Metricon Qld Pty Limited v Chief Commissioner of State Revenue

Supreme Court of NSW|2015-05-13|Before: White J

7 ATR 278 Hope v Bathurst City Council (1980) 144 CLR 1 Kirela Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (No. 2) [2004] NSWLEC 68; (2004) 132 LGERA 90 Kirela Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 [2005] NSWCA 108; 141 LGERA 40 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; (2010) 79 NSWLR 724 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775 Longford Investments Pty Ltd v Commissioner of Land Tax (1978) 8 ATR 656 Longreach Capital Pty Ltd v Valuer-General [2007] NSWLEC 721 Macquarie University v Ryde Municipal Council [1977] 1 NSWLR 304 Minister Administering the Crown Lands Act v NSW Aboriginal Land Council [2008] HCA 48; (2008) 237 CLR 285 Needham v Commissioner of Land Tax [1999] 2 Qd R 611 Re Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25; (2012) 88 ATR 200 Re Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue (2011) 86 ATR 449 Re Molopo Energy v Keybridge Capital Limited [2014] NSWSC 1864 Ryde Municipal Council v Macquarie University (1978) 139 CLR 633 Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue [2009] VSCA 167; (2009) 25 VR 59 Saville v Commissioner of Land Tax (1980) 12 ATR 7 Shell-Mex and BP Limited v Clayton (Valuation Officer) [1956] 3 All ER 185 Shell-Mex and BP Limited v Clayton [1955] 3 All ER 102 Stephen v Federal Commissioner of Land Tax (1930) 45 CLR 122 Taylor v Owners, Strata Plan 11564 [2014] HCA 9; (2014) 253 CLR 531 The Council of the City of Parramatta v Brickworks Limited (1972) 128 CLR 1 Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286 Tourapark Pty Ltd v Federal Commissioner of Taxation (1982) 149 CLR 176 Vaughan-Taylor v David Mitchell-Melcann Pty Ltd (1991) 25 NSWLR 580 Wentworth Securities Limited v Jones [1980] AC 74 Whitfords Beach Pty Ltd v Federal Commissioner of Taxation (1983) 67 FLR 151 Category: Principal judgment Parties: Metricon Qld Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: M Robertson QC with Ms E Bishop (Plaintiff) C Leggat SC with I Young (Defendant)

Solicitors: Bolster & Co (Plaintiff) Crown Solicitors Office (Defendant) File Number(s): 2013/120263; 2013/212871

Judgment

HIS HONOUR: In these proceedings the plaintiff ("Metricon") seeks a review of decisions of the Chief Commissioner of State Revenue to issue land tax assessments for the 2009, 2010, 2011, 2012 and 2013 land tax years.
Metricon is a property developer. The issue is whether it is entitled to exemptions for land tax pursuant to s 10AA(2) of the Land Tax Management Act 1956 (NSW) on the basis that certain lands that were included in the notices of assessment as being taxable were exempt from taxation because they were used for primary production within the meaning of s 10AA, that use of the land had a significant and substantial commercial purpose or character, and was engaged in for the purpose of profit on a continuous or repetitive basis. Under s 10AA, land is only to be taken to be used for primary production if that is the dominant use of the land (s 10AA(3)).
Section 10AA of the Land Tax Management Act provides: "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: (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. (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."
The Chief Commissioner does not dispute that each of the lands in question is used for primary production in the ordinary sense of that phrase. The sole issue is whether Metricon has established that that is the dominant use of the lands. The onus is on it to do so (Taxation Administration Act 1996 (NSW) s 100(3)).
The lands in question are located at Terranora in the Tweed Valley.
From April 2009 the cattle-grazing operations were conducted on the lands by a partnership of Jeffrey and Merrin Gilliland and Tim and Anna Gilliland. Jeffrey and Tim Gilliland are brothers. Merrin and Anna are their respective wives. The Gillilands have been farmers growing small crops and grazing cattle for many years. They agist cattle on the subject lands under an agreement with Metricon pursuant to which they are responsible for maintaining fences and keeping the lands free of noxious weeds. Prior to April 2009 Jeffrey and Merrin Gilliland had agisted cattle on some of the lands.
Initially Metricon sought to set aside land tax assessment notices issued in respect of eight areas of land in Terranora. The eight areas are known 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. Initially the Chief Commissioner disputed that the dominant use of the lands was for primary production and also disputed that the primary production use had the requisite significant and substantial commercial purpose or character as required by s 10AA(2)(a) and was engaged in for the purpose of profit on a continuous or repetitive basis as required by s 10AA(2)(b). Shortly before the hearing the issues were narrowed. Metricon abandoned its challenge to the assessments in respect of the lands known as 14 Mahers Lane, 412 Terranora Road, and 490 Terranora Road, and abandoned its challenge to the assessment in respect of the land at 126 Mahers Lane for the 2010 tax year. The Chief Commissioner abandoned his reliance on s 10AA(2).
There is no dispute that the lands for which Metricon maintains its challenge to the land tax assessments were used for primary production in the ordinary sense (but not the defined) sense of that expression. There is now no dispute that the primary production use by the Gillilands had a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis.
Metricon purchased the lands in question in 2008 and 2009. On 26 October 2007 parts of the land had been rezoned as zone 2(c) Urban Expansion. The rezoning allowed for residential development subject to development consent. Parts of the areas were zoned 7(d) for Environmental Protection. The lands in question are in close proximity to existing residential developments. Metricon spent about $60 million to acquire the lands in question (together with adjacent lands for which there is no longer a challenge to the land tax assessments).
It is common ground that the availability of the primary production exemption is to be determined in respect of the five areas of land separately (Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [34]).
The land at 22 Fraser Drive (also called 37 Fraser Drive) is comprised of a number of separate lots. The proposed development is known as "Altitude Aspire". The Tweed Local Environmental Plan provides that a development approval could not be granted for the land unless a development control plan for the whole of the relevant area had been prepared. The Altitude Aspire development was a development to which Pt 3A of the Environmental Planning and Assessment Act 1979 (NSW) applied. This meant that a project application had to be prepared and submitted to the Department of Planning. On 23 November 2009 the Director General of the Department of Planning advised that the Department had received the application for a proposed subdivision of land at the southern end of Fraser Drive, Terranora into approximately 300 lots and advised Metricon's consultant, Mr Darryl Anderson, of the Director General's Environmental Assessment Requirements for the environmental assessment of the project application. The requirements were extensive. They necessitated the provision of plans and reports that included: "Proposed Subdivision Plans; Landscape Master Plan; Agricultural Buffers Assessment; Cultural Heritage Assessment; Acoustic Report; Soil Contamination Assessment; Conceptual Stormwater Assessment; Ecological Assessment; Vegetation Management and Rehabilitation Plan; Conceptual Groundwater Impacts Assessment; Acid Sulphate Soils Management Plan; Revised Preliminary Engineering Report; Broad Geotechnical Engineering Assessment; Visual Impact Assessment; Biting Insect Management Plan; Bushfire Assessment; Transport Assessment; Site Management Plan; Draft Community Management Statement; Architectural Plans of Proposed Community Facility."
Those reports were provided. Project approval was not granted until 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.
On 28 June 2013 Metricon applied for a construction certificate for the construction of a temporary sales office and related signage on the Altitude Aspire land. This was subsequently granted. The construction of that office and sign post-dated the relevant land tax years. (The liability of Metricon for land tax for the 2013 land tax year arose as at midnight on 31 December 2012 (Land Tax Management Act, s 8)).
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.
In the tax years in question Metricon paid consultancy fees of approximately $2.2 million.
The properties at 126, 140 and 153 Mahers Lane, Terranora 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 that property was included with the other lands used by the Gillilands for cattle-grazing. The challenge to the land tax assessment in respect of 126 Mahers Lane is confined to the 2011, 2012 and 2013 land tax years. There was a house on 126 Mahers Lane. Rental income of $575 per week was derived in each of the 2011 to 2013 land tax years.
140 Mahers Lane consists of three separate lots comprising 11.5 hectares. There is a single cottage on part of the land. The cottage was leased to a husband and wife and three children at a rent of $220 per week and was tenanted from March 2009. There are stockyards on 140 Mahers Lane.
There are two houses on 153 Mahers Lane. That property has a total fenced area of 9.15 hectares, not including a dam. One of the houses was let to a husband and wife and five children. 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.
On each of the properties the house and curtilage occupied by tenants were fenced off from the grazing area of the land. The area occupied by the dwellings and curtilage comprised 6.2 per cent of the total area of 126 Mahers Lane, 2.4 per cent of the total area of 140 Mahers Lane, and 8.3 per cent of the total area of 153 Mahers Lane.
The primary production use of the lands was for the maintenance (including fattening) of cattle for sale. The Chief Commissioner alleged that the dominant use of the land was not for the maintenance of cattle when compared with other, competing uses of the lands. Those competing uses were identified by the Chief Commissioner as follows: "the (lands) formed part of the stock in trade constituting the 'land bank' of [Metricon] and the Metricon group, being land acquired for more than $60 million and held for the purpose, when the time was appropriate, of being developed, subdivided and resold for profit in the course of the commercial land development business of [Metricon] (and its associated entities); Alternatively the parcels of land at 153 Mahers Lane, Terranora, 126 Mahers Lane Terranora [and] 140 Mahers Lane, Terranora were used for a rental and residential use of the dwellings on the respective properties; Alternatively the whole of the [lands] [were] used by [Metricon] for a rental use in respect of the agistment of cattle on the [lands]; Further, and in the alternative, for the relevant land tax years the [lands were] used for commercial land development, in circumstances where [Metricon] (and its associated entities) incurred ongoing expenses in connection with the development of the land and those expenses exceeded the financial outlay and financial return from primary production."
Metricon submits that the reference in s 10AA(1) to land being "used" for primary production refers to only a physical use of the land. It is common ground that Metricon acquired the lands in question for the purpose of a future residential development. It is also common ground that for each of the land tax years in question no development works, such as bulk earthworks, or the construction of roads or houses, had commenced. In this regard the case stands in contrast with Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; (2010) 79 NSWLR 724 and on appeal Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775. In Leda Manorstead, both at first instance and on appeal, it was held that the dominant use of the land was for commercial land development rather than primary production. But there bulk excavation works had commenced. In the present case, development approval for the residential subdivision had not been obtained and had been sought only in respect of one of the five areas of land the subject of the assessments.
Section 10AA(1) refers to a present use of land for primary production which is the dominant use. In deciding whether the primary production use is the dominant use of land the comparison is to be made with other present uses of the land not with an intended future use (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 at [18(a) and (b)], [19] and [24]). In Leda Manorstead the land was being used both for cattle-grazing and commercial land development. It was being used for commercial land development because substantial earthworks were being undertaking in furtherance of the process of developing the land for residential subdivision (at [7]).
It is convenient to deal first with the questions of principle, namely: whether, as Metricon contends, in determining whether a primary production use of land is the dominant use, the comparison is to be only with another physical use or other physical uses; whether Metricon's holding of lands as part of a "land bank", that is, as part of its stock in trade, is a current use of land, as distinct from a holding of the land for an intended future use; and associated with (b), whether the incurring of expenses for consultants and the work done by them was in connection with a present use of the lands for commercial land development, as distinct from an intended future use.
I have concluded that the comparison required by s 10AA(3) of a primary production use with other uses is not confined to a comparison with other physical uses. But I have also concluded that Metricon's holding of the lands as part of its stock in trade was not a current use and that the consultants' work was done and associated expenses were incurred in connection with a current commercial land development use of the lands only to the extent the land was physically used in carrying out activities directed to obtaining requisite approvals. Otherwise the work was done and expenses were incurred in connection with an intended future use.

Metricon's argument: Section 10AA(3) comparison is only with competing physical uses

In Leda Manorstead the taxpayer contended that the earthworks were only a preliminary activity carried out to prepare the land for a contemplated or intended use in the future for residential subdivision and that a present use required a productive return from the land (at [18(d)] and [19]). That argument was rejected. Allsop P with whom Campbell and Whealy JJA agreed, said (at [23] and [24]): "[23] None of these elements of the meaning of use requires a conclusion that use must involve productive return to be present use. As Mason P said in NSW Aboriginal Land Council v Minister Administering the Crown Lands Act [2007] NSWCA 281 ; 157 LGERA 18 at 25 [32] 'use' is a 'protean' term and can be measured from a number of different perspectives. In the High Court in the NSW Aboriginal Land Council case it was held that use of land involves utilisation, exploitation or employment and that it requires actual physical use, not some notional or potential future or contemplated use: at 293-294 [22], 296-297 [30]-[32] (per Kirby J) and 306-307 [73] (per Hayne J, Heydon J, Crennan J and Kiefel J) and see Thomason at 293. [24] I am unable to accept the bright line distinction made by Leda in its submissions. The words of the section (other than identifying particular uses in paras (a)-(f)) do not otherwise prescribe any particular use for which the land could be otherwise used. The particular uses identified in paras (a)-(f) are the uses for which the land must be dominantly used for the application of sub-s (3). As the appellant, Leda, submits, if there is another use for which the land is being put, it must be compared with the relevant use in, here, para (b). In evaluating any given circumstances there is no warrant within the words of the section or the meaning of the word 'use' or the phrase 'used for' to require beneficial return or any other like concept. There will be some circumstances in which activity on the land will be understood or evaluated as preliminary to the undertaking of a future use. That is not what s 10AA is directed to. 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."
Metricon submitted that in rejecting the taxpayer's proposition that a use must involve a productive return in order for it to be a present use Allsop P focused on actual physical use relying on what was said by the High Court in Minister Administering the Crown Lands Act v NSW Aboriginal Land Council [2008] HCA 48; (2008) 237 CLR 285. This is so. That was all that was necessary for the purposes of the decision in Leda Manorstead. Allsop P did not say that only the physical use of land could be considered for the purposes of s 10AA(1) and (3).
Metricon submitted that the ratio decidendi of the Court of Appeal's decision in Leda Manorstead is that for the purposes of s 10AA(1) one is required to look at the activities that occurred on the land itself. It submitted that not only was one required to look at the activities that occurred on the land, a proposition about which there can be no debate, but that the inquiry was confined to an examination of those activities. Metricon relied on paras [23] and [24] of the judgment of Allsop P referred to above, and in particular his Honour's statement that the High Court in the NSW Aboriginal Land Council case held that use of land requires actual physical use (at [23]) and his Honour's statement (at [24]) that another way of asking the question what the people who owned the land were actually using it for was to ask what was the purpose of what the owner was doing on the land. This suggests that a use must be "on the land", not "with the land", and therefore be a physical use.
However, the present issue did not arise in Leda Manorstead. In that case the Chief Commissioner could have argued that even if the taxpayer had not commenced to use the land for commercial development by carrying out extensive earthworks, it nonetheless held the land as part of its "land bank" and that was a present use. But he did not. Allsop P might have assumed that only a physical use of land would qualify as a dominant use under s 10AA(3), but a case is authority for what it decides and not what it assumes.
Campbell JA said (at [49]): "[49] In asking whether the land is used for any purpose that is not listed in s 10AA(3)(a)-(f), the enquiry is not constrained by reference to any of the purposes that are listed in s 10AA(3)(a)-(f). It is just a question of what the land is used for." (Emphasis in original.)
Campbell JA also did not address the question as to whether a use of land for the purposes of s 10AA(1) and (3) was confined to a physical use of land.
The question in Minister Administering the Crown Lands Act v NSW Aboriginal Land Council was whether certain Crown land was not "lawfully used or occupied" within the meaning of s 36(1)(b) of the Aboriginal Land Rights Act 1983 (NSW) and hence was amenable to a claim under that Act by the NSW Aboriginal Council. The land had been reserved for use as a motor registry and subsequently was used for storage. Those uses had ceased. A decision was made to sell the land. An identification survey was made. A real estate agent was appointed to sell the land and was given keys to the property. The building was in disrepair. The agent inspected the land and recommended that it should be tidied. This was the condition of the property when a claim was made under the Act. The Minister did not argue that the land was lawfully occupied, but rather that it was lawfully used at the relevant time, being the time of the claim (at [67]). The Minister argued that the steps taken towards the sale of the land meant that the land was being lawfully used at the relevant time (at [70] and [71]). This argument was rejected.
The High Court held that the expression "lawfully used" in s 36(1)(b) referred to a physical use of the land (at [75] and [76]).
Kirby J, who concurred in the result, approved of the decision of the Court of Appeal that the section required an "actual" use ("actual" being a synonym for "physical") because this construction better advanced the statutory purpose.
The plurality (Hayne, Heydon, Crennan and Kiefel JJ) said (at [74]) that although there are uses of land which can be described as exploitation of the land, it does not follow that exploitation by sale amounted to a use of the land.
The plurality said that preliminary steps required in order to effect a sale did not amount to a lawful use of the land (at [74]). The plurality also said (at [76]) that transitory visits to the land by surveyors for the purpose of a survey and by a real estate agent to look inside the building to be sold did not amount to a use of the land. This last statement was a conclusion. Prima facie one might think that the visit to the land by a surveyor was a use of the land for the purpose of defining its boundaries, and the visit by the real estate agent was a use of the land for the purpose of inspecting the state of the building, even if the words "lawfully used" referred only to physical activities.
Presumably the High Court was of the view that transitory visits of this nature were not a use of the land because they were de minimis and there was an implied requirement in s 36(1)(b) that a lawful use have some sufficient scale or substance. Such uses might in any event have ceased at the time of the claim.
Hayne, Heydon, Crennan, and Kiefel JJ said (at [75]): "[75] As Fullagar J correctly point out [(1957) 96 CLR 493 at 506], in his dissenting opinion in the City of Newcastle Case, '[t]he root of the fallacy lies on the assumption that deriving an advantage from the ownership of land is the same thing as using the land'. That is, while it is probably true to say that a person who uses land derives an advantage from it, the converse proposition, that deriving an advantage from ownership of the land is using the land, is false [City of Newcastle Case (1957) 96 CLR 493 at 506 per Fullagar J.] In particular, taking steps towards selling the land may be directed to the owner deriving the advantages of disposing of an asset and receiving the proceeds of sale. But identifying that the owner seeks to derive these advantages does not show that the land is being used. Rather, what are the acts, facts, matters and circumstances which are said to show that the land is being used?"
Whilst the plurality endorsed the view expressed by Fullagar J in his dissenting opinion in Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 they did not query the correctness of the decision in that case (see at [69]). In Council of the City of Newcastle v Royal Newcastle Hospital the High Court was divided in its opinion. On appeal, the Privy Council held that bushland kept in its natural state on which no relevant physical activities took place was "used" for the purposes of a hospital for the treatment of patients suffering from tuberculosis because the hospital authorities considered that the quiet, serene, and unpolluted surroundings were advantageous to the patients' treatment and recovery (Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1 at 4; [1959] AC 248 at 257).
The reasoning of Fullagar J in the passage cited with approval by the plurality in Minister Administering Crown Lands Act v NSW Aboriginal Land Council was that: "The root of the fallacy lies in the assumption that deriving an advantage from the ownership of land is the same thing as using the land. The fallacy is helped out by the coining of an expression - 'intangible user' - which has no real meaning. Actually, while using the land will practically always mean deriving an advantage from it, an advantage may clearly be derived from the ownership of it without its being 'used' in any way. …" (at 506)
It is no doubt true that it is fallacious to assume that deriving an advantage from ownership of land is the same thing as using the land. To make that assumption is to assume that "use" is not confined to physical use. But, as has been said, "use" is a protean expression. In some contexts it can mean physical use and physical use only. In other contexts it can mean deriving an advantage from the exploitation of land. It is an ordinary meaning of "use", but not the only ordinary meaning, to say that an owner of land uses it by letting it out to a tenant to derive income. Both a tenant in occupation who makes physical use of the land and the owner who derives income from the letting can be said to be using the land for their respective purposes. So much was held by the Privy Council in Commissioner of Income Tax v Hanover Agencies Limited [1967] 1 AC 681, and by the High Court in Ryde Municipal Council v Macquarie University (1978) 139 CLR 633 and Tourapark Pty Ltd v Federal Commissioner of Taxation (1982) 149 CLR 176 at 181. In Ryde Municipal Council v Macquarie University it was held that land that was leased by the University for retail purposes with a view to profit and to provide facilities for the staff and students of the University was used by the University, and that the use by it of the land was solely for its purposes.
In Minister Administering Crown Lands Act v NSW Aboriginal Land Council the High Court did not comment adversely on these decisions.
Whilst it is fallacious to assume that deriving an advantage from the ownership of land is the same thing as using the land, it is also fallacious to assume that deriving advantages from the ownership of land by itself, and without the conduct of physical activities on the land, is not a use of the land. The question depends upon what "use" means in the relevant statutory context.
In some cases the statutory context yields a reasonably clear answer. In Council of the Municipality of Randwick v Rutledge (1959) 102 CLR 54 land was exempted from rates by reason of s 132(1)(c) of the Local Government Act 1919 (NSW) if it had been dedicated or reserved from sale by the Crown for public health, recreation, enjoyment or other public purposes of the like nature and was used for one of those purposes. Thus the exemption was directed to whether land was used for the purpose of public health, recreation, enjoyment or another public purpose of a like nature. That directed attention to the physical purpose to which the land was put. Similarly in Stephen v Federal Commissioner of Land Tax (1930) 45 CLR 122 land was exempt from land tax if it was "used or occupied … solely as a site for … a … public recreation ground". It was in the context of these provisions that Dixon J (in Stephen v Federal Commissioner of Land Tax) and Windeyer J (in Randwick Corporation v Rutledge) referred to the "actual" use of land and used that expression synonymously with a physical use of land. That is not to say that in other contexts an "intangible" use of land, such as by letting it, is not an "actual" use. With all respect to Fullagar J in City of Newcastle v Royal Newcastle Hospital, if the passage quoted above at [39] was intended to go further than warning against the fallacy of making assumptions, it assumed the thing sought to be demonstrated. To say that the expression "intangible use" has no real meaning assumes that "use" refers to a physical use only.
In Ryde Municipal Council v Macquarie University the legislation referred to land that was "used or occupied by the University …". As to the expression "used or occupied" Gibbs ACJ said (at 637) that where the expression "used or occupied" appears, "use" refers to some form of use other than actual occupancy. (See also Macquarie University v Ryde Municipal Council [1977] 1 NSWLR 304 per Mahoney JA at 315-316.) This argument was raised by the Minister in Minister Administering Crown Lands Act v NSW Aboriginal Land Council. It must be taken to have been rejected.
It does not follow that the High Court in Minister Administering Crown Lands Act v NSW Aboriginal Land Council must be taken to have held that the primary meaning of "use" of land is the conduct of physical activities on the land. Although that was the meaning attributed to the word "used" in s 36(1) of the Aboriginal Land Rights Act 1983, the High Court did not say that that was because that was the primary or the only ordinary meaning of the word. As Mahoney JA said in Macquarie University v Ryde Municipal Council [1977] 1 NSWLR 304 at 317 the word "use" has several meanings, each of which is an ordinary meaning of the word.
The Macquarie Dictionary includes in its definition of the verb "use" "to employ for some purpose; put into service; turn into account" and to "apply to one's purposes" and as a noun, "service or advantage in or for being employed or used …". In Macquarie University v Ryde Municipal Council Mahoney JA said (at 313-314): "It has frequently been pointed out that 'use' is a term having an ordinary meaning which is both wide: Shell-Mex & B.P. Ltd. v. Clayton [[1955] 1 W.L.R. 982, at pp. 1003, 1004; [1955] 3 All E.R. 102, at pp. 116, 117]; Bristol-Myers Co. v. Beecham Group Ltd. [[1974] A.C. 646, at p. 679]; Handiside v. Attorney-General [[1969] N.Z.L.R. 650, at p. 651]; and wanting in precision: Arbuckle Smith & Co.Ltd. v. Greenock Corporation [[1960] A.C. 813, at p. 828], per Lord Radcliffe. The heart of the term lies in the notion of the thing in question being employed or availed of, but, according to the context, it may differ in meaning as to how or by whom the thing may be employed within its intended meaning. Thus, although 'use' denotes in general being employed or availed of, the context may indicate that its meaning is limited to use only in a particular manner."
The High Court's decision in Minister Administering Crown Lands Act v NSW Aboriginal Land Council is a binding precedent on the meaning of s 36(1) of the Aboriginal Land Rights Act. It is not a binding precedent on the construction of other legislation where the word "use" or "used" is employed. As Lord Diplock said in Carter v Bradbeer [1975] 3 All ER 158 at 161: "A question of statutory construction is one in which the strict doctrine of precedent can only be of narrow application. The ratio decidendi of a judgment as to the meaning of particular words or combinations of words used in a particular statutory provision can have no more than a persuasive influence on a court which is called on to interpret the same word or combination of words appearing in some other statutory provision. It is not determinative of the meaning of that other provision. This is because the inherent flexibility of the English language may make it necessary for the interpreter to have recourse to a variety of aids or canons of construction, which are not merely lexicographical, in order to select from what may be a number of different meanings which the words as a matter of language are capable of bearing, the precise meaning in which the legislature intended them to be understood."
For these reasons I do not consider that the decision of the Court of Appeal in Leda Manorstead, nor the decision of the High Court in Minister Administering Crown Lands Act v NSW Aboriginal Land Council, requires a conclusion that s 10AA of the Land Tax Management Act in referring to the "use" and "dominant use" of land is directed only to the physical activities conducted on the land.
But although that conclusion is not required by the decisions in those cases, that might nonetheless be the correct construction of the provision in its context.
The decision in Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286 has been influential in the application of s 10AA. It was referred to with approval by the Court of Appeal in Leda Manorstead and in Ferella v Chief Commissioner of State Revenue. Metricon submitted that it follows from Thomason v Chief Executive, Department of Lands that "use" in s 10AA(3) means a physical use of the land. There the Land Appeal Court of Queensland, which included Ambrose J, said (at 303): "In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in s17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole."
I accept that in Thomason v Chief Executive, Department of Lands the focus of the Land Appeal Court was on the physical activities conducted on the land. The reference to the amount of land "actually used for any purpose" is probably a reference to physical use.
The Court expressed reservations about adopting an income approach to determine the question of dominant use. It said that on some limited occasions income might be helpful in conjunction with all other criteria in assisting a determination of the question of what was the dominant use of land. But the Court warned against its being used as a primary determinant (at 304-305). Its conclusion was that: "We are of the opinion, however, that a person viewing the area of land and the number of cattle on it would, as a matter of common sense, say that the main or major use of the 24 hectare block was for the grazing of cattle. Consequently, we are satisfied that the dominant use is for the business of grazing."
The reference to an objective observer viewing the land, as distinct from considering all aspects of how the land was sought to be put to advantage, indicates that the Court focused on the physical uses of the land in determining what was a dominant use rather than indirect uses. But the present issue did not arise in Thomason v Chief Executive, Department of Lands. Nor did the Land Appeal Court treat non-physical uses of the land as irrelevant.
In Thomason v Chief Executive three activities were addressed, namely use for farming purposes, use for residential purposes, and use of a small area of the land for the purposes of measuring, recording and reporting rainfall. Notwithstanding its general approach, the Court went on to deal with the agistment agreement between the owner and the agistee. The Court said (at 304): "The amount of income generated from the agistment is $2,400 per annum, a modest sum both in terms of the cost to the agistee as part of his dairy business and in terms of the amount of income to the appellant."
After expressing reservations about allowing income generated by a use to become the primary determinant of dominance of use, the Court continued: "It is only by comparing the income the owner receives from agistment of dairy cattle with that which he receives from the Bureau of Meteorology (and, perhaps, the value to him of the occupancy of his house upon the land) that one would be able to conclude that, in spite of the fact that 30 or 40 dairy heifers continually graze the 24-hectare block, the dominant use of the land is for purposes other than farming. We are of the opinion, however, that a person viewing the area of land and the number of cattle on it would, as a matter of common sense, say that the main or major use of the 24-hectare block was for the grazing of cattle. Consequently, we are satisfied that the dominant use of the land is for the business of grazing."
The Land Appeal Court did not simply disregard the use by the owner of generating income from his agistment agreement with the dairy farmer as not being a relevant use. Rather, it found that the dairy use was dominant.
Although Thomason v Chief Executive has been applied in cases concerned with s 10AA of the Land Tax Management Act, that has not been in the context of the present issue. The present issue did not arise in that case.
In Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46, the Administrative Decisions Tribunal (Mr Block JM) concluded that an alleged horse-breeding use was not the dominant use of land, but that the dominant use was as an investment property earning income from the letting (at [37]). The appeal to the Appeal Panel of the Administrative Decisions Tribunal was dismissed (Ferella v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 45), and an appeal to the Court of Appeal, that was confined to a question of law, was also dismissed (Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378). In that appeal I said (at [37] and [38]): "[37] The Judicial Member's conclusion referred to in the first question was expressed in para [36] of the Tribunal's reasons quoted at para [20] above. The Tribunal weighed the use of part of the land for rental purposes against the other uses of the land in determining which use was dominant. In doing so the Judicial Member considered the parcel of the land as a whole notwithstanding that different parts of the land were used for different purposes. [38] That approach was entirely orthodox and in accordance with binding authority which was not challenged in this court."
Barrett and Leeming JJA agreed with my reasons. The reasons are not consistent with Metricon's submissions that "use" in s 10AA refers only to the physical use of the land. Had the taxpayer sought to raise the issue in Ferella, he would have been met with the argument that even if the owner's use of the land as an investment property earning income from the letting was not a relevant use for the purposes of s 10AA, use of the land by the tenant was the other side of the same coin and was a dominant use compared with the alleged primary production use. But this issue was not raised in the Administrative Decisions Tribunal, nor on appeal.
For these reasons I do not consider that any binding authority requires a construction of s 10AA that "use" means a physical use of the land. Nor is there binding authority to the contrary.
Section 10AA(1) and the opening words of s 10AA(2) refer to a physical use of land, that is, land that is used for primary production. Each of the purposes set out in s 10AA(3) refers to a physical activity that would be conducted on the land. But s 10AA(3) requires a comparison of the primary production use relied on and another use or uses to which the land might be put. (In Leda Manorstead Gzell J thought that if there were a slight cattle-grazing use that the chief characteristic of the land was that it was unused, the dominant use test would not be satisfied (at [67]). This is in accordance with earlier decisions on earlier provisions of the Land Tax Management Act (e.g. Greenville Pty Ltd v Commissioner for Land Tax (1977) 7 ATR 278; Saville v Commissioner of Land Tax (1980) 12 ATR 7; and Longford Investments Pty Ltd v Commissioner of Land Tax (1978) 8 ATR 656 that concerned ss 10(1)(p) and 3(1) of the Land Tax Management Act 1956 where the question was whether land was used "primarily" for a primary production use. It is arguable that the dominant use test requires only that the primary production use be dominant over any other asserted use. It is unnecessary to decide that question in this case.)
The question is whether it is implicit in s 10AA(3) that another use against which a primary production use is to be compared must be a physical use of the property.
The Chief Commissioner submitted that the taxpayer's contention required reading the words "dominant use" in s 10AA(3) as meaning "dominant physical use". He submitted that reading the word "physical" into the phrase was impermissible unless the conditions for implying words into a statute enunciated by Lord Diplock in Wentworth Securities Limited v Jones [1980] AC 74 at 105-106, as explained and elaborated in Taylor v Owners, Strata Plan 11564 [2014] HCA 9; (2014) 253 CLR 531 at [22]-[25] and [39] are satisfied. Those conditions are: first, that the precise purpose of the provision can be identified; secondly, that there has been an inadvertent failure to deal with an eventuality that must be dealt with if the provision is to achieve its purpose; thirdly, that the words "Parliament would have included" can be clearly identified; and fourthly, that the additional words that might be read into the text are consistent with the wording otherwise adopted.
I do not accept that the taxpayer's construction requires reading words into the text of the statute that requires satisfaction of each of these conditions. There is a difference between reading words into the text of a section and explaining what Parliament meant by the words used (Re Molopo Energy v Keybridge Capital Limited [2014] NSWSC 1864 at [67]). Thus in Minister Administering Crown Lands Act v NSW Aboriginal Land Council the High Court construed the word "used" where it appeared in the phrase "used or occupied" as requiring a physical use. It did not address the conditions for reading words into the text of a statute as explained in Wentworth Securities Limited v Jones. In this case words have not been omitted. The question rather is what the words that were used mean.
The context and purpose of s 10AA and the legislative history of the primary production exemption provide no assistance. Amendments to the Land Tax Management Act have been made piecemeal. As Allsop P said in Leda Manorstead (at [28]) it is not a purpose of s 10AA to encourage primary production. Rather, the provision concerns land use for primary production as defined. There is no requirement to approach the matter in some beneficial fashion to expand the reach of the exemption.
Metricon submitted that because uses for primary production involve a physical use of the land, and because a comparison has to be made with other uses in order to determine which use is dominant, other potentially competing uses should be confined to physical uses in order for the comparison to be made. Otherwise, so it was submitted, the comparison will be between apples and oranges and cannot sensibly be made.
I do not agree. The facts in Ferella and this case indicate the contrary. In Ferella the Administrative Decisions Tribunal weighed the alleged primary production use (the keeping of one horse for the alleged purpose of breeding) with the use by the owner of part of the land by letting it as a residence. The Tribunal found that the letting use was dominant. The appeal was dismissed. As noted earlier in these reasons the present question did not arise for decision in Ferella, but the decision shows that there is no real difficulty in making the comparison.
In this case, if, as the Chief Commissioner contends, use of the lands by Metricon as a "land bank" is a current use and not an intended future use, there is no real difficulty in determining which use is dominant. The expenditure of money and effort on the proposed residential development puts the cattle-grazing use by the Gillilands in the shade.
Further, the comparison of physical uses, such as the use of a house and curtilage on part of the land by a tenant, with the use of the remainder of the land for cattle-grazing, involves the same problem of weighing incommensurables.
I see no reason to read down s 10AA(3) to require that a competing use against which the primary production use is to be measured must be a physical use. As noted earlier in these reasons, "use" has more than one ordinary meaning. An ordinary meaning of "use" includes employing land for a purpose, putting it in service or turning it to account. This need not be a physical use. To this extent, I agree with the decision of the Appeal Panel of the Administrative Decisions Tribunal in Re Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25; (2012) 88 ATR 200 at [36]. But "use" does require doing something with the land, whether it be using it physically or by putting it to advantage, for example, by letting it.

Land banking: Holding Land is not the same as Using Land

However, a "use" for the purposes of s 10AA must be a current use, not an intended future use. It does not follow that Metricon was using the land because it had acquired it for the purposes of residential development and the land formed part of its "land bank", meaning, that it became part of its trading stock. This was the first of the alleged competing uses on which the Chief Commissioner relied. (See para [20].) To say that the land was part of Metricon's stock in trade invites, but does not answer, the question, when is the trading stock used? In Shell-Mex and BP Limited v Clayton [1955] 3 All ER 102 the Court of Appeal said (at 117): "We apprehend that a retail tradesman can, with perfect accuracy, be said to be using his stock when he sells it to customers and to have used it up when it is all sold. So here we think that in as much as the ratepayer's business consists of the sale and distribution of oil, albeit as agent for others, it is using in its business the oil which it sells and distributes. … The word 'use' in its natural meaning is a word of wide import. In British Motor Syndicate Limited v Taylor & Son Ltd, Stirling J pointed out that ([1900] 1 Ch at p 583) 'The first meaning assigned to the word 'use' in JOHNSON'S DICTIONARY is "to employ to any purpose"; it is, therefore, a word of wide signification.' In this wide sense it is, we think, apt to cover the commodity in which a merchant trades …"
On appeal to the House of Lords (Shell-Mex and BP Limited v Clayton (Valuation Officer) [1956] 3 All ER 185 Viscount Simonds said (at 191, 192) that the use a trader makes of his stock in trade is by selling it.
No doubt a trader might use stock in trade before the act of sale. A retailer who puts goods on display for the purposes of sale might be said to use the goods before sale because their display attracts custom. It is clear from Leda Manorstead that a land developer uses land that is its stock in trade by commencing excavation or construction activities for the purposes of sale and does not only use it when the lots are sold. In my view a developer may also use land for the purpose of obtaining necessary approvals such as by engaging surveyors to go onto the land to plot its boundaries, or drillers to dig holes to ascertain subsurface conditions. But in my view, the engaging of consultants to prepare reports for the purposes of obtaining approvals where the work involves no physical use of the land does not involve a current use of the land. Rather, it is work carried out for the intended future use of residential development.
The fact that land is held as part of Metricon's land bank means that Metricon intends to use it. But the fact that land is held does not mean that it is used. In Council of the Town of Gladstone v Gladstone Harbour Board [1964] Qd R 505 land was exempted from rating where it was used for public purposes. The Harbour Board owned land that was not being put to any physical use. Gibbs J (with whom Jeffriess J agreed) noted (at 524) the Harbour Board's submission that although not being physically used the land was "used" within the meaning of the statute where it was occupied and held by the Harbour Board for the purpose of being used for the extension or development of harbour works or other Harbour Board purposes in accordance with the Crown grant, pursuant to which it was held. Gibbs J rejected the submission that the Harbour Board used land because it held it for the purpose of using it in the future. His Honour said (at 526): "In ordinary speech, there is a difference between using land and intending to use it, and in my opinion nothing said in the Judicial Committee or the High Court in Newcastle City Council v Royal Newcastle Hospital (supra), compels me to decide that to hold land with the intention to use it must be regarded as equivalent to using it. It is in my opinion correct to say, as Lowe J. said in Franciscan Order v Kew ((1994) VLR 199, at p 201): 'What is exempted from rateability is land which is used for the excepted purpose and neither dedication therefor nor intention to use it for such purpose is in itself sufficient.' For example, a building in course of erection, which it is intended to use as a hospital when it has been completed and equipped, is not a 'hospital … or other building used for charitable purposes': Municipal Council of Sydney v Prince Alfred Hospital ((1949) 66 WNNSW 87). Land purchased for the purpose of erecting at a future date a place of worship thereon is not used as a place of public worship; see Roman Catholic Bishop of Perth v Perth Road Board ((1933) 49 CLR 37). A warehouse bought for use as a bonded store, but which requires alteration before the necessary approval by the Customs and Excise can be granted, is not used as a warehouse while the work of alteration is being done: cf. Arbuckle Smith & Co. Ltd. v Greenock Corporation ((1960) AC 813 at p 828). In that case at p 828 Lord Radcliffe said: '"Use" is not a word of precise meaning, but in general it conveys the idea of enjoyment derived by the user from the corpus of the object enjoyed'. The decision in Newcastle City Council v Royal Newcastle Hospital (supra) establishes that land may be used although enjoyment is derived from it without any physical occupation, but it does not follow that land is used if it is merely kept with the intention of deriving enjoyment from it in the future."
Metricon purchased the eight areas of land that were the subject of the initial challenges between 10 December 2007 and 23 November 2009 for a total purchase price of $61.13 million. The total purchase price of the lands for which the assessments are in issue was $58.93 million.
Metricon accounted for the land as trading stock for both accounting and taxation purposes during the years ended 30 June 2008 to 30 June 2013. With the exception of the land at 140 Mahers Lane, all of the parcels of land were valued at cost for both the accounting and taxation purposes. In the year ended 30 June 2011 Metricon brought 140 Mahers Lane to account at market value for income tax purposes. The reduction of the carrying value from cost ($6,332,917) to market as at 30 June 2011 ($3 million) yielded an allowable deduction of $3,332,917. That was used to reduce the net taxable income of the Metricon Queensland Unit Trust.
Metricon incurred borrowing expenses for which deductions would have been claimed in assessing its net income. The aggregate tax deduction for borrowing costs and asset write-down over the six years from 2008 to 2013 was approximately $18.7 million.
The Chief Commissioner submitted that the claiming of such deductions was an intangible use of the lands by Metricon. That is, he submitted that Metricon employed the lands to its advantage by obtaining tax deductions that could be set off against other income.
A similar argument found favour with the Administrative Decisions Tribunal in Ashleigh Developments. At first instance, the judicial member, Mr Frost, said (Re Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue (2011) 86 ATR 449 at [55]-[57]): "[55] I agree, therefore, with part of the Chief Commissioner's contention at 32 of his submissions, as referred to in [22] above, namely that 'use' is not limited to actual physical activity that occurs 'on' land and can include an indirect use of land. But there is a further proposition that the Chief Commissioner puts forward, and that is that one such 'indirect use' is the Applicant's use of the land as trading stock. That is not such a straightforward proposition. [56] I had some initial doubts as to whether an entity's holding of property as trading stock truly amounts to a use of that property within the meaning of that word in s 10AA(3) of the LTM Act. Whether or not that doubt is well founded, there was more than a mere 'holding' here. There was a significant write-down in the value of the land, which provided an initial, and an ongoing and very substantial, financial benefit - to such an extent that all, or almost all, of the profits of the joint venture were extinguished with the result that no tax, or almost no tax, was paid on the joint venture's other activities. I fail to see how that financial treatment of the land - a treatment that commenced virtually as soon as the put and call option was entered into - is not properly to be regarded as a 'use' of the land. [57] In this case there are, as the Chief Commissioner submits, three relevant uses of the land during the relevant years. First there is the physical use of the land by Mr Porter as a property for the grazing of cattle. Next there is the use of the land by the Applicant as the subject of a lease to Mr Porter, and from which the Applicant derives income of $1.00 per year. Then there is the use of the land by the Applicant, on behalf of the joint venturers, as an item of trading stock in the joint venture's property development business, and in respect of which significant amounts of money have been expended: see [18]-[19] above."
This reasoning was approved by the Appeal Panel (Re Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25; (2012) 88 ATR 200 at [35]) without any further elaboration, other than to say that the Tribunal's approach was not inconsistent with the Court of Appeal's decision in Leda Manorstead (at [35]).
But the tax deductions that Metricon claimed arose simply from the way in which it financed its acquisition of the lands, and by its exercising the election provided by s 70-45 of the Income Tax Assessment Act 1997 (Cth) to value trading stock at its market selling value, rather than at cost or replacement value. That deduction became available as a result of the decline in the market value of the land from the time of its purchase. Its use of the lands would have been the same whether the lands were acquired with debt or equity and whether the market value increased or decreased. Neither the deduction for borrowing expenses, nor the deduction for bringing forward the loss arising from the decline in market value, involved doing anything with the land; neither employing it, nor putting it into service, nor turning it to account. The deductions were available whether the land was used or merely held. The claiming of available deductions did not convert the holding of land to a use.
For these reasons I do not accept the Chief Commissioner's submission that there was a competing use of the lands which meant that the primary production use was not dominant because the land formed part of the stock in trade that constituted the land bank of the plaintiff and the Metricon Group that was held for the purpose, when the time was appropriate, of being developed, subdivided and resold for profit in the course of the commercial land development business of the plaintiff and its associated entities. The land was so held, but it was not thereby used.
The Chief Commissioner relied on a number of decisions, including decisions of the Court of Appeal decided in other contexts which he submitted supported his argument.
Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 concerned the meaning of the words "actual use" in s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW). Section 55 of that Act provides that in determining the amount of compensation to which a person whose land was compulsorily acquired, regard must be had to certain specified matters (and those matters only) including "(d) any loss attributable to disturbance". Section 59 defines "loss attributable to disturbance" of land as meaning any of six specified matters, the sixth being: "(f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition."
The matter was heard in the Land and Environment Court by Lloyd J (Fitzpatrick Investments Pty Ltd v Blacktown City Council (No. 2) [2000] NSWLEC 139; (2000) 108 LGERA 417). Items in dispute included legal costs and stamp duty associated with the purchase of other land by the plaintiff. Lloyd J found that those costs did not fall within s 59(c) or (d), but did fall within s 59(f). Lloyd J said (at [21] and [22]): "[21] In the present case the land, comprising 4.172 hectares, was held by the applicant for the purpose of development by way of a residential subdivision. Upon receiving the amount of compensation for the market value of the land, the applicant placed the money in an interest-bearing investment for some sixteen (16) months before purchasing other land. That other land was industrial land and was purchased by the applicant for development by way of subdivision. [22] I do not accept Mr Ayling's submission that the purchase by the applicant of the industrial land for development by way of subdivision was unrelated to the actual use of the land which was acquired by the respondent. The applicant's business is the development of land by subdivision. It is irrelevant, in my opinion, that the land which the applicant purchased is industrial land, whereas the land acquired by the respondent was residential land. In my view, the purchase of the land by the applicant for an industrial subdivision is related to the actual use for which it held the acquired land, namely for the purpose of development by way of subdivision."
Lloyd J did not explain why holding land for the purpose of development by way of subdivision involved an actual use of the land.
The appeal to the Court of Appeal was dismissed (Blacktown City Council v Fitzpatrick Investments [2001] NSWCA 259). The leading judgment was given by Brownie AJA with whom Stein JA and Ipp AJA agreed. After referring to the decisions in Council of the City of Newcastle v Royal Newcastle Hospital and the decisions of the High Court in The Council of the City of Parramatta v Brickworks Limited (1972) 128 CLR 1 and Goldsworthy Mining Limited v Commissioner of Taxation (1975) 132 CLR 463 and the decision of the Court of Appeal in Vaughan-Taylor v David Mitchell-Melcann Pty Ltd (1991) 25 NSWLR 580 amongst others, Brownie AJA said (at [23]-[27]): "[23] S59(f) of the Just Terms Act used a different expression: 'actual use'. Lloyd J found that the business of the respondent was 'the development of land by subdivision'; that it held the acquired land 'for the purpose of development by way of residential subdivision'; that the 'actual use for which it held the acquired land [was] for the purpose of development by way of subdivision'; that by reason of the acquisition, the respondent 'lost its developable land', and replaced that land by 'acquiring other developable land'; and that but for the acquisition the respondent could have developed the acquired land. [24] Consistently with the reasoning in cases such as Royal Newcastle Hospital and Brickworks, these findings of fact mean that 'the use' to which the respondent put the land for its purposes, prior to the acquisition, was use for the purpose of residential subdivision. The acquired land formed part of what was called the respondent's 'land bank', being land acquired and held for the purpose, when the time was ripe, of being subdivided and resold for profit. [25] However, the appellant challenges the proposition that this was an 'actual use' of the land. The respondent took us to the Macquarie Dictionary, which gave these meanings for the word 'actual': - '1. Existing in act or fact; real. 2. Now existing; present...' [26] The respondent submitted that the word 'actual' had been inserted to emphasise to the reader that the use had to exist in fact, and to distinguish such a use from a future use, or a potential use, and pointed out that if the question had to be decided independently of the Just Terms Act, a future use or potential use might have been the subject of compensation for disturbance: Brewarrana Pty Ltd v Commissioner of Highways [No 2] (1973) 32 LGRA 240 at 247. [27] Although at first blush this gives the word 'actual' little apparent work to do, I think it is correct. The reasoning in Royal Newcastle Hospital and in Brickworks was recognised by the Parliament: the 1985 amendment to the Environmental Planning and Assessment Act recognised the reasoning and legislated to narrow the benefits conferred by the reasoning; and the Just Terms Act also recognises the reasoning, and operates to narrow the benefits otherwise conferred in the granting of compensation for loss attributable to disturbance. However, in the circumstances of this case, the financial costs in question were associated with the actual use by the respondent of the acquired land."
Thus the Court of Appeal held that s 59(f) requires the applicant to establish a use that exists in fact, that is, a current use, as distinct from a future or potential use, and that the financial costs relate to such an actual use as a direct and natural consequence of the acquisition and are reasonably incurred. The appeal to the Court of Appeal lay only on a question of law. But whether, on the facts found, activities amounted to an actual use of the land wold have been a question of law (Hope v Bathurst City Council (1980) 144 CLR 1 at 7). The Court of Appeal noted that Lloyd J had found as a fact that there was an actual use for which the applicant held the acquired land, being for the purpose of development by way of subdivision. Brownie AJA (at [24]) said that the findings of fact of the trial judge meant that the use to which the respondent put the land prior to its acquisition was a use for the purpose of residential subdivision. That was certainly the effect of Lloyd J's findings. Brownie AJA appeared to accept that because the acquired land formed part of the applicant's "land bank", being land acquired and held for the purpose, when the time was right, of being subdivided and resold for profit, that the land was thereby actually used. His Honour said that this was consistent with the reasoning in cases such as Royal Newcastle Hospital and Brickworks. Brownie AJA cited Taylor J in the High Court in Council of the City of Newcastle v Royal Newcastle Hospital at 515 where his Honour said: "… but where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question had been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land."
With respect, neither decision indicates that the mere holding of land for future residential development is a current use. In Newcastle City Council v Royal Newcastle Hospital the Hospital was using the virgin land surrounding the hospital that housed patients suffering tuberculosis because the hospital got, and purposely got, fresh air and peace and quiet which provided current advantages to it and its patients ([1959] AC 248 at 255). The issue in the Council of The City of Parramatta v Brickworks Ltd was whether "new land" acquired in 1939 that adjoined a brickworks and quarry could be used for those purposes in 1960, notwithstanding the introduction of a planning ordinance for which that was not a permitted use. The question was whether that was an existing use of the land. If it were, it could be continued. Gibbs J who gave the leading judgment, said (at 22-23): "…if the whole of the land in question was acquired for and devoted to the purpose of quarrying and brick-making, the whole may be held to have been used for that purpose although only part of it was physically used. Obviously where an expanse of land has been acquired for the purpose of quarrying it cannot, because of practical considerations, be excavated all at once, but this does not mean that the part which has not been actually dug up is not used for the purpose of quarrying. Similarly a farmer, who has acquired land for the purposes of an orchard, may be said to use the whole of it for that purpose, although only part has been planted with trees. In the present case, immediately before 27th June 1951 the respondent owned one tract of land, all of which had been acquired for the purposes of the quarry and brickworks, and all of which was devoted to those purposes. Some of the land was physically occupied by the buildings and by the brick pit which was in the process of gradual extension. It is beyond argument that some of the land was at the relevant date used for the purpose of quarrying and brick-making. In my opinion there is no justification for regarding the new land as separate from the old, or for saying that the old land was used, but the new land was not, immediately before 27th June 1951."
In the same way it could be said that the whole of land might be used for the purpose of cultivating crops, though parts of it from time to time are left to lie fallow.
But in such cases the whole of land can be said to be in current use because the whole is devoted to a purpose and the parts in current physical use give character to the whole. Could it be contended that the applicant in Council of the City of Parramatta v Brickworks Ltd could have relied on existing use rights if land had been acquired for the purpose of quarrying and brickworks, but no quarrying or brickworks had ever been conducted on the adjoining land? That would appear to have been the analogous position in Blacktown City Council v Fitzpatrick Investments Pty Ltd.
Stein JA gave a short concurring judgment. He said (at [2]-[5]): "[2] As to the principal issue argued, the meaning of 'actual use' in s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991, the construction favoured by Lloyd J in the Land and Environment Court is correct. [3] While care must be taken in utilising the reasoning from decisions construing similar words in different legislative regimes, the cases mentioned by Brownie AJA are helpful in the task of construction. [4] The nature of the respondent's business was that of a land developer and the acquired land was part of its stock-in-trade constituting its 'land bank'. Holding the land in its land bank for subdivision was a use of the land in fact. That is sufficient to make it an 'actual use of the land' within s 59(f) of the Act. [5] The favoured construction gives the expression 'actual use' work to do. While physical use is not required, something which is only a potential future use would fall short of 'actual use'."
Apart from references to the authorities to which Brownie AJA referred, no reason was given for the conclusion at [4].
In Blacktown City Council v Fitzpatrick Investments Pty Ltd the statutory language did not refer to use for a purpose.
I accept the submission of the Chief Commissioner that the decision of the Court of Appeal in Blacktown City Council v Fitzpatrick Investments Pty Ltd supports the Chief Commissioner's position. However, for the reasons indicated at [47] above, that decision, being on a different statute that had a different context and purpose, is not binding in this case. It carries considerable weight, but its ultimate persuasive value depends upon the cogency of its reasoning. With great respect, and for the reasons I have given, I do not think that is very high.
Blacktown City Council v Fitzpatrick Investments Pty Ltd can be compared with Kirela Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (No. 2) [2004] NSWLEC 68; (2004) 132 LGERA 90. There, land was compulsorily acquired that comprised part of land purchased by the applicant in 1998. A claim for compensation was made under s 59(f) in respect of payments made to consultants for town planning advice and in respect of flooding of the acquired land together with adjoining land on which development was planned. There was also a claim for survey costs that related to both the acquired land and the adjoining land. Cowdroy J held (at [12]) that at the date of acquisition the land was not being used for any purpose but was awaiting development for some future purpose. Accordingly none of the claims satisfied s 59(f). His Honour said that the acquired land was not used "in the sense referred to in Fitzpatrick Investments Pty Ltd v Blacktown City Council (No. 2)" and there was no evidence of "actual use of the land as a land bank. The proposal for its use remained only potential …" (at [19]).
An appeal to the Court of Appeal was dismissed (Kirela Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 [2005] NSWCA 108; 141 LGERA 40). Sheller JA with whom Beazley JA and Brownie AJA agreed said that the consultant's fees in question could not be described as a financial cost incurred relating to the actual use of the land as a direct and natural consequence of the acquisition within the meaning of s 59(f) (at [127]). It is not clear whether his Honour agreed with the primary judge's assessment that the fees in question did not relate to the actual use of land as having been incurred as a direct and natural consequence of the acquisition, but there was no adverse comment made in relation to Cowrdroy J's conclusion that the land in question was not being actually used, but was awaiting development for some future purpose.
I find it difficult to reconcile the reasoning in Blacktown City Council v Fitzpatrick Investments Pty Ltd that land acquired for the purpose of development held as part of a developer's "land bank" was actually used within the meaning of s 59(f) and the conclusion of Cowdroy J in Kirela, with which the Court of Appeal did not disagree, that the land acquired there that was awaiting development for some future purpose, was not being actually used. In Kirela, Cowdroy J said (at [19]) that "there is no evidence of actual use of the land as a land bank". It appears that his Honour understood Blacktown City Council v Fitzpatrick Investments Pty Ltd as proceeding on the basis that the land which was a land bank was actually used as such (whatever that might mean), not merely that because the land was held as a land bank it was actually used. The facts of Blacktown City Council v Fitzpatrick Investments Pty Ltd appear only sparsely in the reasons for judgment, and it may be that there was some such use as a land bank in that case that explains the decision. Be that as it may, I do not consider that Blacktown City Council v Fitzpatrick Investments Pty Ltd should determine the approach to be taken to s 10AA of the Land Tax Management Act.

Alleged current land development use

The fourth competing use relied on by the Chief Commissioner was that the lands were used for commercial land development in circumstances where the plaintiff (and its associated entities) incurred ongoing expenses in connection with the development of the land and those expenses exceeded the financial outlay and financial return from primary production.
It was only shortly before the hearing that the Chief Commissioner sought leave to amend his appeal statement to include this allegation. Initially the application was opposed by the plaintiff. Also shortly before the hearing the Chief Commissioner served a proposed tender bundle of some 14 volumes of documents obtained on subpoena or by discovery. Much of that material contained evidence of expenses incurred by Metricon in connection with the obtaining of necessary rezonings or approvals in connection with the proposed development. At a pre-trial hearing counsel for the plaintiff said that with earlier notice the plaintiff might have put on evidence about the need or purpose of particular expenses, for instance, whether they were incurred to meet the requirements of the council that were not necessarily directed to the future development of the property, but perhaps had a region-wide significance. I was not able to decide whether the proposed amendment should be allowed in the limited time available before the hearing. Counsel for the Chief Commissioner submitted that underlying the reports of "financial" experts retained by both the Chief Commissioner and the taxpayer was extensive voluminous material as to costs and expenses. He submitted that the matter was already the subject of evidence and was clearly flagged in the report of Mr Bryant, an accountant retained by the Chief Commissioner. I decided that I could not finally rule on the question of leave until I had been taken to that evidence. I gave leave to the defendant to file his proposed amended appeal statement, but reserved to the plaintiff the right to seek to have the leave rescinded. I foreshadowed that the matter could be further addressed once the experts' reports were read so that the question of alleged prejudice could then be assessed.
The question of whether the leave granted to rely upon the fourth dot point quoted above at [20] should be rescinded was raised at the commencement of the hearing. After some initial submissions I acceded to a submission of senior counsel for the Chief Commissioner for a short adjournment in order for him to take instructions which he foreshadowed might shorten matters by providing a concession that the plaintiff was seeking. After the short adjournment I was advised that the Chief Commissioner put his case in a way I had previously described I understood he might do. I then summarised my understanding as follows: "His Honour: … you would rely upon evidence of the extent to which surveying work was done, or soil samples were taken, or other reports were obtained, which entailed the physical activities on the land, to say … that those activities on the land were a use of the land … then, in order to establish that that, what you would say is a use, was a dominant use, you would rely upon Metricon's intention to develop the land and the amount of expenditure of $2.2 million to date in respect of all development activities, whether on the land or not, in furtherance of the same case that you make that there is an intangible use of the land which is dominant."
Mr Leggat SC who appeared with Mr Young for the Chief Commissioner said that that was so.
Mr Robertson QC who appeared with Ms Bishop for the plaintiff responded by referring to paragraph 76 of the Chief Commissioner's opening outline of submissions. Paragraph 76 of those submissions said: "76 For present purposes, the absence of the earthworks factor renders some of the comparators relied upon by Gzell J in Leda as inappropriate in the context of the plaintiff. But the ultimate conclusion by Allsop P (with whom Campbell JA and Whealy JA agreed) at paragraph [43] (set out above) accords almost precisely with the activities of the plaintiff set out in the sub-paragraphs under Categories I-VI above. Accordingly, in the defendant's contention, if the court accepts that there is no requirement for physical activity on the land, the extent of the plaintiff's use of the Land for commercial land development and rental purposes, whether regarded individually or cumulatively are such that the land in question at the relevant dates was not land the dominant use of which was for cattle grazing within para (b) of sec 10AA(3). Alternatively, the dominant use of the land comprised of 126, 140 and 153 Mahers Lane was not cattle grazing when compared with the physical residential use of the dwellings by the tenants."
Mr Robertson QC said: "ROBERTSON: … the way my learned friend talked about a fall-back position, we've got the fall-back position set out at [76]. [Para 76 read]. That's the fall-back position and if I apprehend what my learned friend is conceding, he is not going to press as an alternative [argument] that the dominant use of the land comprising in some of the other parcels was not cattle grazing when compared with the physical surveying work and all the other things that we're talking about. So everything that my learned friend wants to say about the surveyors and the $2.2 million is to promote his intangible use argument, and we're happy with that. LEGGAT: That's the case."
It was on that basis that the defendant was given leave to rely upon the last of the alleged competing uses referred to above. In other words, the Chief Commissioner relied upon the incurring of expenditure for the obtaining of approvals only to support his case that the "intangible use" of land was a dominant use or meant that the primary production use was not a dominant use.
Whilst the fourth dot point asserted that the land was used for commercial land development, the Chief Commissioner did not seek or obtain leave to withdraw his admission of paragraph 10 of Metricon's appeal statement that "the plaintiff, a property developer, has not undertaken any development works on the land". In respect of that allegation the Chief Commissioner said only that he was not in a position to confirm or deny whether Metricon, in its capacity as trustee for the Metricon Queensland Unit Trust, had acquired and thereafter undertaken any development works on the land. He otherwise admitted the paragraph. Mr Leggat SC said that "development works" was to be understood as building works, the construction of houses or roads or bulk excavation or matters of that kind (T9).
Although the Chief Commissioner does not rely upon the last alleged competing use to say that the physical activities conducted on the land, such as surveying and drilling, for which expenses were incurred in connection with the development of the land, meant that cattle-grazing was not the dominant use, he does say that the incurring of those and related expenses in the order of $2.2 million involved an intangible use that meant that cattle-grazing was not a dominant use. What that use was was other than "land banking" not clearly defined, except it was submitted that there could be a use for residential development before development works in the nature of excavations or building work commenced and the expenses were incurred as part of that use. The Chief Commissioner pleaded that during the relevant land tax years Metricon intended to develop the land and was engaged in the process of developing the land as a State Significant Site under Pt 3A of the Environmental Planning and Assessment Act in respect of 37 Fraser Drive, Terranora. He pleaded that the land formed part of the stock in trade constituting the "land bank" of Metricon and the Metricon Group that was held for the purpose when the time was appropriate of being developed, subdivided and resold for a profit in the course of the commercial land development of Metricon and its associated entities, and at all material times Metricon incurred ongoing expenses in connection with the subdivision and development of the whole of the land.
Whilst I have concluded that merely holding land as part of its stock in trade was not a current use, that conclusion does not prevent the Chief Commissioner from contending that there was a current "land development use" to which large levels of expenses were devoted which means that the cattle-grazing use was not dominant.
As noted above development approval was sought for a development on 22 Fraser Drive. This was known as "Altitude Aspire". The wider area of Metricon lands that were affected by that development and which could be the subject of later development applications were known as "Area E". The Tweed Local Environmental Plan provided that a development approval could not be granted for the land unless a development control plan for the whole area had been prepared. The Altitude Aspire development was land to which Part 3A of the Environmental Planning and Assessment Act applied. This meant that a Project Application had to be prepared and submitted to the Department of Planning. The Altitude Aspire development continued under the transitional provisions of Part 3A. It was necessary for Metricon's consultants to prepare a draft development control plan, to deal with matters required to be addressed by the provisions of relevant planning legislation and the appropriate planning instruments, and to obtain and comply with the environmental assessment requirements of the Director General of the Department of Planning. The required plans and reports are referred to at para [11] above. Metricon's consultant, Mr Anderson, deposed that obtaining the reports from the various experts was a lengthy and expensive process.
The environmental assessment requirements of the Director General included an assessment of the potential impacts of the project and a draft statement of commitments, being measures to be taken to abate or mitigate identified adverse environmental impacts associated with the projects and to reduce risks to human health. The carrying out of that assessment would have required an on-the-ground inspection of the lands and their surrounds. Various plans and documents had to be supplied to the Department of Planning. These included that the existing site survey plan show not only the location of the land, the measurements of the boundaries, but also the existing levels of the land in relation to buildings and roads and similar matters. A further requirement was for a site analysis plan identifying existing natural elements of the site. That analysis would have required individuals physically to go onto the land to identify natural elements of the site such as water courses, rock outcrops, existing vegetation, slope topography, and to view corridors and structures on neighbouring properties where relevant to the application. A locality/context plan was required indicating local features such as parks, community facilities, open space, traffic and road patterns, the location and uses of existing buildings and shopping and employment areas. In other words, the plan required investigation of the proposed development in the context of its locality. This would have required investigation of the locality by human beings on foot and in vehicles, in order, amongst other things, to check that conditions on the ground matched material in existing published works.
A further requirement was for the provision of subdivision plans. These would have been prepared having regard to the inspections and analyses already carried out, but there would needed to have been a further visit to the land to check the design, probably by walking along the centre lines of proposed roads.
A landscape concept plan was also required that indicated the likely mature height of trees. This in turn would have required a soil assessment, although that would have been done at the first stage where the landscape concept plan was prepared. Soil analysis would have been carried out both for contamination and to identify the soil characteristics.
Other requirements such as impacts on aboriginal heritage and traffic management measures required a consideration of the locality and not just the site.
The preparation of all of the required plans and reports was a lengthy and expensive process that involved at least 1,000 hours of the consultants' time. But except to the extent the consultants' work required them to visit the lands, their work did not involve a use of the lands.
The Chief Commissioner referred to Whitfords Beach Pty Ltd v Federal Commissioner of Taxation (1983) 67 FLR 151 where the Full Court of the Federal Court had to determine when the taxpayer's business of developing, subdividing and selling land at Whitfords Beach extended to that part of the land that was 'ventured in' or 'committed to' the taxpayer's business (at 152). The Full Court held that from a date in December 1967 (when there was a change of shareholding in the taxpayer) the land in question had been ventured in or committed to the taxpayer's business of developing, subdividing and selling land because there had been a persistent intention to develop the entire area of land and a continuous course of conduct directed to the implementation of that intention as the entire project progressed from stage to stage (at 157). Nothing in that decision determines when the land was first used for development, subdivision and sale.
The Chief Commissioner also relied on Longreach Capital Pty Ltd v Valuer-General [2007] NSWLEC 721 which concerned a valuation of land listed on the State Heritage Register for rating purposes. Section 123 of the Heritage Act 1977 (NSW) required a heritage valuation to be made on certain assumptions including that "that land may be used only for the purpose, if any, for which it was used at the relevant date". The land in question had been a hospital, but that use had ceased. Longreach acquired the land for the purposes of redevelopment. It had prepared a Draft Master Plan proposing subdivision of the land into five lots containing different precincts for development, including residential precincts, a "community knowledge" precinct, a community business precinct, a lifestyle and recreation precinct, and landscape/open space areas. It submitted a development application for the subdivision that had not been approved as at the relevant date (at [14]). Jagot J observed (at [38]) that the development application must have involved survey work identifying at the least the lots into which the land was to be subdivided. Jagot J accepted the opinion of a valuer, a Mr Carroll, that at the relevant date the land, "was used for the purpose of an en globo development site containing a series of buildings, the majority of which were to be retained and used in the future development of the property for uses ranging from residential to educational purposes as described in the draft Master Plan" (at [22(1)] and [40(6)]).
In the same way, the Chief Commissioner argued that there was a current land development use of the whole of the Metricon land. He submitted that, by analogy with Parramatta City Council v Brickworks Limited, the use extended to the whole of the Metricon lands which were proposed to be developed in stages.
The decision in Longreach Capital Pty Ltd v Valuer General provides some support for the Chief Commissioner's argument, although it was decided in a different context. But the decision contains no real analysis as to why preliminary activity necessary to obtain approval for the use of land for a particular purpose amount to a current use of the land for that purpose.
In Commissioner of Land Tax (NSW) v Joyce (1974) 132 CLR 22 one of the questions was whether land was exempt from land tax on the basis that it was "used or occupied … solely as a site for a place of worship …". Gibbs J observed (at 29) that: "When one speaks of 'a site for a church', rather than of 'the site of a church', the words naturally suggest that the church is to be built, but has not yet been built, on the site mentioned. … I am disposed to think that the exemption … is not restricted to land on which something of the kind mentioned in the paragraph is already built or constructed. For example, if the other conditions laid down by the paragraph or fulfilled, land on which a church was in the course of erection, as well as land on which a church had been erected, would be exempt from the tax …"
In Needham v Commissioner of Land Tax [1999] 2 Qd R 611 the Queensland Court of Appeal observed that the expression "as a site for" contains an element of futurity as well as an element of present use (at [13]).
The decision of the Court of Appeal of British Columbia in Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam) (1996) 30 BCLR (3d) 263 has been cited in this country. In that case land "used for residential purposes" was subject to lower rates than if used for other purposes. The majority (Esson JA, Prowse JA concurring) said that the land in question consisted of three parcels which had been assembled for the purposes of forming a proposed town centre, the planning was well advanced to develop the land for residential, commercial and civic purposes. The areas to be developed for each of those purposes was established with some 70 per cent being designated as residential. At the relevant date no application had been made for a development permit and no construction work had begun. Some geotechnical work and soil studies had been done on the site, legal and traffic surveys had been completed and a retail market study had been conducted. The majority held that although the land was held for residential purposes, it was not being used for residential purposes. The majority left open the question whether land would be used for residential purposes if buildings intended for residential purposes were being built, but were not ready to be occupied for such purposes (at 270).
Subsequently, Donald JA of the Court of Appeal for British Columbia, with whom other members of the Court agreed, said the following (Assessor of Area # 10-Burnaby/New Westminster v Intracorp Developments Ltd (Assessor of Area # 10) [2000] BCCA 121): "27 The problem in this case comes down to one of statutory interpretation: what is meant by the phrase 'used for residential purposes'? This matter has been considered before, and Bosa No. 2, in particular, offers some useful interpretive approaches. It is clear from both the majority and dissenting opinions in Bosa No. 2 that the phrase does not contemplate holding property for residential purposes. For the purpose behind the use of the land to become residential, there must be more than a mere intention to develop the land as residential: Assessor of Area 10 - Burnaby/New Westminster v. Reemark XIII Developments Ltd. (June 4, 1992), Doc. Vancouver A921572 (B.C. S.C.) (B.C. Stated Case 329). At the other end of the spectrum, all three judges in Bosa No. 2 accepted that the phrase allowed for something less than actual occupation. The construction phase of a development lies in the gray area between mere holding and actual obligation. 28 I am attracted to the notion of commitment to a residential use proposed by Mr. Justice Lambert in his dissenting opinion in Bosa No. 2. The issue remains, however, as to the degree of development required to demonstrate such a commitment. In other words, at what stage in the progress of the project can it be said with confidence that the commitment to follow through with the intention to develop the land for residential purposes has been proven? In light of the majority view in Bosa No. 2, by which I am bound, the commitment must go beyond pre-construction development steps and manifest itself in the actual building of the project. Once it is clear that the project has entered the construction phase then the facts should be examined in each instance to determine whether the development has reached the stage where the owner is committed to one use rather than another. 29 The degree of commitment may be inferred from a number of factors examined in the context of the development as a whole including, but not limited to: 1. the various legal instruments attached or applicable to the land and/or proposed buildings (zoning requirements, restrictive covenants, building permits, purchase and sale agreements, etc.); 2. relevant features of the actual construction (with the acknowledgment that it may be difficult to discern anything meaningful at early stages of construction; and 3. any substantial indication that the owner is using the land for a non-residential purpose or is in some way reneging on the stated intention to develop the land for residential use. 30 Although the construction itself may often be the most persuasive indication of commitment, it may not be the determining factor in every instance. This is particularly evident in the early stages of construction. For example, it may be that there is something about the site preparation that establishes that the owner has embarked upon a specific residential project. In the absence of any compelling indication to the contrary, the likely conclusion is that the land is being used for a residential purpose. However, the reverse does not necessarily follow. It may be that the site clearing and demolition leave open a number of optional uses. But this fact alone does not automatically negate a commitment to a residential purpose without further inquiry into all of the circumstances of the development. The issue is really one of whether the owner has dedicated the land to a particular use and has actually started construction. This, as stated, is evaluated by reference to the factors listed above."
Bosa No. 2 and Assessor of Area #10 were considered by the Court of Appeal of Victoria in Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue [2009] VSCA 167; (2009) 25 VR 59 without adverse comment. That case concerned a claim by an owner of land that had commenced construction of golf courses and other sporting facilities to an exemption of land tax that was available where land was vested in a body corporate of a specified kind and was "used for out-door sporting recreation or cultural purposes or similar out-door activities". The golf courses and facilities were in the course of construction and had not been completed. The Court of Appeal held that the taxpayer was not entitled to the exemption because the purposes described, namely recreation or cultural purposes or similar outdoor activities, were still in the future.
These and other cases were considered by Gzell J in Leda Manorstead. His Honour concluded (at [61]): "[61] In my view, the impact of the earthworks on Cobaki at 31 December 2005; their sheer size and cost; the extent of the devotion of labour and machinery to the activity; the intention of Leda from the time it acquired Cobaki that it would be a residential subdivision; and Leda's continued negotiation with Tweed Shire Council and other regulatory bodies to obtain consents to development applications for subdivision and development applications for associated earthworks establishes that the purpose of the use of Cobaki was manifested by the commencement of the earthworks, and it was 'used for' residential development. Put another way, although in the development phase, Cobaki was being 'used for' the end purpose that was to follow completion of construction - residential subdivision. Leda had demonstrated in very specific terms its commitment to Cobaki being 'used for' a residential purpose."
I conclude that at the relevant dates the Metricon lands, and in particular 22 Fraser Drive, were held for future residential development, but were only being used for residential development to a limited extent. Their only current use for residential development was to the limited extent the lands were physically used by being used for the carrying out of preliminary activities necessary for the obtaining of requisite approvals for future residential development. It is admitted, and I would in any event conclude, that that use of the land for obtaining requisite approvals does not have a character or intensity that would mean that the primary production use was not dominant.

Agistment use is inconsequential

The third competing use identified by the Chief Commissioner was that the whole of the land was used by Metricon for a "rental use in respect of the agistment of cattle on the land". This refers to the financial benefit that Metricon received from its agistment agreements with the Gillilands under which the Gillilands undertook to maintain fences and to keep the lands clear of noxious weeds. For the reasons I have given, I consider that this use can also be considered as a competing use.
Whilst Metricon uses the land by making it available to the Gillilands for agistment in return for their undertaking to maintain fences and keep the lands clear of noxious weeds, Metricon's use in that way is of minor significance. The nature, extent and intensity of the primary production use, and the time and labour spent far outweighs Metricon's use of the land for agistment purposes. Indeed, Metricon's use of the lands by putting them out for agistment in return for the undertaking to maintain fences and keep the lands free of noxious weeds, is but an aspect of the use of the lands by the Gillilands for primary production. That is to say, the way the Gillilands used the lands for primary production included their complying with their undertaking to maintain fences and keep the lands clear of noxious weeds. Their performance of their side of the bargain was but a small part of their primary production activities. The benefit that Metricon derives from that arrangement is itself a use of the lands, but it is very minor in comparison to the Gillilands' primary production use.

Conclusion for 22 Fraser Drive and 512 Terranora Road

The Chief Commissioner did not dispute that there was a primary production use of the lands at 22 (also called 37) Fraser Drive and 512 Terranora Road for the purpose of determining whether those lands were exempt from land tax for all years, including the 2009 land tax year. This was so notwithstanding that Jeffrey Gilliland gave evidence to the effect that cattle were moved onto those lands after fencing work was completed in about February or March 2009. That evidence, standing alone, could indicate that there was no cattle grazing, at least involving the Gillilands, as at 31 December 2008. However, there was evidence from records produced by the North Coast Livestock Health and Pest Authority that returns had been lodged with that authority on 31 July 2008 recording that as at that date there were 25 beef cattle on 22 Fraser Drive and it had a pasture area of 25 hectares as well as a cropping area of 10 hectares. This would indicate that there was a primary production use. There was no competing use. The case was fought on the basis that there were competing uses which meant that the primary production use was not dominant, not that there was no primary production use at the relevant date or time. Accordingly, as there is no competing rental use to be considered in relation to 22 Fraser Drive and 512 Terranora Road, the assessments in respect of those properties should be set aside.
The other competing use to consider is the letting of houses and curtilages on 126, 140 and 153 Mahers Lane and the physical use of those premises by tenants.

The Gillilands' use of the Metricon lands

In 2006 Jeffrey Gilliland made arrangements with Mr Des Greber and Mr Jeff Greber to agist cattle on land then owned by them at 140 and 153 Mahers Lane. He commenced agisting cattle on those properties together with the property at 127-137 Mahers Lane in 2006. The cattle were cattle owned by him and his wife Merrin. Anna Gilliland said that as at 31 December 2008, 87 head of cattle were being run on the three properties in Mahers Lane. 140 and 153 Mahers Lane comprised about 60 per cent of that area. That figure is in excess of the figures contained in agistment agreements with the Grebers under which Des and Jeff Greber agreed that Jeff and Merrin Gilliland would have the right to agist 20 head of mature cattle on each property. That right would have extended to accompanying calves. But it appears from other evidence that the formal agistment agreements are not a reliable record of the number of cattle actually agisted. Thus the same figure of 20 head of cattle appears in agistment agreements made by the Gillilands with Metricon, but it is clear that the number of cattle agisted substantially exceeded that figure.
The parties agreed on the income and expenses that should be attributed to cattle-grazing on different parcels of land in calendar years 2009-2013. The agreed figures were as follows: 2009 Hectares Income Expenses Profit 140 Mahers Lane, Terranora 11.5 12.3% 423 393 29 153 Mahers Lane, Terranora 11.61 12.4% 426 396 30 22 Fraser Drive, Terranora 33.97 36.3% 1248 1161 88 450 Terranora Road, Terranora 34.62 37.1% 1276 1186 90 14 Mahers Lane, Terranora 1.76 1.9% 65 61 5 93.46 3439 3197 242

2010 Hectares Income Expenses Profit 140 Mahers Lane, Terranora 11.5 11.3% 1270 1184 87 153 Mahers Lane, Terranora 11.61 11.4% 1282 1194 87 22 Fraser Drive, Terranora 38.97 33.4% 3755 3499 256 512 Terranora Road, Terranora 42.93 42.2% 4745 4421 323 14 Mahers Lane, Terranora 1.76 1.7% 191 178 13 101.77 11243 10476 766

2011 Hectares Income Expenses Profit 140 Mahers Lane, Terranora 11.5 10.7% 5248 2740 2402 153 Mahers Lane, Terranora 11.61 10.8% 5297 2766 2424 22 Fraser Drive, Terranora 33.97 31.6% 15499 8093 7096 512 Terranora Road, Terranora 42.93 39.9% 19570 10219 8957 126 Mahers Lane, Terranora 54.76 5.3% 2599 1357 1190 14 Mahers Lane, Terranora 1.76 1.7% 834 435 382 107.53 49047 25611 22451

2012 Hectares Income Expenses Profit 140 Mahers Lane, Terranora 11.5 10.7% 7076 2703 4372 153 Mahers Lane, Terranora 11.61 10.8% 7142 2728 4414 22 Fraser Drive, Terranora 33.97 31.6% 20896 7982 12914 512 Terranora Road, Terranora 42.93 39.9% 26385 10078 16307 126 Mahers Lane, Terranora 54.76 5.3% 3505 1339 2166 14 Mahers Lane, Terranora 1.76 1.7% 1124 429 695 107.53 66128 25260 40868

2013 Hectares Income Expenses Profit 140 Mahers Lane, Terranora 11.5 10.7% 3338 1499 1839 153 Mahers Lane, Terranora 11.61 10.8% 3370 1513 1856 22 Fraser Drive, Terranora 33.97 31.6% 9859 4428 5431 512 Terranora Road, Terranora 42.93 39.9% 12449 5591 6857 126 Mahers Lane, Terranora 54.76 5.3% 1654 743 911 14 Mahers Lane, Terranora 1.76 1.7% 530 238 292 107.53 31200 14013 17186

2009 Assessments for 140 and 153 Mahers Lane

Liability for land tax arises as at midnight on 31 December immediately preceding a calendar land tax year. In Longford Investments Pty Ltd v Chief Commissioner of Land Tax, Sheppard J said (at 660-661) that although the liability for land tax arises as at midnight on 31 December, the question of whether land was used primarily for primary production was to be considered having regard to the facts spanning "some few months" before and after that date. In Leda Manorstead, Gzell J applied this reasoning and said that in the circumstances of that case a reasonable period for inquiry was six months before and after the relevant date (at [4]). His Honour observed that that allowed for a consideration of the financial records pertaining to the uses to which the land was put.
This approach recognises that the question of the dominance of a particular use, or whether a primary production use has a significant and substantial commercial purpose or character, requires examination not of a single event but of a state of affairs that exists as a continuum. Experience before and after 31 December that is part of that continuum can throw light on the position as it existed at that date. But that does not alter the fact that liability to land tax is imposed and hence a claimed entitlement to exemption is to be determined as at midnight on 31 December. This is significant where there is a material change occurring after 31 December.
In the present case there were two significant changes occurring in March or April 2009. The first is that, so far as the evidence reveals, the letting of 140 Mahers Lane did not commence until March 2009. The lease commenced on 4 March 2009 and was for a rent of $220 per week. Consistently with this the "Owner Income and Expenditure Ledger" kept by the managing agent showed receipts of rent for the 140 Mahers Lane property commencing only in March 2009. Thus as at the relevant date for the 2009 land tax year there was no competing rental use that could prevent the primary production use by Jeffrey and Merrin Gilliland from being a dominant use.
The second relevant event was the formation of the four-way partnership between Jeffrey and Merrin Gilliland and Tim and Anna Gilliland in April 2009. Jeffrey and Merrin Gilliland owned a property in Tyalgum that was used for grazing cattle, and Tim and Anna Gilliland owned a cattle-grazing property at Doon Doon. In April 2009 the partnerships of Jeffrey and Merrin Gilliland and of Tim and Anna Gilliland transferred cattle to their four-way partnership to be fattened on the Metricon lands and on other land at Cudgen prior to sale. Both partnerships contributed 24 steers each to the new operation and the four-way partnership purchased a further 79 steers. There is evidence referred to below relevant to the intensity of the primary production use undertaken by the four-way partnership. There is no such evidence in relation to the cattle-grazing operation of Jeffrey and Merrin Gilliland prior to April 2009 on the Mahers Lane properties. It is clear that the scale of the cattle agistment carried out by Jeffrey and Merrin Gilliland prior to April 2009 was less than the operations of the four-way partnership conducted after that time. There is considerable uncertainty as to how many cattle were agisted on 153 Mahers Lane and how frequently cattle were agisted on that property in the period around 31 December 2008. Metricon has the onus of establishing that the primary production use at that time was the dominant use of the land. There was a competing rental use for 153 Mahers Lane. A house on 153 Mahers Lane was let to a Mr and Mrs Hall in April 2008 at a rent of $2,500 per month. The tenancy agreement provided that five children would ordinarily live on the premises with Mr and Mrs Hall. The leased premises included a double lock-up garage plus three other car spaces, a store room and a shed in the rear paddock. As noted at para [19] above, the area occupied by the dwellings and curtilage on 153 Mahers Lane comprises 8.3 per cent of the total area of that property.
Letting expenses were incurred in relation to 153 Mahers Lane in the months before and after 31 December 2008 of approximately $640 per month. Those expenses were incurred for matters such as managing agent's fees, lawnmowing or gardening, plumbing and pest control.
Metricon did not establish how much time was spent by Jeffrey or Merrin Gilliland in and around December 2008 in relation to the cattle agisted on the Mahers Lane properties. After the establishment of the four-way partnership there is evidence that not more than 10 per cent of the total time spent by the Gillilands in their overall cattle enterprises was spent in relation to the agistment of cattle on the Metricon lands. The cattle use in 2008 appears to have been substantially lower than in subsequent years. The agreed figures for income and expenses of the cattle operation in 2009 show only minimal income and expenses which must reflect a small-scale operation. Jeffrey Gilliland was unable to make an estimate as to how much time he and Tim Gilliland spent on the Metricon lands even after December 2008. The evidence of the position as at December 2008 is too unsatisfactory to enable me to draw a conclusion that the cattle-grazing use of 153 Mahers Lane in and around 31 December 2008 was the dominant use of the land having regard to the competing rental use considered either from the point of view of Metricon and the vendor from Metricon who obtained the rental income, or from the point of view of the tenants who physically occupied the house and curtilage.
In my view the assessment for the 2009 land tax year for 153 Mahers Lane should be upheld.

2010 to 2013 Assessments for 126, 140 and 153 Mahers Lane

The four-way partnership agists cattle not only on the Metricon lands, but also on other land at Cudgen. Suitable cattle are identified to be sent to the Metricon/Terranora lands for finishing to bring them to an optimum weight before sale. Those lands are an important part of the Gillilands' cattle enterprises, but involve low levels of involvement by the Gillilands in managing the cattle. The cattle are selected on the basis that they are "easy care" and they are expected to feed and reproduce themselves unaided. Jeffrey Gilliland deposed that the stock are checked on a regular basis and any necessary animal husbandry processes or health treatments are carried out, but that the management approach is designed to minimise the amount of time that he, Tim, Merrin or Anna Gilliland have to spend in managing the herd. Four tasks were identified as being conducted on the Metricon lands, namely, a down-the-throat drench and ear-tagging for buffalo fly (although the evidence was contradictory as to whether or not this actually took place on the Metricon lands or on the home farms at Doon Doon and Tyalgum), needling of calves at around three months of age followed up with a booster shot four to six weeks later, dehorning of cattle and calves during the winter months, and, in some years, the putting out of mineral lick blocks in a paddock as a food supplement. There is often no need for the blocks to be used because of the quality of the pasture.
The Gillilands were unable to provide any estimate as to how much time on average was spent by them attending the Metricon lands. Those lands were used to finish the cattle to bring them to an optimum weight before sale. An agronomist retained by the Chief Commissioner, a Mr Peter Schuster, assessed that a reasonable allocation of labour shared between all three partnerships was that partnership 2 (the four-person partnership) would require 10 per cent of the overall labour devoted to the three partnerships.
An agricultural consultant, Mr Alastair Rayner, described the nature of the cattle-grazing use on the Metricon lands and how that use relates to the cattle-grazing businesses of Jeff and Merrin Gilliland at Tyalgum and of Tim and Anna Gilliland at Doon Doon as follows: "b. The Gilliland operation is structured to best use all available grazing land. As Mrs. Anna Gilliland explained it to me during my inspection, the main group of breeding cows is run on the Doon Doon and Tyalgum lands. They are run in breeding groups and are joined to bulls that have been purchased from well-respected stud breeders such as David Bondfield of Palgrove Charolais. These cows are allowed to calve down at Doon Doon. A similar breeding program is operated on Tyalgum lands. Steer progeny and surplus heifers, that is those not required to be used for future breeding, are taken from Doon Doon and Tyalgum and grown to market weights on the Terranora lands. Breeding cows that have come to the end of their productive life within the herd, generally around the age of 10 years of age are moved from Doon Doon & Tyalgum to the Terranora lands. Here they are allowed to calve down and along with the resulting progeny are sold to the market, either directly to an abattoir or through the Murwillumbah saleyards. Excess breeders can be drawn from Doon Doon and Tyalgum and grazed as part of a breeding group on the Cudgen lands, where steers and heifers are sold to the market, either directly to an abattoir or through the saleyards. c. The structure of the operation provides the Gilliland operation a high degree of flexibility. Firstly the Terranora land allows the Gilliland's [sic] to carry more breeding cows on both the Doon Doon and Tyalgum land. By taking steers, surplus heifers and cull or cast for age cow to another location, the [Gillilands] can allocate more land and pasture at Doon Doon and Tyalgum to maintaining a core large breeding herd. Secondly Terranora and Cudgen provide additional grazing land that potentially can be used as emergency grazing in periods of poor pasture growth. d. In my experience I believe this is a sensible and practical approach to commercial beef production. By using land such as the Terranora lands, the [Gillilands] can carry more breeding females and as a result will have more steers and surplus heifers available for sale. Additionally by taking cull cows to Terranora they are able to carry a higher number of younger breeding females. In practical terms, all the pasture and land available on both Doon Doon and Tyalgum is then directed towards maximizing female reproduction and efficiency. e. I consider moving growing steers, surplus heifers and cull cows to the Terranora lands to be a sensible and practical option. The Terranora lands can be used to grow cattle to meet the weight and fatness requirements of abattoirs. This effectively means these animals do not have to compete with the breeding herd for pasture or land space. If the animals were to compete for these resources at Doon Doon and on Tyalgum, the Gilliland operation would likely have to reduce breeding cow numbers and change market focus to lighter sale weights, as there would be insufficient resources to support the operation in its current form."
The quality of the pasture on the Metricon lands is high and is ideal for fattening the cattle prior to sale. Anna Gilliland said that the cattle generally started to show their age by about 10. It was only good cows that were moved to the Metricon lands. When they were moved they were in calf. She said that: "Basically you get two good years out of them and they weigh so much more it's remarkable. It's perfect for finishing. At home you wouldn't be able to do it to that degree."
She said that a cow would probably put on at least 100 kilograms although this could fluctuate. Anna Gillilands said that an empty cow, that is one without calf, would probably be ready to go to market within 12 months and would put on 100 kilograms in that period.
In the financial year ended 30 June 2009 the four-way partnership sold 16 head of cattle. In the following financial year ended 30 June 2010 the number of sales increased to 45. The sales increased to 117 in the financial year ended 30 June 2011, 171 in the financial year ended 30 June 2012, and fell to 112 in the financial year ended 30 June 2013. The sale proceeds increased from $6,879 in the financial year ended 30 June 2009 to $21,622 in the following year, then $90,827, $153,788 and $72,558 in the financial year ended 30 June 2013. Closing livestock as at 30 June 2009 to 30 June 2013 was as follows: End financial year Closing livestock 30 June 2009 133 30 June 2010 140 30 June 2011 178 30 June 2012 193 30 June 2013 309

The Chief Commissioner accepts that this was a substantial and significant commercial cattle-grazing business. The use of the Metricon lands was a necessary element in the running of what is said to be the best farm in the Tweed Valley. This accolade is a reflection both of the quality of the pasture and the husbandry of the Gillilands. It is an important factor in assessing the intensity of the primary production use.
The rental use of 153 Mahers Lane continued through each of the relevant years with the same tenants and approximately the same rental income and letting expenses. The disproportion between the level of rental income and letting expenses and primary production income and expenses was substantially reduced by December 2009 and further reduced in the following years. In Thomason the Land Appeal Court warned against placing undue reliance on levels of income in determining what use of land is dominant and emphasised the importance of what would be seen by an outside viewer.
The rental use of 140 Mahers Lane also continued between 2009 and 2013. Rental income for 140 Mahers Lane from 2009 to 2013 was as follows: 2009 - $9,460 2010 - $12,100 2011 - $12,520 2012 - $12,650 2013 - $12,720
Letting expenses ranged from $1,204.29 in the financial year ended 30 June 2009 to $2,377.13 for the year ended 30 June 2010. Letting expenses in subsequent years was slightly lower. The house at 140 Mahers Lane was occupied by a couple and three children.
The house and curtilage at 126 Mahers Lane was let pursuant to a residential tenancy agreement made on 24 June 2010. The agreement named four people who would ordinarily live at the premises. The rent was $575 per week. The rental income received was $16,120 in the calendar year 2010, $29,785 in the calendar year 2011, $30,590 in the calendar year 2012, and $14,375 in the six months to June 2013. The letting expenses associated with 126 Mahers Lane were as high as $6,423.79 in the financial year ended 30 June 2011, but were $3,212.11 in the following financial year, and $1,910.94 in the financial year ended 30 June 2013. There were plumbing costs of $2,220 in the financial year ended 30 June 2011.
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. That is relevant to, but not determinative of, the assessment of which use was dominant.
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 (see at [50]), 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.
Having regard to the concessions referred to at [101]-[105] above, no question arises as to whether the limited current use I have found of the lands for the purposes of future residential development can be weighed along with the residential use against the primary production use. It is unnecessary to decide whether a primary production use can be said to be dominant if it is the chief or primary single use even though two or more other uses, when combined, or when considered in conjunction with the non-use of parts of the lands, could collectively be said to be dominant.
For these reasons the land tax assessments for 2010-2013 for 153 Mahers Lane, 2009-2013 for 140 Mahers Lane and 2011-2013 for 126 Mahers Lane should be set aside.
There may be consequential orders to be made. I direct counsel for the plaintiff to bring in short minutes of order in accordance with these reasons. I will hear counsel on the question of costs if there is no agreement on that matter. 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: 31 March 2016

Local Government Act 1919(NSW)

(Taxation Administration Act 1996(NSW)s 100(3)).

(2000) 108 LGERA 417

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