenue driver for the business.
4. The question thus is whether there are two separate activities (such that it is necessary to determine which is the dominant use on each parcel of land) or an integrated or composite activity (involving both breeding and raising) such that the dominant use of all parcels (whether for breeding, training or spelling) is for the purpose of the ultimate sale of the stallion's semen and the broodmares' progeny.
5. The Chief Commissioner emphasises that the horses are being bred and educated in order to race (and says that the fact that there is an incidental sale at some stage does not affect this).
6. I accept that much of the use of the Land is devoted to breeding, training and preparation of the horses for racing (and that an obvious objective is to maximise prize winnings or success on the track). However, viewed overall, I have concluded that this is an integrated operation in which the preparation of horses for racing is with the overall or dominant purpose or objective of increasing or maximising the revenue from the nomination fees (i.e., the sale of bodily produce) and from the sale of the progeny produced by the broodmares.

Orders

1. For the reasons above, I therefore make the following orders: 1. Revoke the land tax assessments. 2. Refer the matter to the defendant to assess for land tax excluding the taxable value of the Kelvinside and Woodland properties. 3. Order the defendant to pay the plaintiffs' costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 April 2022