Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue; Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue

EX TEMPORE Judgment 1This is an application by the Chief Commissioner of State Revenue for directions for the filing of expert evidence under the Uniform Civil Procedure Rules, Part 31, r 31.19, and for an order for disclosure before he puts on his evidence.

Expert evidence 2The Chief Commissioner wishes to adduce evidence from Mr Hoffman and Mr Bryant. He proposes that the experts give evidence to update the evidence that they gave in the previous proceedings before the Court, Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; (2010) 79 NSWLR 724, and to provide the Court with assistance by way of evaluative material upon which it can determine what the competing uses of the land were during the relevant years. 3The application was initially opposed, but in light of my decision in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23, opposition was withdrawn. But as the solicitors for Leda Manorstead said in their written submissions in reply, the approval of the Court is still required. It is appropriate, therefore, that the Court should deal with the issues initially raised by Leda Manorstead in deciding whether to allow the proposed expert evidence. 4First, it was submitted that the articulation by the Chief Commissioner of the need for the evidence is so general one cannot know what expert evidence is required. The matters the expert evidence is to address are identified as being reasonably required in order to assist the Court by providing evidence about what the land is used for and the scale and intensity of the uses, as well as the characteristics of the Leda Manorstead's cattle operation and how that operation is conducted. 5A number of considerations that I observed in the previous proceedings are, it is submitted, required for determination in these proceedings as well. For example, the profitability of the cattle grazing, the percentage of the land committed to grazing, the percentage of the land agriculturally suitable for grazing and the percentage not usable or needing rehabilitation, the percentage of land committed to other uses, the level of expenditure of competing uses, the level of commitment, both financial and in terms of labour, by Leda Manorstead to the cattle operation compared with the level of commitment to other uses of the land, and the value of the herd as against the value of other expenditure relating to other uses. 6It is submitted that Mr Hoffman will be able to assist the Court by providing a report on whether the operation is conducted in a way similar to or different from other commercial cattle operations, what percentage of land is grazing land, whether the cattle operation is profitable and if not why not, and what remedial steps could be undertaken to improve profits, the number of cattle able to graze on the land in the present state of the soil, whether pasture improvement is required and if so over what portion of the land, whether Leda Manorstead has taken steps to improve pasture, the fertility of the soil and the likelihood of productive pasture in the future, and what is the indicia of a commercial cattle grazing enterprise with the purpose of making a profit. 7It is submitted that Mr Bryant would look at dominant use in terms of income and expenditure for cattle trading contrasted with income and expenditure for development, whether the cattle operation is making a profit as well as how the land is treated in accounts. In this regard it is submitted that Leda Manorstead has indicated that the land is treated as trading stock but it has not provided financial accounts to that effect. It is submitted that this is something that the Court will need in terms of evaluating the use of the land. 8Section 10AA(1) and s 10AA(2) of the Land Tax Management Act 1956 (Management Act) are in the following terms: "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)." 9The concepts of commerciality and profitability in s 10AA(2)(a) and s 10AA(2)(b) of the Management Act are so broad that it is difficult to identify with great specificity the relevant evidence. The itemisation to which I have referred is, in my view, sufficient. Prima facie, there is no reason for the Court to depart from the leave granted in the earlier proceedings and the terms of that leave. 10Leda Manorstead had submitted that the evidence proposed to be adduced is directed to objective current and likely future profitability of cattle grazing under s 10AA(2)(b) of the Management Act and, it is submitted, that it raised subjective issues. 11Leda Manorstead had argued that the reasoning in Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADT 250 at [74] - [78] was to be preferred to the reasoning of the Appeal Panel in Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25 at [45] - [52]. 12I have taken the view that s 10AA(2)(a) of the Management Act is objective and that s 10AA(2)(b) is subjective. I said that in Maraya at [77] "Section 10AA(2)(a) is concerned with objective qualities of the use of the land. The words "significant" and "substantial" in s 10AA(2)(a) are to be construed in their context and by interpreting the phrase "significant and substantial commercial purpose or character" as a whole rather than by adding up linguistic elements of each of the words (Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 396-397 quoting R v Brown [1996] 1 AC 543 at 561)." At [101] I said: "But I add a few words with respect to s 10AA(2)(b) of the Management Act. It introduces a subjective element into the land use. The primary production use must be engaged in for the purpose of profit on a continuous or repetitive basis, whether or not a profit is actually made." 13But I have also said that the expression of opinion by the taxpayer that the use is for the purpose of profit need not be accepted. At [103] I said: "The court is not bound, however, to accept Mr Giusti's assertion that Maraya engaged in its use of the land for primary production for the purpose of profit." 14Since that issue can be explored before the Court, expert evidence on the topic is relevant and in my view admissible.