These three valuation appeals were heard together, following an inspection of the subject rural lands, on 2 October 2018.
They concern the statutory valuations, for the years 2015, 2016 and 2017, of Lots 101 and 102 of DP1122102, and Lot 2 of DP1171468 (formerly Lot 103).
The central issue in dispute between the parties is whether the subject lands should be valued as one "parcel" or two.
The parties agreed upon a Court Book ("CB").
The subject lands are owned by the Applicant company, zoned "RU1 - Primary Production", and located at, and known as, 50 (sometimes stated as 40) Strathmore Road, The Oaks.
Lots 101 and 102 each comprise approximately 40 acres, and Lot 2 approximately 108 acres (a total area of 75.78ha). Approximately 57 acres of this area is currently unsuitable for use by the Applicant (CB p149, par 49).
The Applicant's operations on the lands comprise two "streams" - spelling and conditioning of racehorses (a quite intense use on Lot 2), and breeding thoroughbreds for sale (exclusively on Lots 101-102). The two operations were distinguished in detail in various submissions made to Property NSW (see, e.g., CB p173, par 2.5), and are delineated in a "Farm Useage Map", which occurs frequently in the material (see CB pp30, 45, 77, 114, 177, 218, and 245).
Appeals against decisions of the Valuer General ("VG") are often concerned largely with a valuation's consequences for the imposition of local government rates and/or State land tax.
The breeding operation in the present case would be regarded as primary production, on rural land, so as to attract taxation concessions and exemptions, but the use of Lot 2 would be taxable. As such, the Applicant contends in these appeals that Lot 2 should be separately valued (Tp12, LL38 to 41).
It is recorded in the Applicant's material (CB p143, pars 16-19) that the three Lots, and a related Farm, were "classified as primary production land exempt from taxation under s 10AA of the Land Tax Management Act 1956 ... for each of the 2010 through to 2014 land tax years".
That exemption was disallowed for the 2015 land tax year, and then retrospectively revoked for the 2010 to 2014 land tax years.
Section 10AA relevantly 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.
...
(3) For the purposes of this section, land used for primary production means land the dominant use of which is for:
...
(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or
The Applicant notes (subs par 19):
The "land" for the purpose of s.10AA is the land determined by the Respondent as the relevant parcel that is separately valued and entered in the register: see Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9 at [10]ff.
Objections by the Applicant were rejected by the Chief Commissioner of State Revenue.
The Applicant then sought, unsuccessfully, to have Property NSW "reparcel" Lots 101-102, separately from Lot 2. The Applicant refers to Lots 101 and 102, together, as "Parcel One", and Lot 2 as "Parcel Two", and I will adopt that nomenclature when appropriate.
Generally speaking, it could be said that Lot or Parcel 2 is flat land below a "steep cliff" upon which sits Parcel One (Tp10, L47). Parcel 2 has on it more substantial improvements/infrastructure. These features of the land are clear in a Google Map which also occurs frequently in the material (see CB at pp29, 44, 76, 113, 176, 217, and 237, and the diagram at 243).
The CB also includes many photographs of the land and the operations on it (see CB pp239, 241, 247-240, 256-259, and 273-292).
[3]
The Statutory Regime
Section 14A of the Valuation of Land Act 1916 ("the VLA") provides:
Valuer-General to ascertain land values
(1) The land value of each parcel of land in New South Wales, other than:
(a) lands of the Crown, or
(b) land that is within the Western Division and is not within the area of a rating or taxing authority,
is to be ascertained each year.
(2) The Valuer-General may at any time value any parcel of land, either on his or her own initiative or:
(a) in the case of lands of the Crown, on the application of the public authority by or on whose behalf the land is held, or
(b) in the case of land within the Western Division (including land referred to in paragraph (a)), on the application of the Secretary of the Department of Industry, or
(c) in the case of land within the area of a rating or taxing authority (including land referred to in paragraph (a) or (b)), on the application of that authority.
(3) (Repealed)
(4) The Valuer-General may separately value different parts of the same parcel of land, in which case this Act applies to each such part as if it were a separate parcel of land.
...
It is to be noted that the term "parcel of land" is not defined in the VLA: see Triguboff v Valuer-General ("Triguboff") (2009) 166 LGERA 128; (2009) 71 ATR 819.
The Applicant's objections to annual valuations seek to have the lands valued in two separate "parcels", one comprising Lots 101-102 taken together, and the other being Lot 2, for base dates 1 July 2015, 2016, and 2017, pursuant to s 34(1)(e) of the VLA.
The Applicant's objections were disallowed by the Respondent ("the VG"), and these appeals are brought pursuant to s 37(1) of the VLA, which provides:
Right of appeal
(1) Any person entitled under Part 3 to object to a valuation may appeal to the Land and Environment Court if the person is dissatisfied with the Valuer-General's determination of any such objection to the valuation concerned (whether or not the person was the objector).
The VG argues that the subject lands do not meet the relevant criteria (for separate valuation) set by s 27(2) of the VLA. Section 27 relevantly provides (emphasis mine):
Where lands are to be separately valued
(1) Where several parcels of land, owned by the same person, are separately let to different persons, they shall be separately valued.
(2) Lands which do not adjoin or which are separated by a road, or are separately owned, shall be separately valued: Provided that the Valuer-General shall, subject to section 28, include in one valuation lands owned by the same person if worked as one holding for agricultural or pastoral purposes.
...
(4) Where a part only of a parcel of land is subject to a particular rate or tax, the value of such parcel shall be apportioned so as to show separately the value of that part which is subject to the particular rate or tax.
...
Section 40 of the VLA provides (emphasis mine):
Powers of Land and Environment Court on appeal
(1) On an appeal, the Land and Environment Court may do any one or more of the following:
(a) confirm or revoke the decision to which the appeal relates,
(b) make a decision in place of the decision to which the appeal relates,
(c) remit the matter to the Valuer-General for determination in accordance with the Court's finding or decision.
(2) On an appeal, the appellant has the onus of proving the appellant's case.
At the hearing, the Applicant, on the basis of Cowdroy J's decision in Justin John Enterprises Pty Ltd v Valuer-General [1999] NSWLEC 208, elected not to press the submissions it originally made on the basis of the proviso to s 26. Section 26 provides:
Where lands are to be included in one valuation
(1) Where several parcels of land adjoin, are owned by the same person, and where no part is leased, they shall be included in one valuation, unless the Valuer-General otherwise directs: Provided that any such parcels of land shall be valued separately if buildings are erected thereon which are obviously adapted to separate occupation.
(2) Where several parcels of land adjoin, are owned by the same person and are all let to one person, they shall be included in one valuation, unless the Valuer-General otherwise directs.
(3) This section does not apply to land which is required, by section 27B, to be separately valued or included in one valuation.
The Applicant relied, instead, upon s 28A which provides:
Land of which part only is ratable or taxable
If land in respect of which one valuation would otherwise be made under this Act is ratable or taxable as to part only, the part that is ratable or taxable is to be separately valued.
[4]
The Evidence
The Applicant relied primarily on extensive affidavit material from one of its directors, Julia Katherine Ritchie (CB tabs 6 and 8), detailing the history of the subject lands, and of the Applicant's operations.
The Respondent relied on expert valuation evidence from Peter Bruce Adlington, a Certified Practising Valuer of 20 years standing (CB tab 7).
Both deponents were briefly cross-examined.
As the Respondent concedes (subs par 27):
It is not in dispute that the three lots adjoin, are owned by the same person and that no part is leased. Accordingly, the elements for one valuation are met.
The Applicant summarises the evidence of its use of the subject lands in these terms (subs 7-11):
7. Lots 101 and 102 comprise approximately 80 acres and are used to maintain thoroughbred brood mares and their offspring (weanlings). The broodmares offspring are raised for sale, which generally occurs at the annual yearling sales.
8. Lots 101 and 102 are physically separated by fences from Lot 2 and have access from a public road that is separate from Lot 2. There are no buildings on Lots 101 and 102, only horse shelters. The upper paddocks on the available land in Lot 101 is where the foals are kept when they are weaned from their mothers. The mares rest in readiness for the breeding cycle to begin again and, on occasions, the mares in-foal are separated from the mares that are not in-foal.
9. Lot 2 comprises approximately 108 acres, upon which several buildings are erected, including two residences, an office, barns and stables. Lot 2 also includes various items of extensive infrastructure and, unlike Lots 101 and 102, is used to educate and condition thoroughbreds to become racehorses.
10. The infrastructure on Lot 2 also includes a covered lunging yard, two mechanical walking machines and mechanised swimming pool all of which are designed for the purpose of educating and conditioning racehorses.
11. There is only incidental use of Lots 101 and 102 by the racehorses as part of a racetrack on Lot 2 extends approximately 400m into Lot 102.
I am satisfied that the uses described for the two parcels, as defined by the Applicant ([7] and [30] above), are their respective "dominant uses".
Adlington was asked, in particular, about the grass "training track", which is approximately 11.5m wide, from rail to rail, which extends from Lot 2 on to Lot 102 (see subs par 11, quoted above in [30]). He had originally deposed (CB p265, par 13):
... I consider that a significant feature of the property is the grass training track which extends from the eastern part of Lot 2 to the western end of Lot 102. The western end of the track opens into a paddock marked on the Farm Usage Map in Tab 5 of the Applicant's affidavit ("the Farm Usage Map") as "The Downs", which is partly within Lot 101 and partly within Lot 102. The location of the track indicates that this facility is common to both of these two lots (PA8 shows the training track continuing from Lot 2 into Lot 102, and the internal access road servicing Lot 2, Lot 102 and Lot 101. PA13 shows the western end of the training track as it extends into "The Downs" paddock).
He added to this evidence a supplementary affidavit dated 27 September 2018 (CB tab 7, between pp292-293), which included an aerial photograph ("B"), which he deposed (par 8) showed the "length of the track from its western point to the eastern boundary of Lot 102. This shows the length of the track within Lot 102 DP1122102 to be 643.4 metres".
Adlington could not opine as to the use of the track (Tp3, L28 to p4, L8), but Ritchie testified that the whole length of the track is not used (Tp6, L1). She deposed (CB p294, pars 5c and 5d):
c. the grass training track is used by thoroughbreds housed on Lot 2 which are in education to become competitive racehorses or for existing thoroughbreds in racing programs to maintain their racing fitness between their racing campaigns; and
d. the thoroughbreds residing on Lot 2 do their predominant training or fitness in the lower part in Lot 2 on the grass track which includes education at the starter barrier gates for race start practise and for three quarter pace work for the first 1400 metres of the grass track which is located on Lot 2, and the thoroughbreds use the upper part of the grass training track to slow down. ...
Ritchie added (CB p295, par 10):
... the grass training track is used by thoroughbreds which are located on Lot 2 that are to become competitive racehorses or to maintain their racing fitness between their racing campaigns. The grass training track is never used by horses housed in Lot 101 or 102, although some horses may have used the grass training track previously as part of their conditioning if and when they were housed at Lot 2.
Ritchie also confirmed (Tp6, LL17-30) that there is a fence on Lot 2 approximately 45m from the boundary of Lots 101 and 102, and that there are two staff residences on Lot 2, one occupied by the manager, and the other by staff who primarily serve the operations on Lot 2, but also check "all the animals up in the paddock" first thing each morning before they feed them (see Tp8, L48 to p10, L16).
In respect of the fence, Ritchie deposed (CB p295, par 7):
... although there are no specific fencing boundaries between Lot 101 and 102 and separately Lot 2, the nearest fence line has been selected as part of the reparcelling application which demarcates the different land use for the horses. As a consequence of this, for horses in adjacent paddocks, some horses will be breeding stock and others may not.
and Adlington deposed (CB p266, pars 17a and b):
a. there is no fencing coinciding with the eastern boundaries of Lots 101 and 102 to separate Lots 101 and 102 from Lot 2. The boundary between the eastern side of Lots 101 and 102 and the western side of Lot 2 appears to straddle three paddocks, the training track and two internal access roads which appear to service the whole property;
b. based on viewing the aerial photographs generally as well as the site inspection, I observe a single fenced area traversing all three Lots and not marked separately on the Farm Usage Map, and with no fences following the lot boundary lines. ...
Ritchie's co-director, since May 2009 (CB p158), is prominent racehorse trainer Anthony James Cummings, and his "Cummings Racing" website (Exhibit R1) lists "Wild Oaks" among its "facilities", with the following text (emphasis mine):
Wild Oaks is another pre-training and agistment facility that we use for our horses. Situated neatly in the Camden Valley, Wild Oaks is a short one hour drive from Sydney, making it easy for Anthony and our owners to keep an eye on the horses when they are away from the stables. The facilities on this 186 acre property are first class, with an eight horse water walker, dry walker, 1600m grass track with race rail and irrigation as well as a 600m sand track. Wild Oaks is a one-stop shop for our horses needs and we invite you to come and see what it has to offer ...
[5]
Applicant
The Applicant submits that the two parcels of land are "physically and functionally distinct"; they are physically separated by fences, and have separate accesses from the public domain. Their uses are "fundamentally different", and the use of the racetrack by racehorses on Lot 2 is only incidental: see again Triguboff, at [22]-[24].
More substantial buildings, including residences, and specialized infrastructure, are found on Lot 2, rendering it "self-evidently adapted to separate occupation", and the respective uses of the two parcels are quite separate and distinct. (See, generally, subs 7 to 11, and 21 to 24.)
By declining to value the parcels separately, the Respondent has rendered land tax assessments "incontestable", foreclosing the Applicant from contending that the dominant use of the land is primary production. "Such an outcome is inimical to constitutional principle" (subs 27).
As the Applicant submits (in par 28):
The manifest purpose of s.28A is to overcome this very situation and to ensure that exemptions to land tax are given practical effect. It is not for the Respondent to determine whether the statutory test for land tax exemption is in fact satisfied - that is a matter for the Chief Commissioner and subject to the review and appeal procedures in Part 10 of the Taxation Administration Act 1996 (NSW).
The Respondent should be ordered to value the two parcels separately.
[6]
Respondent
The Respondent notes that, as the Applicant cannot bring itself within either s 27(1) or s 27(2), it has had to develop an argument about s 28A.
However, s 28A does not give power to the VG - or to this Court on appeal - to determine if any part of the land is rateable or taxable. Such matters are the province of the Local Government Act 1993 (e.g. s 555) and the Land Tax Management Act 1956 (e.g. s 10R) (Tp13, L47-p15, L38), and these are not categorisation proceedings: c.f. SH Camden Valley Pty Ltd v Camden Council [2015] NSWLEC 104.
As Ms Carpenter submits (par 39 - emphasis mine), the VG "has no statutory power under s28A to determine of his own volition if land is rateable or taxable as to part only".
[7]
Applicant in reply
Mr Jones, in reply, suggested that Ms Carpenter was in error in those submissions.
The language of s 28A is mandatory, and does not envisage any need to "overlay or paraphrase any other requirements" such as "machinery provisions in another act before it's engaged" (Tp16, LL2-3, and LL22-25). For example, either the Chief Commissioner or Council, or the ratepayer or taxpayer, "can simply request the [VG]" to value the land accordingly (Tp16, LL5-8).
Relying on the "converse" authority of Sisters of Mercy Property Association v Town of Newtown and Chilwell (1944) 69 CLR 369, Mr Jones argued (Tp16, LL46-48) that "it would be absurd if there's clearly an exempt use, yet s 28A can't be engaged to value the non exempt use separately".
He submitted (Tp17, LL12-15) that his contention is "consistent both with the text and context of the statutory language, and ... the construction for which the [applicant] contends is inimical to that". All relevant authority asserts "the primacy of the statutory language" (Tp17, L32).
[8]
Conclusion
The Applicant bears the onus and has failed to bring itself within either arm of s 27, a failure which is fatal to its claims in this appeal.
The Respondent's arguments are to be preferred, and the Court finds the relevant statutory provisions to be quite clear in their intent and application, as explained by Ms Carpenter.
In addition, the Court accepts the arguments mounted by Adlington in support of the Respondent's submission that the lands are "worked as one farm" (CB pp265-267, pars 12 to 22) - or as a "one-stop shop" ([38] above).
Ms Carpenter (subs par 34) points to elements of Ritchie's evidence - and one might add, Exhibit R1 - which appear to concede some of Adlington's opinions.
The orders sought by the Respondent (in par 42 of its subs) ought to be made.
[9]
Orders
Accordingly, the Court makes the following orders:
In 2018/259146
1. Appeal dismissed.
2. The Valuer-General's decision to not separately value Lots 101 and 102 in DP1122102 from Lot 2 in DP1171468 as at base date 1 July 2015 is confirmed.
In 2018/74396
1. Appeal dismissed.
2. The Valuer-General's decision to not separately value Lots 101 and 102 in DP1122102 from Lot 2 in DP1171468 as at base date 1July 2016 is confirmed.
In 2018/259147
1. Appeal dismissed.
2. The Valuer-General's decision to not separately value Lots 101 and 102 in DP1122102 from Lot 2 in DP1171468 as at base date 1July 2017 is confirmed.
The Court Book and Exhibit R1 may be returned.
[10]
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: 29 November 2018