Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Ferella v Chief Commissioner of State Revenue [2023] NSWCATAP 50 Hearing dates: 2 December 2022 Date of orders: 20 February 2023 Decision date: 20 February 2023 Jurisdiction: Appeal Panel Before: Dr R Dubler SC, Senior Member P H Molony, Senior Member Decision: (1) Leave to appeal refused. (2) Appeal dismissed. (3) The respondent shall file and serve submissions and documents on which he intends to rely as to costs within 21 days of publication of these reasons, such submission not to exceed 2000 words. (4) Within a further 21 days, the appellant shall file and serve submissions and documents on which she intends to rely in reply, such submission not to exceed 2000 words. (5) Within a further 14 days, the respondent shall file and serve any submissions and documents on which he intends to rely in response, such submission not to exceed 1000 words. (6) Submissions must include submissions concerning whether an order should be made under s 50(2) of the Civil and Administrative Tribunal Act, 2013 dispensing with a hearing. Catchwords: APPEAL – no errors of law – leave to appeal on the merits refused – appeal dismissed. REVENUE LAW – Land Tax – exemption for land used for primary production under s 10AA of the Land Tax Management Act – onus of proof under s 100(3) Taxation Administration Act 1956 – whether dominant use was the maintenance of horses for the purpose of selling them or their natural increase – relevance of intention - whether the use of the land has a significant and substantial commercial purpose or character, and is engaged in for the purpose of profit on a continuous or repetitive basis. Legislation Cited: Administrative Decisions Review Act 1997 Civil and Administrative Tribunal Act 2013 Civil and Administrative Tribunal Rules 2014 Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: CEO of Customs v AMI Toyota Ltd (2000) 102 FCR 578 Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 Collins v Urban [2014] NSWCATAP 17 Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 204 Craig v South Australia (1995) 184 CLR 163 Ferrella v Chief Commissioner of State Revenue [2022] NSWCATAD 154 Ferrella v Chief Commissioner of State Revenue [2014] NSWCA 378 Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 430 Kostas v HIA Insurance Services Pty Ltd [2010] 241 CLR 390 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] 79 NSWLR 724; [2010] NSWSC 867 Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7, 81 ATC 4373 Young v Chief Commissioner of State Revenue [2020] NSWSC 330 Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 98 ATR 545 Texts Cited: Nil Category: Principal judgment Parties: Nida Ferella as Executor of the Estate of the late Gustavo Ferella and Nida Ferella (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: E Graham (Respondent) Solicitors: Angelo Ferella (Agent) (Appellant) Crown Solicitor (Respondent) File Number(s): 2022/00198231 Publication restriction: None Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Administrative and Equal Opportunity Division Citation: [2022] NSWCATAD 154 Date of Decision: 18 May 2022 Before: J Gatland, Senior Member File Number(s): 2019/301452 2021/151905 REASONS FOR DECISION Introduction 1. Nida Ferella, both in her own right and as Executor of the Estate of the late Gustavo Ferella (the appellant), has appealed a decision made by the Tribunal on 18 May 2021 to confirm decisions made by the Chief Commissioner of State Revenue (the respondent) to dismiss her objection to land tax assessments for the years 2020 and 2021, made with respect to a property owned by the appellant in Box Hill (the land). The land is zoned as "high density residential" pursuant to a planning instrument. 2. The appellant disputed the assessments and claimed that the land was exempt from land tax under s 10AA of the Land Tax Management Act 1956 (NSW) in those years, because it was used for primary production, specifically breeding horses. She sought administrative review of the determination of her objections by the Tribunal under the Administrative Decisions Review Act 1997 (NSW) (the ADR Act), in accordance with s 96 of the Land Tax Management Act. The administrative review was heard on 20 December 2021 when the appellants agent, Mr Angelo Ferella, did not appear. He wrote to the Tribunal indicating that, if he could not attend, he was content for the hearing to proceed in his absence and to rely on the materials provided. The respondent was represented by Ms Graham, who also appeared before us. 3. In Ferrella v Chief Commissioner of State Revenue [2022] NSWCATAD 154 the Tribunal affirmed the respondent's decision. It found that the appellant had not discharged the onus placed on her by s 100(3) of the Taxation Administration Act 1996 (NSW) of her proving her case. That section provides: (3) The applicant has the onus of proving the applicant's case in an application for review. (4) If the applicant or respondent appeals against a decision of the Civil and Administrative Tribunal in an application for review to an Appeal Panel of the Tribunal, the applicant in the application for review continues to bear the onus of proving the applicant's case in the appeal if the Appeal Panel grants leave for the appeal to extend to a review of the merits of the decision. 1. Specifically, the Tribunal found that the appellant had not discharged the onus of proving the matters set out in s 10AA of the Land Tax Management Act, which relevantly provided: (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) … (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 … 1. As the land was not rural land, s 10AA placed the onus on the appellant, in the circumstances, to prove: 1. that the land was used for primary production, in that its dominant use was the maintenance of horses for the purpose of selling them or their natural increase (s 10AA(1)); and 2. that the use of the land has a significant and substantial commercial purpose or character, and is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made) (s 10AA(2)). 1. The Tribunal found that the appellant had not discharged the onus of proof with respect to either of those matters and had not established that the land was exempt from land tax. The Tribunal affirmed the decision, thereby upholding the land tax assessments for the years 2020 and 2021. 2. On 7 July 2022, some 50 days after the decision was published, the appellant filed a notice of internal appeal. Rule 25(4) and (4A) of the Civil and Administrative Tribunal Rules 2014 (NSW) (the NCAT Rules) have the combined effect of requiring that an internal appeal in a matter such as this be made within 28 days of publication of the Tribunal decision unless the enabling legislation (the Taxation Administration Act) makes contrary provision, or an extension of time is granted. In this case there is no contrary provision. 3. On 29 July 2022 the appeal panel made an order extending time for the filing of the internal appeal to 7 July 2022. The appeal hearing. 1. The appeal was listed for hearing before us on 2 December 2022 by audio-visual link, when Counsel represented both parties. Most of the material relied on by the parties was conveniently contained in two bundles agreed by them. We also had the following materials before us: 1. Appellant's amended notice of appeal and grounds of appeal 2. Appellant's Outline of Submissions dated 18 October 2022. 3. Respondent's reply to the amended notice of appeal filed 25 November 2022. 4. Respondent's submissions filed 25 November 2022. 1. At the conclusion of the hearing we reserved our decision. The Appeal 1. Section 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) states: "Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance—with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance—as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds." 1. A question of law may include, not only an error in ascertaining the legal principle or in applying it to the facts of the case, but also taking into account an irrelevant consideration or not having regard to a relevant consideration. This includes not making a finding on an element or central issue that is required to be made out in order to claim an entitlement to relief: see CEO of Customs v AMI Toyota Ltd (2000) 102 FCR 578 (Full Fed Ct), [2000] FCA 1343 at [45], applying the statement of principle in Craig v South Australia (1995) 184 CLR 163 at 179. 2. The appellant filed an amended notice of appeal dated 18 October 2022 in which she raised questions of law but did not seek leave to go to the merits of the decision. In oral submissions, her Counsel indicated that if the appeal panel was the view that the questions of law relied on actually raised issues of fact, then leave was also sought to appeal on the merits, insofar as we thought it necessary. Counsel for the respondent did not object to the appeal proceeding on that basis. 3. The questions of law address whether the Tribunal erred in concluding that the appellant had not proved that: 1. The land was exempt from land tax because it is used for primary production, in that its dominant use was the maintenance of horses, for the purpose of selling them or their natural increase. 2. The 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 (whether or not a profit is actually made). Primary Production What the Tribunal decided. 1. In its decision the Tribunal, having reviewed the evidence relating to the use of the land at paras [27]-[32], drew the following conclusions of fact, at [37]: 1. "The colt (now stallion) born in November 2016 was maintained on the property at Box Hill for the purpose of sale and/or natural increase. I accept also that, given this animal is a thoroughbred and has been used already to provide covering services to brood mares, it may also be considered to be maintained on the land for the sale of its bodily produce in a similar manner found by Ward CJ in Eq (as her Honour then was) in Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 430. 2. There can be no definitive finding with regard to the filly born in December 2016 as it is unclear whether that animal has been sold, disposed of in some other manner, or retained as breeding stock. The Applicants have not demonstrated that the filly was maintained on the Box Hill property for the purpose of its sale or natural increase. 3. With respect to the two foals produced in 2019 and 2020, given the life-stage of those animals in the relevant years, it is unlikely there would have been significant further steps to advance the sale of those foals in the relevant years. However, the hearing of this matter took place late in 2021 and at that time there was still no evidence presented by the Applicants of any further effort to sell these foals. The Applicants have therefore not demonstrated that these animals were maintained on the Box Hill property for the purpose of sale or natural increase. 4. I accept there are three horses maintained on the property as brood mares. However, as noted above despite Mr Angelo Ferella's affidavit evidence that these mares were covered annually, there was no evidence of any progeny either in or arising from breeding activities taking place in the 2020 year. The Applicant's submissions in reply refer to annual coverings subject to the health of the mares and they submit that no covering took place in the 2020 season due to COVID-19 lockdowns. There is no clear explanation of what occurred with respect to each brood mare for the 2019 season. Consequently, the Applicants have not demonstrated that these animals were maintained on the Box Hill property for the dominant purpose of natural increase or sale." 1. At para [38] the Tribunal accepted that there was no other use to which the land was put "aside from maintaining horses." Echoing Roden J, in Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7, 81 ATC 4373, the Tribunal stated the fact that the land is used for a sole use, which does not involve the entirety of the land, is not sufficient to determine its dominant use. In that case Roden J explained, with respect to the use of land "primarily" for a particular purpose, that, at [10]: "I am of the view that, for any use of the land to justify the statement that the land is used primarily for that purpose, it is necessary not only that that use prevail over any competing use but also that it be sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused." 1. The Tribunal then concluded: 40 There was no evidence in these proceedings as to the extent to which Applicants used the property at Box Hill for maintaining horses and the extent to which the property was unused. 41 While there was evidence before the Tribunal to permit the conclusion that, in the relevant years, the property at Box Hill was used for the dominant purpose of maintaining seven horses, something more is required than evidence of the maintenance of animals in order to establish a dominant use of the land for the purpose of primary production. What is required to be demonstrated on the evidence is that the dominant use of the land was the maintenance of animals for the purpose of selling those animals or their natural increase. 1. The notice of appeal raised the following issues with respect to the primary production issue: "1. Having held that: i. the Applicants were not required to sell horses in each year to meet the definition in s 10AA(3) of the Land Tax Management Act 1956 (NSW); ii. three horses were maintained on the Box Hill property as brood mares; iii. there was no other use to which the Box Hill property was put; and iv. that it may take more than 11 months from covering a brood mare to obtain a live foal and then further time (even years) to be able to sell that progeny, the learned Senior Member erred in holding that those animals were not maintained on the Box Hill property for the dominant purpose of natural increase or sale. 2. The learned Senior Member ought to have found instead that those animals were maintained on the Box Hill property for the dominant purpose of natural increase or sale. 3. Having found the matters stated in sub-paragraphs 1(iii) and (iv), above, the learned Senior Member erred in holding that: i. the animals were not maintained on the Box Hill property for the dominant purpose of natural increase or sale; ii. the— Box Hill property was not used for the dominant purpose of primary production in the relevant years. 4. Having found the matter stated in sub-paragraph 1(iii), above, the learned Senior Member erred, in concluding that the Box Hill property was not used for the dominant purpose of primary production in the relevant years, by relying upon the matter stated in [40] of her reasons; namely, that "there was no evidence in these proceedings as to the extent to which Applicants used the property at Box Hill for maintaining horses and the extent to which the property was unused." 1. In submissions, the appellant argued that that the Tribunal erred at law when it found, at [40] and [41], that the absence of evidence as to the extent to which the land was used for the purpose of maintaining horses, as opposed to the extent to which it was unused, led it to err when it concluded that the appellant had failed to prove her case, in that the appellant had not discharged the onus placed on her by s 100(3) of the Taxation Administration Act. In this regard the appellant relied on the decision of French CJ in Kostas v HIA Insurance Services Pty Ltd [2010] 241 CLR 390 at 397 (Kostas), with respect to the former Consumer, Tenancy and Trader Tribunal: "The Tribunal's modus operandi must also serve its function, which, in this case, was to hear and determine a building claim. This implies a rational process of decision making according to law. A decision based on no information at all, or based on findings of fact which are not open on the information before the Tribunal, is not compatible with a rational process." 1. Further, in making that decision the Tribunal had failed to take into account the appellant's intention regarding the present use of the land. This was additional to the appellant's argument that she had discharged the onus of proving that the land was used for primary production in the years 2019 and 2020, in that its dominant use was the maintenance of horses for the purpose of selling them or their natural increase. 2. The respondent took issue with each of these propositions and submitted that the Tribunal had correctly found that the appellant had not discharged the statutory onus of proof placed on her by s 100(3) of the Taxation Administration Act. With respect to the issue of whether part of the land was unused, the respondent also submitted that this was not an issue that arose before the Tribunal. Consideration. 1. Land tax is charged by calendar year, and is charged on the land as owned "at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied": s 8 Land Tax Management Act. In the present case, the Tribunal was satisfied, at [41], that the land was used for the purpose of maintaining horses, but was not persuaded that that use was "for the purpose of selling those animals or their natural increase." 2. Land which is used for the purpose of agisting horses will not satisfy the primary production requirements of s10AA(3)(b) of the Land Tax Management Act, because while the land is used for the dominant purpose of maintaining horses, it is not done for the purpose of selling those animals or their natural increase or bodily produce. Similarly, simply maintaining horses on land for whatever reason, be it training them, or training riders, or as a hobby, will not satisfy the requirements of s10AA(3)(b). In Young v Chief Commissioner of State Revenue [2020] NSWSC 330 at [144] Payne J said: "Depending on the surrounding circumstances, the maintenance of horses on land leads to at least two possible conclusions. Horses, like other animals, may be maintained on land for the purpose of sale (including sale of their progeny). Unlike many other animals, horses may also be maintained on land for purely recreational purposes. There is no necessary conclusion that horses are maintained on land for the purposes of sale. That must be established by proof. I am not satisfied that the necessary conclusion was established here." 1. In Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] 79 NSWLR 724; [2010] NSWSC 867, Gzell J at [69 -70] explained that: "69 Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use. 70 That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts." 1. The use to which regard is to be had is the use of the land at the relevant time: see Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 per Barrett AJA, at [67], with whom Ward and Macfarlan JJA agreed. It is often necessary to have regard to activity on the land during periods preceding and following the assessment date. In the present case the member indicated that she had taken activities in the period of six months either side of the assessment date into account (at [13]) in line with the time allowed in earlier cases such as Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] 79 NSWLR 724; [2010] NSWSC 867, at [6] and Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 204 at [23]. 2. In some cases it may be necessary to have regard to the intention of the landowner, especially where the assessment concerns what Roden J called a "hiatus period" in Saville v Commissioner of Land Tax (1980) 12 ATR 7 at 11. His Honour was there dealing with an earlier provision concerning the use of land "primarily" for a particular purpose. He suggested a number of possible explanations for hiatus periods in which the land is not used, such as the land lying fallow or being restocked. His Honour considered that in such a hiatus period: "…it would be appropriate to have regard of the owner or person in occupation of the land as to its use." 1. Importantly, in Ferrella v Chief Commissioner of State Revenue [2014] NSWCA 378, which related to an earlier land tax assessment with respect to the same land as that now under consideration, White J, with whom Leeming and Barrett JJA agreed, said at [53] and [54]: "Saville v Commissioner of Land Tax is not authority for the proposition that the subjective purpose or intention of the user of land is a mandatory consideration in determining whether a use of land for the purposes of primary production (as defined) is the dominant use where there are competing uses. Roden J did not so decide. In any event, his Honour was dealing with a different provision. It is not necessary to decide whether the assessment of which competing use is dominant must be wholly objective, or whether, as the Land Appeal Court of Queensland said in Thomason, in the passage quoted at [39] above, the conclusion of an objective observer cannot be ignored; or, as Gzell J said in Leda Manorstead at [70], that dominant use is a question of fact and degree that may be determined as an objective matter of impression on the facts." 1. We have set out at para [15] to [17] above the Tribunal's findings of fact and conclusions with respect to the activities conducted on the land and whether the land was used for primary production as defined in s 10AA(3) of the Land Tax Management Act in the relevant years. It is evident that the Tribunal reached its decision based on its own conclusions of fact with respect to the materials before it. In doing so, the member, at [40], commented that there was no evidence as to the extent to which the property was used for maintaining horses, as against the extent to which it was unused. The member drew no conclusion based on the absence of evidence relating to the extent to which the property was unused, but based her conclusions on an objective assessment of the evidence that was actually before her with respect to the use of the land. This is consistent with there being no evidence regarding the extent to which the land was unused. 2. Additionally, that issue was not agitated by the appellant before the member. The submission, based on Kostas, that the Tribunal reached its conclusion on primary production based on no material, must fail. The processes followed by the Tribunal were both orthodox and rational. 3. Section 100(3) of the Taxation Administration Act places the onus on the appellant of proving that the correct and preferable decision for the Tribunal to make was to set aside the respondent's dismissal of the land tax objection. Similarly, if we grant the appellant leave to go to the merits on appeal, she will "bear the onus of proving the applicant's case in the appeal": s 100(4). In Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 204 JM Verick explained, at [27-30]: "27. I think it is clear from the authorities that the onus of proof in relation to the main issues of fact is on the applicant (see Krew v Federal Commissioner of Taxation 71 ATC 4091) and that, if the applicant is unable to establish that it is entitled to the exemption under s10AA of the LTM Act, the assessment must stand irrespective of any error in the Chief Commissioner's assessment or his understanding of the facts. The latter is a principle of long standing (see Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 and affirmed by the High Court in Federal Commissioner of Taxation v Dalco). 28. In Dalco, Brennan J, who handed [down] the principal judgment and with whom all members of the Court agreed with his Honour's reasoning, provided the following guidance as how to discharge the onus at p 624: 'The manner in which a taxpayer can discharge that burden varies with the circumstances. If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment ...' 29. Land tax, like income tax is an annual impost, in discharging the onus an applicant is required to consider each year separately and "it must be shown in respect of a particular year that the challenged assessment was wrong" (see Krew). 30. To discharge the onus borne by the Applicant, the Applicant was required to establish affirmatively, on the balance of probabilities, that in each of the Tax Years under review the Cornish Land was predominantly used for an activity or activities recognised in s 10AA as a primary production activity or activities." 1. In Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 430, Ward CJ said, at [44]: "Pursuant to s 100(3) of the Taxation Administration Act, Godolphin bears the onus of establishing its entitlement to the exemption conferred by s 10AA(1) of the Land Tax Management Act. Thus, Godolphin must establish (on the balance of probabilities) that in each of the land tax years the dominant use of the land was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce." 1. In the present case the member found that while she was satisfied that the land was used for the maintenance of horses, the appellant had not discharged her onus of demonstrating that the dominant use of the land was the maintenance horses for the purpose of selling them or their natural increase. We think that decision was open to the Tribunal on the material before it and on the member's findings of fact. We can see no error in her reasoning or any misapplication of the applicable law. 2. The appellant's submission that the Tribunal failed to consider evidence of intention does not withstand analysis. There was no evidence of intention given by or on behalf of the appellant. There was an assertion by Mr Angelo Ferella in his first affidavit, that dominant use of the land was the maintenance of horses for the purpose of selling them or their natural increase. Counsel for the appellant submitted that intention could be inferred from the materials before the Tribunal and the lengthy history of the land's use. We do not agree. 3. At the heart of the dispute before the Tribunal was whether the land was being used for the dominant purpose of maintaining horses for the purpose of selling them or their natural increase. Drawing an inference of such an intention was not justified when the onus was on the appellant to prove the land's use. Secondly, intention, if relevant, is only a small part of the facts and circumstances to be taken into account in forming an objective assessment of the land's dominant use. Thirdly, there was no evidence that the periods under consideration could properly be regarded as "hiatus" years in the management of the land, with the result that intention should have been given little or no weight. 4. Similarly, the appellant's submission that the Tribunal made its decision based on an absence of evidence, concerning how much of the land was used as opposed to unused, must fail for the following reasons: 1. The Tribunal made no such decision. The Tribunal's comments, at [40] about the absence of evidence regarding comparative use of the land, versus lack of use, were just that: a summary of what the evidence was. 2. The absence of evidence in that regard was not the basis for the Tribunal's decision. Rather, the Tribunal considered all the other material relied on by the parties in reaching its conclusion. The Tribunal engaged in a rational process in reaching its decision. 3. The Tribunal concluded that the use of the land was for the dominant purpose of maintaining horses: not that it was unused. 1. We can see no error in the Tribunal's conclusion that the appellant had not demonstrated that the land was used for primary production within the meaning of s 10AA(3)(b) of the Land Tax Management Act. The Commerciality Test. 1. In addition to satisfying the primary production test in s 10AA(3) the use of the land must also satisfy the commerciality test in s 10AA(2) to be exempt from land tax. This requires that the use have a "significant and substantial commercial purpose or character" and "is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made)." Given that the appellant had been unable to satisfy the Tribunal that horses were maintained on the land "for the purpose of selling them or their natural increase," its attempts to satisfy the commerciality test were bound to fail. What the Tribunal decided. 1. Relevantly, the Tribunal found: "46 In Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46 at [23] the Tribunal concluded that the activity on the Box Hill Property in the years between 2007 and 2011 was altogether minimal. In that case the Tribunal found there was at most two horses and at times no horses being maintained on the property. The facts in these proceedings are different; there are more horses on the property and there is some evidence of breeding and of attempted sales. However, the scale of the activity undertaken on the Box Hill property, in the relevant years and in the periods before and after those years, was small. 47 In addressing the question of the level of intensity and activity associated with the horse breeding which took place and which was referrable to the Box Hill property, the Applicants in their submissions refer to invoices for service fees and stud services dated between January 2013 and May 2016. While those fees are significant in themselves, those expenses were incurred well before the relevant years and even allowing for the difficulties which may have befallen the Applicants in the 2020 year, the Applicant's evidence concerning the commercial purpose and character was limited. … 49 There is no characterisation of the facts in this case which could reasonably lead to the conclusion that the use of the land identified by the Applicants is significant or that it has a significant and substantial commercial purpose – there are just seven horses, four of which are nominally for sale or intended to be sold, three of which brood mares retained for breeding. … 54 In this case, there was insufficient evidence tendered by or on behalf of the Applicants on which a finding could be made that the use of the land had a commercial purpose or character, let alone that such character was significant and substantial. 55 The evidence tendered by the Applicants, at its highest, showed that animals were maintained on the property at Box Hill and that there was some breeding activity which resulted in food, transport and veterinary expenses, the registration of the colt born in November 2016 and two sales listings (including that of the colt). 56 The Applicants submit the Tribunal should consider or have regard to the value of the horses and the potential for sale of those animals to generate reasonable returns on sale. However, the limited evidence of sale activity does not assist the Applicant in making this point – there was no evidence that such assets were capable of being realised by the Applicants or what their realisable value in fact was. 57 The Chief Commissioner submitted, and I accept, that the Applicant's evidence was wanting in this regard; there was no financial reports showing profits and losses or forecasts, there was no business plan or strategic documents which might allow the Tribunal to determine whether the use of the land had a commercial purpose of character and certainly there was no evidence to demonstrate a significant or substantial commercial purpose or character to the use of the land." 1. The appellant submitted that that the Tribunal had found that: 1. use of the land did not have a significant and substantial commercial purpose or character, and 2. was not engaged in for profit on a continuous or repetitive basis, due to the "slenderness" or low intensity of the horse breeding operation. In doing so, the appellant submitted that the Tribunal failed to have regard to the principles as to use and intention propounded by Roden J in Saville. It had also placed too much emphasis on the low intensity of the horse breeding operation when finding that there was "no evidence to demonstrate a significant or substantial commercial purpose or character to the use of the land." 1. The respondent submitted that the appellant had not discharged the onus placed on her by s 10AA(2) of the of the Land Tax Management Act. The Tribunal had correctly found that there was no evidence that satisfied the requirements of the sub-section. Consideration 1. With respect to the appellant's submission that the Tribunal did not take into account evidence of intention when considering commerciality we repeat what we said above at [33] and [34]. 2. It was incumbent on the appellant to prove that the use of the land satisfied both elements of the commerciality test in s 10AA(2) of the Land Tax Management Act. In its decision the Tribunal referred to the following passage from the decision of White J (as he then was) in Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 98 ATR 545 at [109]-[111]: [109] … For a use of the land to have a commercial purpose or commercial character, the purpose or character of the use must be or include the making, or the potentiality for the making, of profits. Nothing in the Court of Appeal's decision [in Maraya] excludes the potentiality for making profits from satisfying the requirement of commercial purpose or commercial character. [110] The magnitude and size of the use for primary production and the intensity of the operation are relevant to an assessment of whether the commercial purpose or commercial character of the use is significant and substantial. This includes the size of the herd, the size and carrying capacity of the land, the resources put into the business of primary production, and the revenues and profits generated. In deciding whether the use has a significant and substantial commercial purpose or character it is appropriate to compare the use of the subject lands with other primary production activities of the same kind, in this case cattle-raising, and with how land is generally used. [111] The return from the primary production use relative to the value of the land can be relevant in determining whether there is a commercial purpose or character of the use, and, if so, whether that commercial purpose or character is significant and substantial." 1. The small size of the horse breeding operation on the land relied on by the appellants was therefore a relevant consideration in deciding whether that use satisfied the requirements of s 10AA(2). So too, were the small number of brood mares involved; the small number of foals produced; the fact that no progeny had been sold in either year (or surrounding period); the absence of any profits; and the absence of books of accounts, business plans or other indicia of an ongoing business in pursuit of continuing profits. 2. We are satisfied that there is no error of law in the Tribunal's finding that the appellant had failed to demonstrate a significant or substantial commercial purpose or character to the use of the land engaged in for the purpose of profit on a continuous or repetitive basis. Conclusion on questions of law. 1. There is no error of law affecting the Tribunal's decision. Should the appellant have leave to appeal on the merits? 1. In Collins v Urban [2014] NSWCATAP 17 at [84] an appeal panel summarised the general principles to be applied when considering whether to grant leave to appeal. "1. In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; 2.Ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4 a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed, BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [20] and the authorities cited there, SAB v SEM [2013] NSWSC 253 at [8] and [9] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; 3. In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there." 1. In the present case we can see no basis for granting the appellant leave to go to the merits. The Tribunal went about its fact finding process in an orthodox manner. It properly took into account and implemented the statutory provisions of 100(3) of the Taxation Administration Act relating to the onus of proof. The conclusions it reached were clearly open on the material before it. There are no obvious errors in those conclusions. The issues under consideration with respect to the application and administration of the Land Tax Management Act are reasonably settled. 2. Leave to appeal on the merits should be refused. Costs. 1. The respondent has indicated his intention to seek costs if successful. We will make orders calling for submissions on the issue of costs, in which the parties are to indicate whether they are content for the appeal panel to determine the issue of costs on the papers, without a hearing. Conclusion. 1. The appeal panel makes the following orders: 1. Leave to appeal refused. 2. Appeal dismissed. 3. The respondent shall file and serve submissions and documents on which he intends to rely as to costs within 21 days of publication of these reasons, such submission not to exceed 2000 words. 4. Within a further 21 days, the appellant shall file and serve submissions and documents on which she intends to rely in reply, such submission not to exceed 2000 words. 5. Within a further 14 days, the respondent shall file and serve any submissions and documents on which he intends to rely in response, such submission not to exceed 1000 words. 6. Submissions must include submissions concerning whether an order should be made under s 50(2) of the Civil and Administrative Tribunal Act, 2013 dispensing with a hearing. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 21 February 2023